Benzingaยท2025-09-24 12:22Core Insights - The AI sector is experiencing conflicting forces, with both caution regarding spending and an urgent need to invest to meet demand, leading to soaring capital expenditures among AI firms [1][2] - GQG Partners warns that the current tech sector exhibits "dotcom-era overvaluation," suggesting that the consequences of the current AI boom could be more severe than the dot-com collapse of the late 1990s [3][4] Capital Expenditure Trends - Big tech's capital expenditure (CapEx) as a percentage of EBITDA is currently between 50% and 70%, comparable to levels seen during the 2000 telecom bubble and the 2014 energy bubble [4] - Companies with such high capital intensity historically tend to be "structurally poor investments" [4] Market Conditions and Fundamentals - GQG's analysis highlights "deteriorating fundamentals" in the tech landscape, including decelerating revenue growth, collapsing free cash flow, and intensifying competition [5] - 35% of the S&P 500's weight is now driven by companies trading at over 10 times sales, surpassing the 25% level seen at the dot-com peak [6] Investment Opportunities - GQG Partners believes the market is at a "significant inflection point," indicating that AI-related revenues are still low compared to the massive capital being invested [7] - The firm suggests that there are "better investment opportunities outside the tech sector," advising caution for those heavily investing in the AI boom [7] Performance of Big Tech Stocks - Notable year-to-date performances of big tech firms include Nvidia Corporation at 29.01%, Alphabet Inc. at 32.85%, and Tesla Inc. at 67.48% [9][10] - Exchange-traded funds (ETFs) linked to technology also show strong performances, with the iShares US Technology ETF at 22.23% year-to-date [10]