Why Andy Constan Says The AI Bubble is in Earnings, Not Price

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Veteran macro trader Andy Constan joins Monetary Matters live on Monitoring the Situation to discuss why he has 100% confidence that AI stocks are in a bubble. The nuance though is that unlike most bubbles, where the bubble is in unsustainable prices with no earnings, this is a bubble in unsustainable earnings that will eventually fall and make the current somewhat reasonable prices look lofty in hindsight. Constan highlights metrics like the $400 billion in S&P 500 earnings expectations and the over 60% of that is supposed to accrue to AI winners, and argues that based on projected GDP growth that their simply “isn’t enough pie for all of the S&P 500 to eat” without it coming other very important areas of the economy.

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Timestamps:

00:00 Earnings Bubble Thesis

01:22 Defining a Bubble Regime

04:02 Past Bubbles and Patterns

07:57 Why PE Looks Normal

08:57 GDP Pie Math Reality

13:06 Unlimited ETFs HFGM

15:23 AI ROI and Inflation Risks

18:34 Three Cohorts Funding Compute

23:36 What a Real Pop Looks Like

28:22 Timing and Investor Discipline

30:27 Trading It Collars Not Shorts

33:13 Closing and Sign Off