Top Investors Unfazed by AI Bubble Fears, Bullish on Tech Stocks' Long-Term Potential

Despite concerns about an AI bubble and the over-concentration of tech stocks in the S&P 500, top investors from General Atlantic and Coatue Management express confidence in the long-term potential of the tech sector. At CNBC's Delivering Alpha conference, they highlight the significant investments being made by large public companies like Alphabet, Microsoft, and Amazon, which they believe will drive the next wave of technological innovation.

Investors See Hyper-Scaler Advantage

Philippe Laffont, founder and portfolio manager of Coatue Management, which manages approximately $70 billion in assets, emphasizes the 'hyper-scaler advantage' that major tech firms possess. These companies, he says, are investing hundreds of billions of dollars into AI, positioning them to lead the next phase of technological advancement.

Bill Ford, Chairman and CEO of General Atlantic, a firm with $118 billion under management, agrees. He notes that the significant financial commitments from these tech giants are a reason for optimism, not skepticism. 'The people driving change in AI are the large public companies and the incumbents, they have the advantage,' Ford states.

Private Market Focus with Public Market Awareness

While both firms remain focused on private market opportunities, they acknowledge the importance of understanding the strategies and investments of major public tech companies. 'You can't invest in the private market without an understanding of what Oracle, what Google, what Microsoft is doing,' Ford explains. 'You can't make good decisions. We have to be fully aware of what they are doing even if we are not investing in them.'

AI Investments Yielding High Returns

General Atlantic has been actively investing in AI across its portfolio of 200 companies. Ford reports that these investments are already showing high returns, particularly in areas such as customer care, coding, and digital marketing. 'We have seen a pretty high payback, and this is just the front edge of the value opportunities from applying AI,' he adds.

Market Volatility and Valuations

Laffont acknowledges that rapid increases in stock valuations can raise concerns, but he believes that the long-term potential of AI-driven growth is not yet fully priced in. He cites Oracle's recent stock performance as an example, noting that while the stock saw a significant rise, it has since pulled back, indicating that the market is still adjusting to the new realities of AI investment.

Alphabet's Resurgence

Alphabet, once thought to be lagging in the AI race, has now become one of the best-performing big tech stocks of the year. Warren Buffett's Berkshire Hathaway recently revealed a stake in the company, signaling a shift in sentiment. This move underscores the dynamic nature of the tech sector and the potential for quick turnarounds in investor perceptions.

References

• A simple reason why the market's biggest investors say they aren't worried about AI bubble, tech stock selling