Investors are growing nervous about a potential bubble in artificial intelligence stocks, but the real payoff may be just beginning — and the payoff could extend far beyond Silicon Valley’s typical winners, the $19 billion hedge fund investor said.
“This is a generational platform transition. We’re probably in the third or fourth time of the actual build,” David Craver, co-chief investment officer at Lone Pine Capital, said of Goldman Sachs’ Exchange. Podcast published Thursday.
Craver said he understands the concerns surrounding large amounts of money being spent on AI, but added that underlying signs such as improved models, strained production capacity, and real-world business impacts suggest there is still room for this cycle to play out.
He cited three signals that keep him bullish on AI infrastructure.
First, models continue to improve as more computing power is put into them. “They’re definitely getting better,” and there are more uses for them, he said.
Second, hyperscalers and inference providers still lack sufficient capacity, so demand continues to outstrip supply, he said.
Third, and most importantly, companies are already seeing dramatic benefits from bringing AI within their companies.
He said founders and digital-first CEOs are talking about “amazing” productivity gains, from automated coding to replacing manual workflows with AI agents.
“Many CEOs have said to me, ‘I think I can more than triple the revenue of my business, and I don’t need to hire any new people,'” Craver said.
However, not all companies achieve such a return on investment. According to PwC’s latest Global CEO Survey released last month, 56% of the 4,454 CEOs surveyed said AI has not yet brought revenue or cost benefits to their business.
When legacy companies fight back
Early AI benefits primarily went to infrastructure leaders like Nvidia and cloud providers. Craver believes the next step will depend on adoption across existing large enterprises.
“I have a theme that I call ‘dinosaur revenge,” So you’re going to see large companies adopting this technology and taking significant costs out of their business over the next two, three, four years,” he said.
He said the impact would be clearly felt in corporate earnings.
“If you go on a conference call in 2027, CFOs are going to say, ‘We’re eliminating $500 million in spending on an annual basis because we’re implementing this new technology,'” he said.
He says this dynamic is “very bullish for the market.”
Craver’s comments come at a precarious time for AI stocks, with investors growing more nervous after years of wild stock market gains.
Software stocks sold off this week as investors weighed the disruptive impact of AI against soaring valuations, aggressive capital spending and concerns about whether capital spending is outpacing fundamentals.
Meanwhile, stocks in insurance brokerages, asset managers, and real estate services companies, sectors seen as most vulnerable to AI disruption, plummeted.
Craver said that despite the volatility, Lone Pine remains “very bullish on the overall bet” on AI.
“When everyone thinks it’s a bubble, it’s not a bubble,” he said. “When you get to the other side of this, it’s going to be a bubble.”
