BofA's AI Big 10 chart is doing the rounds: bubble evidence or bubble denial?

[Electric Holly]

Yahoo Finance ran a piece on Bank of America's AI Big 10 basket, which lumps together Nvidia, Microsoft, Alphabet, Amazon, Meta, Apple, Tesla, Broadcom, Micron and AMD as the concentrated core of the AI trade. The framing is aimed squarely at people worried about an AI stock bubble, with a chart that will either calm you down or terrify you depending on your priors

The concentration itself is the story for me. When ten names dominate the index to this degree, every pension and passive fund on earth is making a leveraged bet on AI capex whether the holders know it or not. That is fine right up until the quarter where hyperscaler spending guidance comes down

And the cracks are visible if you want to see them. Microsoft just had its worst month since 2000 during an otherwise strong quarter for the index, hyperscalers have been trading at their cheapest forward multiples since ChatGPT launched, and the Meta compute news knocked chip names purely on the inference that someone overbuilt. The market is rewarding cash flows now and punishing promises

The counterargument is that earnings have actually kept pace in a way they never did in 1999, and calling a bubble on profitable monopolies is how people miss decade long runs. So which is it, rational concentration in the companies that own the future, or the most crowded trade in market history one guidance cut from unwinding?

Scared of an AI stock bubble? Then donfinance.yahoo.com