I've been covering markets for nearly a decade, and I'm getting that familiar twitch in my eye. You know the one—it's the involuntary response to watching stocks defy gravity while fundamentals take a back seat to pure, unfiltered enthusiasm.
The warning signs are everywhere if you're willing to see them. Just last week, my rideshare driver spent our entire trip explaining his options strategy for semiconductor manufacturers. He hadn't heard of price-to-earnings ratios, but was confident his leveraged positions would triple by summer. Gulp.
We've been here before, haven't we? The intoxicating feeling that making money in stocks is... well, easy. Too easy.
The AI trade has become particularly fascinating to watch. It's like a financial perpetual motion machine that shouldn't work but somehow keeps spinning faster. Here's how it goes: Company A announces some vague AI initiative requiring massive computing resources. Company B (usually a chipmaker) rockets higher on this "demand signal." Then—and this is where it gets circular—Company B invests in Company C, an AI startup, which then... you guessed it... buys more hardware from Company B.
Round and round we go. Everyone gets richer on paper. Genius all around!
Take a breath and look at some of these valuations, though. Palantir now commands a staggering $450 billion market cap on roughly $4 billion in revenue. That's a 112.5x price-to-sales ratio, for those keeping score at home. Normal software companies? They typically fetch 5-10x sales. Even the darlings of high-growth tech usually top out around 30-40x in rational markets.
But who needs rationality when you have rocket emojis, right?
The quantum computing sector might be even more disconnected from reality. Most of these companies are years—if not decades—away from meaningful commercial applications. Yet investors are pricing them as if they'll be revolutionizing computing by next Tuesday. It's as if the market has developed the ability to bend time itself, collapsing future potential into present-day valuations.
Then there's Oklo. Lord help us. This nuclear startup went public via SPAC and promptly tripled despite having virtually no revenue and a nuclear reactor that exists primarily in PowerPoint presentations. Look, I'm all for long-term thinking (we need more of it!), but there's a wide gulf between patient investing and what we're seeing now.
What connects all these examples is what I've started calling the "narrative premium"—the extra multiple investors willingly pay not for current fundamentals or even reasonable projections, but for increasingly fantastic stories about what might happen in some sci-fi future. The more world-changing the story, the higher the premium.
Has anything actually changed about market cycles? Not really. These patterns feel uncomfortably similar to previous episodes of market euphoria—the dot-com bubble, the 2021 SPAC mania, even echoes of the 1960s "Nifty Fifty" era. Different actors, same script.
I'm not suggesting the market will crash tomorrow. Timing markets is a mug's game, and periods of widespread euphoria can persist much longer than seems logically possible. But... when your nephew who couldn't define "revenue" six months ago starts lecturing you about Archer Aviation's total addressable market over Thanksgiving dinner, it might be time to reassess your risk exposure.
Taking some chips off the table isn't bearish—it's prudent. Trees don't grow to the sky, narratives eventually meet reality, and when the correction comes (it always does), those with cash on hand will find themselves facing a very attractive shopping list.
As Buffett famously said, be fearful when others are greedy. And right now? Greed isn't just in the air—it's practically suffocating.
