[RoosterRedux]

AI is difficult for any investor to understand because it doesn't fit classical valuation models. But it is particularly difficult for fixed-income investors to understand.

I say this (above) because I have been an AI investor for several years and have had a chance to watch how the market responds to its development.

The market sees that there is significant value to AI stocks like Nvidia and AMD, but it has difficulty understanding how these stocks' values are not a measurable function of foreseeable earnings. Both Nvidia and AMD are more a function of the estimated future demand for AI chips and platforms (the AI market) than for future earnings.

That's why Nvidia (more than AMD) moves 3 steps forward and 2 steps back...and sometimes even drops when very positive earnings results are reported (and this isn't just because of investor disappointment in earnings reported...it is often because investors don't know how to interpret the results).

[Alberta's Child]

AI is the 2024 version of EVs … which were the 2022 version of self-driving cars, which were the late 2010s version of dot-com companies.

These are the “bright, shiny new thing” industries that attract a flood of capital from investors who are chasing gains without any regard for the fundamentals of the companies they are buying.