The Bears Have Declared Victory… Again. But Are They Right?
After a bruising week for AI and technology stocks, the bears are celebrating. But the earnings evidence makes the victory speech considerably less convincing.
In this update, Garry Davis examines why the broad AI bubble narrative misses important differences in earnings, valuations and financing risk, while cautioning that further market weakness is still possible.
In the charts, forward earnings expectations have risen much faster than index prices, implying significant compression in forward P/E ratios. That challenges the claim that US equities have advanced solely because investors have paid increasingly speculative valuations. The qualification matters: these are forecast earnings, not guaranteed profits, and share prices can still fall.
The downside risks are real. Cash conversion is deteriorating for some hyperscalers and financing pressures are acute in more exposed parts of the AI trade, particularly neoclouds. Yet strength in healthcare, smaller companies and the equal-weight S&P 500 suggests continuing rotation, not confirmed market-wide capitulation. Garry explains why the response is to stay selective, watch for confirmation and follow a clear plan.
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Any advice in this video is general advice only. Neither your personal objectives, financial situation or needs have been taken into consideration. Accordingly, you should consider how appropriate the advice, if any, is to those objectives, financial situation and needs, before acting on the advice. Garry Davis (AR No:317590) is an authorised representative of Primary Securities Ltd (AFSL No. 224107).
Note to traders* The publishers of this material wish to disclose that they may hold stocks mentioned in their portfolios and that any decision to purchase those stocks should be made only after the purchaser has made their own enquiries as to the validity of any information in this material.
Past performance should not be taken as an indicator of future returns.
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