Core Viewpoint - The current AI trend is not a bubble but a genuine and long-term productivity revolution, as stated by Coatue in their latest secondary market report [1][2]. Market Analysis - The AI sector has been a core driver of growth in the U.S. stock market since the launch of ChatGPT in November 2022, with AI-related companies in the S&P 500 achieving a return of 165% over nearly three years, significantly outperforming the overall index return of 68% and the 24% return of non-AI companies [3]. - The growth of AI has expanded beyond the "Mag 7" companies, with AI-related returns in 2025 exceeding those of the Mag 7 for the first time, indicating a broader market penetration [6][8]. Sector Performance - AI sectors such as energy, semiconductors, and software have shown returns significantly higher than the Mag 7, with AI energy achieving a 53% return in 2025 YTD, three times that of the Mag 7 [8][12]. - The AI industry's growth is transitioning from being driven solely by algorithmic breakthroughs to include innovations in energy supply, semiconductor manufacturing, and data infrastructure [12]. Consumer Resilience - Strong consumer fundamentals have alleviated concerns about economic recession, providing crucial support for corporate earnings and financial assets [13]. Historical Context - Historical analysis indicates a 48% probability of continued market growth in 2026, based on past performance of the S&P 500 after three consecutive years of growth [15]. - Long-term holding strategies are emphasized, as premature selling during periods of high growth can lead to significant opportunity costs [18][20]. AI Bubble Characteristics - Coatue defines a bubble as a state where asset prices significantly exceed intrinsic value, driven by speculation and investor behavior. The current AI investment trend resembles characteristics of both stock market and infrastructure bubbles [21][25]. AI Adoption Concerns - Market skepticism regarding AI includes concerns about inflation, high valuations, concentration of AI winners, and capital expenditures. However, Coatue counters these concerns with data showing a decline in inflation expectations and a sustainable growth trajectory for AI companies [31][35][41][52]. AI Profitability Framework - Coatue outlines a profitability framework for AI, highlighting both direct and indirect benefits, such as revenue increases from AI products and cost savings from operational efficiencies [89]. - The potential for AI revenues to grow tenfold in the next 5-10 years, reaching $1 trillion in profits, is projected, with AI expected to account for 4% of global corporate profits [98]. Market Signals - Current IPO activity and leverage levels indicate that the equity market is not exhibiting bubble-like characteristics, although high retail investor leverage poses potential risks [102][106]. AI Infrastructure Focus - The AI infrastructure sector has outperformed software sectors since the launch of ChatGPT, with significant returns in semiconductor indices compared to cloud software indices [107][109]. - The rise of AI applications is also noted, with several private AI application companies achieving valuations exceeding $5 billion, indicating a shift towards scalable AI solutions [111]. Investment Principles - Coatue emphasizes the importance of long-term investment strategies in AI, advising against premature selling and highlighting the need to monitor private market dynamics for early signs of industry changes [124][125].