Why big private investors aren’t worried

The world’s largest investors are often more focused on private markets than public markets, but with the artificial intelligence boom expected to reshape the economy for decades to come, they can’t afford not to pay close attention to what’s happening with the largest publicly traded tech stocks, and they’re not worried.

Amid concerns about dangerous over-concentration in the so-called “Big Seven” stocks that dominate the market Standard & Poor’s 500and related concerns Artificial intelligence bubbleTwo managers who oversee tens of billions of dollars from investors told CNBC at the Delivery Alpha conference last week that they remain optimistic about what is happening in the US technology sector and the huge sums being invested in artificial intelligence.

Coatue Management founder and portfolio manager Philippe Laffont, whose fund manages nearly $70 billion in assets, according to Securities and Exchange Commission filingHe said on “Delivering Alpha” that there is an important difference between now and the dot-com bubble, which he called the “hyper-expansion advantage,” referring to the ability of companies to… alphabet, Microsoft and Amazon To invest what Wall Street estimates could reach more than $500 billion in AI bets next year.

General Atlantic Chairman and CEO Bill Ford, whose company manages $118 billion in assets, agreed that the dollar signs currently being discussed in the market are a reason for conviction about the largest public technology stocks rather than skepticism. “The people who are driving change in AI are the large public companies and incumbents, and they have an advantage,” he said.

Even as Ford said his company remains focused on private market opportunities and how AI can be applied to its portfolio companies — investments that he says are being made across each of the 200 companies in which General Atlantic invests — he added: “You can’t invest in the private market without understanding what Oracle is doing, what Google is doing, what Microsoft is doing.”

“You can’t make good decisions,” Ford said. “We have to be fully aware of what they’re doing even if we’re not invested in it.”

General Atlantic has been investing “very aggressively” across its portfolio companies in AI, and Ford said it has already seen “a very high return,” adding that this is at what can be described as just the “front edge” of value opportunities from applying AI, in areas such as customer service, programming and digital marketing.

Lafont, whose firm invests in public and private companies, said it’s fair to have concerns about technology stocks that are increasing in value too quickly because that could conflict with the bullish outlook for long-term valuations. That’s because with publicly traded stocks, he said, belief in the future doesn’t necessarily mean that belief isn’t already priced in. He cited Oracle’s recent stock chart as an example — though he did not specifically reference the concern about the company recently expressed by other market skeptics — which rose over the past year from $150 a share to nearly $350 a share, before falling back to the $220 range.

Alphabet is a good example of how quickly the story of AI-related big tech stocks can change, and in their case for the better. It wasn’t long after that Google has been left for dead By some investors betting in the wake of ChatGPT’s debut and Google’s Gemini stumble that it is losing the AI ​​war. Alphabet is now the best-performing big tech stock of the year. Last week, Warren Buffett Berkshire Hathaway She revealed that she had acquired a stake in the company.

Berkshire Hathaway’s bet on Google This is notable given Buffett’s previous comments that he missed an opportunity to invest in the company. in Berkshire meeting 2019, Charlie Munger, a vice chairman at Buffett and Berkshire, lamented that they “made the mistake” of not buying Alphabet earlier because “we could see how successful Google Ads was in our own operations. We just sat there sucking our thumbs.” At the time, shares were heading toward $59. On Friday, shares closed at over $276, and over the previous quarter – so Berkshire has just released its buy and sell portfolio -The stock has never traded below $170.

the Nasdaq The index ended last week in the red, its second straight weekly decline since August, but it remains less than 5% below its all-time high and above its 200-day moving average. Since its COVID low, the Nasdaq has risen more than 245%.

The rapid rise in technology valuations is certainly a phenomenon that investors need to study, Lafont said, and that includes a greater understanding of not only the bull case but also the naysayers — “short-selling” investors. Michael Burry recently claimed That overextended companies artificially boost profits — but Lafont said that when you compare 2025 to 2000, it’s a very different story.

He added that during the dot-com bubble, “all the capital was fueled by IPOs and new companies with somewhat questionable business models.” Today’s largest publicly traded technology companies are on track to produce nearly $1 trillion in free cash flow annually, and to do so without significant debt, he said.

Most companies in the market, even those that produce free cash flow, do so “with a significant amount of debt,” Lafont said, leaving them overburdened when it comes to investment options.

But big tech companies are a different story. “These are investments made by companies with real boards and return on capital requirements, so I think the system is very healthy and the leverage implicit in the system is small,” he said. “I’m alert, but if you ask me: ‘Am I anxious?'” he added, “I haven’t yet.”

Wall Street has Concerns about Oracle’s balance sheet And the debt burden as a source of financing investment in artificial intelligence.

Lafont and Ford weren’t the only investment executives on CNBC’s “Delivering Alpha” to express optimism on the topic of artificial intelligence. Mary Callahan Erdos, CEO of JPMorgan Asset and Wealth Management, said on a separate panel: Investors should focus on the opportunities for artificial intelligence Rather than whether there is currently a bubble.

Ford said that the investments made by these large public companies offset each other – the so-called Circular AI economy That has attracted scrutiny – a phenomenon he sees as bullish and based on the belief that companies believe they have a “real big opportunity at the other end”, in addition to investments backed by the revenues and profits they are now making. “They are all fighting for a very big prize, and they need to invest now to win,” Ford added.

“The amazing thing about the increase in valuations among the Mag 7 is the tracking of earnings,” he said. “This is not two or three times the price-to-earnings ratio. The earnings are there,” Ford said.

Both investors said that even as the cost of computing falls, they don’t expect a market to go to zero as a result, which would happen in a classic commodity scenario.

“It’s like gasoline to an engine,” Lafont said. “It’s strange, because if I say that as the price falls, the P in Q must go to zero, even if the P in Q goes to zero, the P in Q can go to almost infinity,” he said. equation This dictates that the price of a good good will fall, as will the overall revenue opportunity. Laffont said he believes the cost of algorithmic tokens will fall dramatically, but what he called “the flexibility of things we can do with low-priced tokens is almost infinite.”

“A lot of things can be done, not only with intelligence and software but also in cars and human machines. I’m fairly optimistic that for a long time, more than a decade, with any decline in token price, the total P times Q will still grow strongly.”