r/valueinvesting
Bad news for value investors- Short term the market could go lower but mid/long term AI will pull the market higher
AI-driven capex will fuel a K-shaped market rally, making traditional value investing obsolete while boosting tech stocks.
- Hyperscalers will continuously increase spending on chips and data centers to stay competitive in the AI arms race.
- The entire data center value chain will experience massive demand and revenue growth, driving stocks higher.
- AI will pull the broader market higher in the mid-to-long term despite short-term volatility.
- Traditional value stocks unrelated to AI will be left behind in the K-shaped economic rally.
- Relying on historical cash flows to find cheap stocks is no longer an effective strategy in the current market.
This is bad news for value investors because the rally will not include the “value names” which is basically anything that isn’t related to AI part of the K shaped economy.
Nothing has changed fundamentally for the market. We’ve seen Oracle raising debt at beginning of year, Google issuing equity recently, and META’s recent rumor. Hyperscalers will continue to spend more and more on chips and data centers just to not lose the AI arms race. And all the players in the data center value chain - chips, electronic components, optical fiber connectors etc.. - will all continue to see massive growth in demand and revenue and stocks will multiply further into the next few years.
I just think it’s not a good time to shop for “value” in the traditional backward looking way where you pick the stock that is trading cheap relative to its historic cashflows. I don’t know what this means for value investing for the next few decades but I find my portfolio (now 50% cash) not include anything related to “value” in the traditional sense and it’s hard for me to deploy any cash into those names. It’s just how I feel about the market for now
If anyone thinks this drop signifies that the AI trade is over they would probably be found in this sub and this sub alone.
How are we supposed to know when it is safe to buy value stocks again? Even Berkshire has dropped and traditionally it has risen during bad markets
I think Berkshire itself is a value trap now. They are no longer good capital allocators which means they don’t deserve the premium they had.
Is the irony here the fact that they are buying Alphabet which is what pretty much everyone in this sub bought and is probably still holding?
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lol, the market sees the first legitimate red week after a parabolic move and these posts start to come out.
This is a healthy pullback that was much needed given the run that the overall market has been on.
Sentiment has not changed whatsoever as far as the ai buildout goes
I can't wait for a post-IPO world. All this reallocation and for what? To load up on risky garbage.
The Fed is/will be throwing cash at the economy. That always creates rallies, value will still perform well and drop less when the lights are turn on and the party is over.
You’re totally neglecting the possibility of a hard global recession, which could absolutely poo the bubble and cause the capex to dry up.
It won’t happen