Palantir is the latest tech stock to see a notable rise due to the artificial intelligence trend. Interactive Brokers Chief Strategist Steve Sosnick sits down with Yahoo Finance to discuss recent tech gatherings and stock market value.
video transcript
Julie Hyman: But let’s broaden the discussion about AI. Is the AI bubble bursting? Or is the hype spreading abroad? In today’s Morning Brief, Yahoo Finance’s Brian Sotzi contributes from Cannes on the AI hype and its move there.
Snapchat, Meta, Pinterest are just a few companies showcasing their latest AI projects. And most of the Lions Conference panels will be about technology and how it will shape the advertising industry. But how many discussions and new products will actually come to fruition? How many people are just on the hype train? Musician and investor will.i.am sat down with Brad Smith and Brian Sotzi to discuss the impact of AI in the creative industries and beyond.
Will Iam: Well, there are still many people in the world who don’t know about generative AI. So we can’t just sit back and feel as if it came for us. we mean everyone. There are still many people who do not understand how it changes everything.
So I say for a while, this is a while for the next decade.
Julie Hyman: Obviously it was quite windy on the French Riviera. In effect, what he meant was that ChatGPT is still not used by a broad segment of the world’s population that has never even heard of it. So there are a lot of runways for growth here.
Let’s continue our discussion on AI with our guest, Interactive Brokers Chief Strategist Steve Sosnick. Steve, we’ve been interspersed with discussions about AI. Because AI is permeating everything we do today. But I think Palantir is an iconic example of that. Thanks to AI, we have made great strides. So where are we now as investors? And what should people do with this stuff?
Steve Sosnick: Now this is an important question. And from what Raymond James said here, it’s really hard to judge because it’s based on basic foundations. Inventory has more than doubled. I was bogged down in the 6-8 range for months or even years. Then all of a sudden I was 16. That’s a big deal.
So at some point take profit? Will you make it through to the end? And it really strikes a balance between fear and greed. Let me assure you that it’s probably as life-changing as it’s advertised. And I say: We remember the internet bubble days, and we’re almost at a stage where companies would be hit hard if they announced they were working on a website. The Gap store was to launch a website.
This is where we are now, and everyone has to say what they are doing when it comes to AI. Because they can’t help but say that. And you, too, are you dealing with the so-called pickaxe and shovel of the AI Gold Rush, I think partly he’s Nvidia, partly Palantir.
Or every other company should mention it regardless of whether they are really committed to it.
Julie Hyman: As with most things when it comes to investing, I think it all depends on your time frame. And if you think this is going to be a game-changing technology, do you just stick with these things?
Steve Sosnick: I think you need to remember this evaluation discipline. I really think so about the recent rally, whether it’s AI stocks or things like Darden and FedEx that we talked about before. Many of them are margin extensions — sorry, multiple extensions. So if future E buys things strictly for multiple expansion reasons and not for actual growth i.e. just want to focus more on expected revenue streams without actually finding growth triggers In the case of , even with dramatic growth, one has to wonder if that is the right move in an environment of fiscal headwinds and tight monetary policy. Or is it likely to be pulled back?
Julie Hyman: So if it’s not AI, what’s going on in this market? Where should people looking to add positions? think. So what should people buy now?
Steve Sosnick: I think the multiple expansions made it even more difficult. We will keep an eye on dividends. After all–
Julie Hyman: But it’s so boring.
Steve Sosnick: It’s boring. It’s boring. AI is exciting. It’s fun is not it. Will.I.am will not air —
Julie Hyman: He’s not going to talk about dividends.
Steve Sosnick: He’s not going to talk about utility stocks or dividends. No, it’s not funny. But in the end, sometimes it’s better not to be funny. Because this guy doesn’t have to put all his chips into one hot spot or hot market. Perhaps you want something a little more stable. And that’s where dividends come into play. That’s where defensive stocks come in. And that’s where the appraisal discipline comes into play.
Again, are we paying too much for growth? If you have some kind of growth booster and you’re not overpaying, someone recently asked me about Alphabet and Meta and some of these stocks and their PE/G ratios, and I divided PE by expected growth The value will be slightly over 1. They have achieved great results so far. But by conventional valuation, they’re surprisingly not expensive.
Julie Hyman: That’s how people see it – you think PEG is something people should pay attention to.
Steve Sosnick: I think PEG is something that cannot be overlooked. If you’re paying a huge multiple for growth that may or may not come, you should re-evaluate it. Or if you’re paying a big multiple for the growth of a company that hasn’t grown much, you might want to reconsider. This is another big red flag.
Julie Hyman: Well, some of these companies are still not profitable. Some players are small. Obviously not Nvidia or Palantir, for example. You’re looking at different indicators for some little people.
Steve Sosnick: And you have to look at them differently. Investing in those companies is never a bad thing. But you have to choose. And we have to realize that in some cases it can work very well. You can look back on the others in a few years, but why did I invest in this one?
So you don’t know that’s ok. If you invest in stocks, by definition you should be optimistic. Bond investors are generally pessimistic, or at least neutral. But if you are investing in stocks, you should be optimistic because you are investing in future growth, earnings and expansion.
But that doesn’t mean it always works for everyone. Optimism is good. Unbridled optimism can be dangerous. that’s ok. It’s okay to take risks as long as you understand that you’re risking the riskier parts of your portfolio and not the ones you’ll have to pay rent for in a few months.
