Nasdaq Sinks 5% as Investors Retreat from AI Trade After Election

Micron is a different beast though.

There are plenty of suckers willing to gamble on a failing business (massive and rapidly growing debts, assets that can easily be cloned, no realistic path to profitability), so I don't think an IPO is off the table.

As an example, Palantir has a similar cash flow / market cap ratio. I didn't check many others.

The investors were right that the Internet would be important, and that Cisco would continue to be an important manufacturer of networking infrastructure. This just fundamentally did not matter because after the dot-com bubble popped, the market decided that Cisco simply wasn't worth the price it was selling at during the height of the bubble.

Obviously you wouldn't pay 10x revenue if you expect revenue to be flat for the next 10 years.

No wonder that company no longer exists with a CEO that doesn't get that.

I empathize with this view, however it is very hard to value businesses that have extremely high margins, and who grow revenue very quickly on existing products while they're adding additional products.

I don't think NET is a steal at 39x revenue. But at no point in the last 5 years has NET been available to purchase for <15x revenue [1].

During that time, it has had Gross Margins in the exceptional range of 70%-75%, and YoY quarterly revenue growth in the similarly exceptional range of 25-40%, which has increased in our post-AI agent software economy.

If you're a Ben Graham acolyte, you would have sat out of NET since it's IPO. However, if you're a Charlie Munger/Buffet admirer who understands the pivotal role NET plays in the software ecosystem (i.e. it's inside your "circle of competence"), you'd do well to consider the Mungerism:

"Forget what you know about buying fair businesses at wonderful prices. Instead, buy wonderful businesses at fair prices."

That still leaves as an exercise to the reader what a "fair price" is for NET, but (to me, at least) it's clearly a wonderful business.

[1]: https://www.macrotrends.net/stocks/charts/NET/cloudflare/pri...

Here's the valuation though. Percentage of total web traffic going through Cloudflare.

- 2016 ~3.9%

- 2017 ~5.3%

- 2018 ~6.6%

- 2019 ~7.6%

- 2020 ~11.2%

- 2021 ~15.4%

- 2022 ~19.4%

- 2023 ~18.0%

- 2024 ~18.9%

- 2025 ~19.2%

- 2026 (early) ~20.9% (with later snapshots higher, up to the mid-to-high 20s)

Combine that with consistently excellent execution and popularity, you get the valuation.

In the end, States and their utility regulators have to be on board with large data center deployments. Some GOP-led states were often friendly to builders, but their citizens realized what was happening and the backlash was going to happen anyway because of electricity prices. It's just one more nail in the coffin from a cost-of-living perspective, and the utilities hadn't yet passed the costs on to their customers (but it will pop up soon).

States that were led by Democrats were already pushing back for their own regulatory regimes for energy cost recovery, etc. Data centers were wildly unpopular at a STATE level, so it didn't really matter what was going to happen at the federal level.

Happily I think the power market in the US will do most of the regulating for the industry. AI is not bringing costs down for most people at the moment, or perceived to be helping people in a big way. Until there is an understanding of how it will work within society or a bit of trust built up with an industry that has mostly said "shut up and take it" I think it's reasonable to expect some conversation without jumping to "these folks are all populist stupid politicians". (In my opinion, populist, stupid politicians could be used to describe both parties so what is really changing?)

On the other hand a number of governors have changed (Texas in particular just went to a Democrat, and there are SpaceX interests there). They by definition can't prosecute on a federal level but they do hold some enforcement power.

I’m convinced the best thing that happened in the nuclear arms race is the beginning of a dialogue that resulted in the start and salt treaties.

Ai obviously needs something similar.

Doom scrolling is nothing good for society and it’s with us only because extremely well funded organisations make money from it, and has weaponised it against the general population.

I am a high voltage tester and know electricity very well.

Industry exists within the context of society. It would be great if SV tech bros could understand this reality.

Micron a little as well,

AI corps with their hands out ?

they can go to hell. :}

Someone hack out a libreOffice plugin called "poetry bucket" that lets you paint over, or into a document.

By someone, I mean, one of you AI agents out there.

Github in 12 hours.

See you at the pub.

There is growing public sentiment about AI & Tech, but per exit polls that wasn't a Top 3 reason swing voters went blue (Economy, Wars, Corruption). Today's market correction is being driven by the majority in both houses of congress flipping blue. Trump and most Republican legislators were seen as broadly supporting AI / Tech and most Democrats are seen as being less supportive.

AI / Tech-friendly legislation is now likely to face a slower, more difficult path through committee and passage. IMHO, the actual impact of the political change is nowhere near 5% of company value, but outsized swings tend to happen on any adverse news when the market is already fearful they've bought into a high-priced bubble far in advance of actual earnings.

That's my attempt at a universal definition for technical and non-technical users. How does it compare?

We curtail literally millions of these "futures" every day around the world. They are called children. They are the literal future of humanity.

With the housing bubble, it was because people owned multiple homes then struggled to pay two mortgages as economic conditions degraded, and banks were willing to absorb losses if the homes were sold below the cost of the mortgage.

What is encouraging people to route from the stock market? Bond yields aren't high enough yet to encourage people to retreat from stocks, and there's no other alternative investments. Plus, so much of the S&P is held in 401ks. And I agree, economic hardship is not widespread enough for people with significant investment holdings to start selling them off to live. Those who are struggling are those who used to be struggling too (thus, no extra money for investments).

Just like the last time before the 2022 market crash [0] and that was before you created your account.

[0] https://news.ycombinator.com/item?id=29508238