Comment by bigwheels
4 days ago
> Benchmark today’s AI boom using five gauges:
> 1. Economic strain (investment as a share of GDP)
> 2. Industry strain (capex to revenue ratios)
> 3. Revenue growth trajectories (doubling time)
> 4. Valuation heat (price-to-earnings multiples)
> 5. Funding quality (the resilience of capital sources)
> His analysis shows that AI remains in a demand-led boom rather than a bubble, but if two of the five gauges head into red, we will be in bubble territory.
This seems like a more quantitative approach than most of "the sky is falling", "bubble time!", "circular money!" etc analyses commonly found on HN and in the news. Are there other worthwhile macro-economic indicators to look at?
It's fascinating how challenging it is meaningfully compare current recent events to prior economic cycles such as the y2k tech bubble. It seems like it should be easy but AFAICT it barely even rhymes.
Yep.
Stockmarket capitalisation as a percentage of GDP AKA the Buffett indicator.
https://www.longtermtrends.net/market-cap-to-gdp-the-buffett...
Good luck, folks.
How valuable is this metric considering that the biggest companies now draw a significant % of revenue from outside the U.S.?
I'm sure there are other factors that make this metric not great for comparisons with other time periods, e.g.:
- rates
- accounting differences
I estimate you’re talking 25% from overseas.
If that bothers you, just multiply valuations by .75
Doesn’t make much difference even without doing the same adjust for previous eras.
Buffett indicator survives this argument. He’s a smart guy.
Besides your chart, another point along these lines is that the article cites Azhar claiming multiples are not in bubble territory while also mentioning Murati getting essentially infinite price multiple. Hmmmm...