In a recent CNBC interview, Warren Buffett said it is “tough to find values when everybody is preferring gambling.” The S&P 500’s Shiller CAPE ratio stands at 41.6, near its 44.2 peak before the 1999 dot-com crash and above its 32.6 peak in 1929.
Shiller’s CAPE ratio compares the S&P 500’s current price with its average inflation-adjusted earnings over the previous 10 years. The article says optimism over generative AI has added $19 trillion in global market value, while some financial professionals worry enthusiasm has outrun fundamentals; it also cites Federal Reserve rates of 3.75%–4% and 10-year Treasury yields just under 5% as headwinds.
AI bulls counter that leading companies’ prices are reasonable relative to earnings and growth: Nvidia was trading at a forward P/E of 25, while its second-quarter earnings rose 128% year over year. The article says Nvidia’s boom could quickly reverse if hyperscalers become unwilling to spend hundreds of billions on its AI hardware.
