AI Valuations Are Cross-Sectionally Inefficient
Insight
The full AI supply chain cannot all be priced correctly at once. Memory makers trade at 3-5x PE while Nvidia trades at a low PE; meanwhile power, cooling, and optical names trade rich. The two pricings imply contradictory futures: if Nvidia and memory are right, the picks-and-shovels (power/cooling/optical) underperform; if the picks-and-shovels are right, Nvidia and memory have substantial upside. Either way, the market is offering one direction of mispricing in a structural way — the trade is which side is closer to the underlying token economics.
Source Context
"If you look at the valuations for all these AI names, they just they can't all be accurate. You have memory makers that, you know, three to five times PE. You have Nvidia at a really low PE. You actually have, um, you know, some other accelerator companies at reasonable multiples. And then you have everything else. Everything in power, everything in cooling... If the multiples on the power, cooling, optical names are correct, Nvidia, memory, they're going up a lot. If the multiples on Nvidia and memory are are correct, everything else is probably going to underperform. The AI market is cross-sectionally inefficient right now." — 74:18(https://www.youtube.com/watch?v=HGbA6ze0_3M&t=4458s)