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Tech stocks are facing massive multiple compression - despite accelerating earnings, giants like NVIDIA and Micron are trading at historically low P/E ratios as the market struggles to price in AI disruption and geopolitical instability.
“Nvidia is growing at 80 and it's trading below 20 times earnings. That's at a parity almost with the S&P 500 so I couldn't agree more. I don't think folks know quite what to do with this.”
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AI is cannibalizing the software sector - investors are aggressively repricing software companies on the assumption that AI will crush margins, even though official earnings and margin data have not yet shown a decline.
“It's really ironic that NVIDIA, the largest stock in the S&P 500, is disrupting its own siblings to some degree in the software space. No one really expected that.”
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The domestic oil supply response is stalling - unlike the 2022 energy shock where US production ramped up quickly, current rig counts remain flat despite the threat of a prolonged closure of the Strait of Hormuz.
“In 2022... you saw the Baker Hughes rig count really ramp up oil production to compensate for the higher oil prices. That has not happened yet.”