Oxbow Advisors’ Ted Oakley says the AI trade looks eerily similar to the dot-com bubble witnessed in the late 1990s.
In a new interview with David Lin, the founder and managing partner of the $2.1 billion wealth manager explains why his firm is staying away from the sector, despite the momentum behind leaders like Nvidia (NVDA).
Oakley warns that valuations of AI stocks appear to be disconnected from fundamentals.
“If you go back and look at a lot of the AI names, you know, have NVIDIA and all that group, all that stuff. We don’t have that. We don’t own that. We can’t make the numbers work in those companies.
If you see the prices you pay, because they’re fad stocks and they’re like a lot of the stocks were in 99, early 2000. If anything, you put the dot-com behind it, it just soared. But a lot of them went under. And I think a lot of this, a lot of this AI group is really overvalued in our opinion.”
Oakley emphasizes that Oxbow isn’t allocating any resources to analyzing AI companies further.
“As soon as we see them, we see they’re really expensive. We don’t, we don’t do any work in that area. But that would probably be the most overvalued group I see.”
Other asset managers are also voicing their concerns about the lofty valuations of the stocks involved in the AI trade. Billionaire Jeffrey Gundlach, CEO of DoubleLine Capital, has said that the transformative potential of AI firms is likely priced in.
“But it seems a lot like kind of the fiber optic stuff back in the late 1990s, where it’s very real, it’s happening, it’s going to be world-changing, but the markets are incredibly efficient at pricing things in and often overdo it.
So I am not a momentum person at all, unless there’s a fundamental reason, and momentum driving things, very high valuations, that’s just, I don’t, if there’s one thing that makes me not sleep at night is owning stuff like that, and that’s just me.”
Oxbow Advisors is a $2.1 billion asset manager headquartered in Austin, Texas.
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