AI Stocks Are Wildly Expensive

追加: 2026-05-31

[00:00:00]At the end of last year, lots of investors were concerned about an AI bubble. News articles reported evidence of circular financing. They said the leading AI companies were burning through huge amounts of cash and that cracks were beginning to show. But although these worries haven't gone away, the truth is that AI has only accelerated in 2026.

[00:00:25]Nvidia, for example, which supplies the GPUs powering most of the AI trade, reported revenue last month that was up 85%.

[00:00:36]It's fastest growth in five quarters.

[00:00:39]And Anthropic, creator of large language model Claude, said its annualized revenue had hit $47 billion, a figure that was at just $1 billion at the start of 2025.

[00:00:51]Entrepreneurs, fund managers, even politicians have come to the conclusion that the AI revolution is real and here to stay. And yet stock market investors have a bit of a problem right now because even though the AI revolution is happening, many of the companies taking part have become viciously expensive.

[00:01:13]Nvidia, for example, trades at 20 times revenue with a market cap that is higher than most countries' GDP. Micron, which supplies high bandwidth memory used in data centers, now trades at 100 times its trailing 12-month free cash flow. PC and server company Dell just hit 37 times earnings. But it isn't just the large AI players that look hyped up.

[00:01:42]AXT, a company that makes chemical substrates that go into semiconductors, is up 7,000% over the past year. Bel Fuse, which makes power transformers, circuits, and cables, is up 278% Modine, which makes data center cooling systems, is up 200% and Comfort Systems, a business that provides electricians, plumbers, and mechanical engineers, is up 290%.

[00:02:13]Some companies have gone up simply because they sound like they could be future AI winners. IQE, a tiny semiconductor company out of Wales, is up 800% despite reporting a 17% revenue drop and a 30 million pound operating loss. And XFab stock jumped 78% this week after a tenuous social media post went viral.

[00:02:39]Without doubt, many of the companies supporting the AI boom will eventually fall back to Earth. Capital light businesses with pricing power, talented people, and sustainable business models will always prosper, but capital heavy manufacturers producing hardware and materials that are easily commoditized simply have no business trading at such high multiples. It's not always easy to spot the winners from the losers, and that makes this a tricky time for investors to navigate. The AI revolution is real, but so were railways and the internet, and that didn't stop many investors losing money. But, these are my personal opinions, not financial advice. For more investing videos, join me at freeminutebreakdowns.com.

[00:03:28]Thank you for watching.