The world of social media is a funny one (mainly because it’s just media and there is nothing social about it anymore).
I dropped a meme the other day and one of the comments was about being sorry when the tech bubble bursts.
So my question was ‘if you knew it’s a bubble then why weren’t you long?’
It’s strange – many people would almost prefer it if the market were going down for some reason.
I think this stems from two emotional views.
The first reason is certainly cope.
They have missed out and so calm themselves down by suggesting the market should collapse.
And or two…
They prefer the illusion of safety in other assets (which is Brits’ issue with Cash ISAs and property).
If we get a bit more technical, I do think there are many who like to compare history with now.
The DotCom and GFC were two events which have scarred the minds of many an investor.
DotCom’s valuations were insane and the hype behind firms like Pets.com were largely unfounded.
They IPO’d at $11 per share and 9 months later traded at $0.19 per share, a massive collapse.
But they didn’t make any bloody money.
Back then at IPO, they raised about $80m…
At $11 per share.
LOL
That would be a joke now.
Already we can establish a contextual difference between the market then and the market now.
But digging further into the differences, we see a different structure of ‘this bubble’ versus DotCom.
The firms at the peak of ‘this bubble’ are huge already in their own right with revenues not even related to AI.
AI is effectively just a cost improvement for these companies, rather than it being their definitive business model.
Take Google or Meta.
Most of their revenues come from advertising – all that AI will do is improve who ads get served to which likely lowers advertisers’ cost per acquisition.
Versus Pets.com who was using the internet to venture into a new method of buying things where people weren’t even used to said method yet.
And people talk about the money flow from OpenAI to Nvidia to Oracle and blah blah blah.
Again, share prices might pop off the news here, but does that distract from, say Oracle’s main business?
No, not really.
Nvidia trades at 69x free cash flow.
What detractors don’t recognise though is Nvidia’s orderbook is filled out to the end of 2026, and keeps getting filled up every quarter recurrently.
So does the stock trading at 69x free cash flow even matter given this context?
And just touching on OpenAI for a sec, Microsoft is their main backer — is Microsoft’s business AI or are they just a mega giant who has the capability to invest a shitload into the AI ecosystem because, well, ‘why not?’
What else are they going to do with their money to make better return on invested capital in 10 years time? Create another Windows OS? They’re already a company with a massive balance sheet with soo much cash to know what to do with – $80bn sitting there.
The main point I’m trying to get across to you is that AI is largely tangential to the businesses operating the most influence in the SP500 price movement.
So let’s get into what might actually be bad for the market.
The GFC was all to do with opaque risk modelling and, well, fraud where people would lie about income to get mortgages.
We don’t have those issues in banking anymore.
But the world which does have these issues is private equity.
Take a look at the below chart.
This shows Blackstone, Apollo, KKR and the Carlyle Group, all listed PE firms.
What you might notice is they’re all pretty much perfectly correlated.
Now compare this to the price charts of the top of the SPX.
Because of the different business models at the top end of the SPX, their price charts look different (so aren’t all correlated to AI).
However with private equity, there is a big issue currently with funding completely drying up. There are no exits.
And just yesterday, the FT released this article…
Private equity groups have struggled to raise funds in recent years, finding it difficult to return cash to their backers. Only about 5,000 of the more than 15,000 firms have successfully raised funds over the past seven years. https://t.co/R288fjNhQG pic.twitter.com/5ODkOUGLGi
— Financial Times (@FT) November 2, 2025
If you want to talk about bubbles, it’s likely private equity has been the biggest bubble and not AI…
And that private equity bubble seems to be silently popping in front of our eyes.