Agree or Disagree: We are in another tech bubble.
Displaying poll results.20304 total votes.
Most Votes
- What's the highest dollar price will Bitcoin reach in 2024? Posted on February 28th, 2024 | 8443 votes
- Will ByteDance be forced to divest TikTok Posted on March 20th, 2024 | 2605 votes
Most Comments
- What's the highest dollar price will Bitcoin reach in 2024? Posted on March 20th, 2024 | 68 comments
- Will ByteDance be forced to divest TikTok Posted on March 20th, 2024 | 9 comments
not a bubble (Score:4, Informative)
Re:We have an advertising bubble... (Score:5, Informative)
Not a bubble, but maybe a froth, lot of little bubbles. We're not seeing the entire tech sector inflated, but we're seeing inflated prices in individual companies and within particular areas of the sector. At the height of the 1990's tech bubble, price/earnings ratios were about twice what they are now. Right now, buying $1 worth of earnings in a company costs about $19 worth of stock (Price/Earnings, or P/E, = 19). So if you buy $1 worth of a company, it will pay for itself in 19 years, assuming the earnings stay the same. At the peak of the dot com bubble in the late 1990s, buying $1 worth of earnings cost about $40 (P/E =40). So we'd have to see the prices of companies double to get back to where we were during the peak of the dot com bubble.
That being said, there are individual companies that are massively overvalued. Facebook is trading at 77 times earnings, Netflix is trading at 151 P/E, Amazon is trading at 489 P/E, which means that one dollar invested in Amazon will pay for itself if half a millennium at current earnings levels. That's pretty much the way stocks traded during the dot-com bubble. Tesla doesn't even have a P/E ratio since they can't actually turn a profit, but their stock soars none the less, which is again classic bubble behavior. So yes, these individual companies show bubble-level valuations of the sort we saw during the dot com bubble. But this isn't the case for all companies. Google is trading at a P/E of 30, Microsoft at a P/E of 15, Apple at a P/E of 14.67. Google is probably fairly priced given its rapid growth, Microsoft is underpriced assuming they ever manage to get their shit together (debatable), Apple is a bargain even if they manage to grow modestly in the next few years.
So yes, there are individual companies that are showing bubble-like behavior but it's not spread across the entire sector the way it was in the dot-com bubble. There are pockets of madness but it's not yet systemic. And even the companies that are wildly overvalued are solid companies. Maybe they're overpriced, but I don't think anyone doubts that Amazon, Netflix, and Facebook will continue to be important companies, we're not talking about Pets.com here.