Why aren’t major individual investors worried?

The world’s biggest investors often focus more on private markets than public ones, but as the artificial intelligence boom continues to reshape economies for decades to come, they can’t help but pay close attention to what’s happening with the biggest publicly traded tech stocks, and they’re not worried.

Amid concerns about high-risk concentration in the so-called “Magnificent Seven” stocks that dominate the world. S&P500and related concerns about an AI bubble, two executives who oversee tens of billions of dollars from investors told CNBC at last week’s Delivering Alpha conference that they remain bullish on what’s happening in the U.S. tech space and the large sums of money being invested in AI.

Philippe Laffont, founder and portfolio manager of Cortue Management, whose funds manage about $70 billion in assets, according to a filing with the Securities and Exchange Commission, said at Delivering Alpha that there are important differences between now and the dot-com bubble, which he calls the “hyperscaler advantage,” noting the ability of companies to: alphabet, microsoft and Amazon Wall Street predicts that spending on AI next year could reach more than $500 billion.

Bill Ford, chairman and CEO of General Atlantic, which manages $118 billion in assets, agreed that the dollar sign currently being discussed in the market is reason for confidence, not doubt, for the largest publicly traded tech stocks. “The big public companies and incumbents are driving the AI ​​change, and they have an advantage,” he said.

While Ford said his company remains focused on private markets opportunities and how AI can be applied to its portfolio companies, he said the investments are in all 200 companies in which General Atlantic invests, adding: “You can’t invest in private markets without understanding what Oracle, Google and Microsoft are doing.”

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

General Atlantic is investing “quite aggressively” in AI across its portfolio companies, he said, adding that Ford is already seeing “quite strong returns” in what it describes as the very “frontier” of value opportunities from applying AI in areas such as customer care, coding and digital marketing.

Mr. Laffont, whose firm invests in both public and private companies, said it’s natural to be concerned about tech stocks that appreciate rapidly, because that can conflict with his bullish view on long-term valuations. That said, in the case of publicly traded stocks, confidence in the future doesn’t necessarily mean that belief isn’t already priced in. He cited Oracle’s recent stock chart as an example, but he didn’t specifically address concerns about the company that other market skeptics have recently expressed, even though the stock has risen from $150 to nearly $350 per share over the past year, before returning to the $220 range.

Alphabet is a great example of how the story of big tech stocks around AI can change quickly, sometimes for the better. It was only recently, in the wake of ChatGPT’s debut and Google Gemini’s stumbles, that Google was deemed dead by some investors who bet the company had lost the AI ​​war. Alphabet is currently the year’s best-performing large tech stock. Last week, Warren Buffett Berkshire Hathaway announced that it had invested in the company.

Berkshire Hathaway’s bet on Google is notable given Buffett’s previous comments that he missed an opportunity to invest in the company. At the 2019 Berkshire meeting, Buffett and Berkshire Vice Chairman Charlie Munger lamented that it was a “mistake” not to acquire Alphabet sooner. That’s because “we could see in our own operations how well Google’s ads were working, and we were just sitting there sucking our thumbs.” At the time, the stock price was about $59. The stock closed at more than $276 on Friday, and the stock has never dipped below $170 since last quarter, when Berkshire just announced portfolio sales.

of Nasdaq ended last week in the red, marking the second consecutive week of decline since August, but remains less than 5% below its all-time high and above its 200-day moving average. Since the coronavirus lows, the Nasdaq has risen more than 245%.

Laffont said that while the rapid rise in tech company valuations is definitely a phenomenon that investors need to study, including a better understanding of not only the bulls but also the naysayers (“Big Short” investor Michael Burry recently argued that hyperscalers are artificially inflating earnings), he said the picture is very different when comparing 2025 to 2000.

He said that during the dot-com bubble, “all the capital was backed by IPOs and startups with pretty questionable business models.” Today, the largest publicly traded tech companies are generating nearly $1 trillion in free cash flow annually without taking on large amounts of debt, he said.

Mr. Lafont said most companies in the market, even those generating free cash flow, operate with “a lot of debt” and have challenges when it comes to investment choices.

But when it comes to top technology companies, it’s a different story. “This is an investment made by a company with a real board and return on capital requirements, so I think the system is fairly sound and the implicit leverage within the system is small,” he said. “I’m careful, but if you ask me, ‘Are you worried?’ I’m not yet,” he added.

Wall Street is concerned about Oracle’s balance sheet and debt load as a source of AI investment financing.

Lafont and Ford weren’t the only investment executives to express bullishness on the AI ​​topic on CNBC’s “Delivering Alpha.” Mary Callahan Erdoes, CEO of JPMorgan Asset & Wealth Management, said on a separate panel that investors should focus on future opportunities from artificial intelligence, not whether there is a bubble now.

Mr. Ford said he views the high-profile investments these large publicly traded companies are making in each other, the so-called circular AI economy, as a bullish phenomenon, based on the belief that in addition to the revenue- and profit-driven investments that both companies are currently generating, he sees “a truly significant opportunity on the other end.” Mr Ford added: “They are all fighting for very big prizes and they need to invest now to win.”

“What’s surprising about the valuation increase within the ‘Mag7’ is the earnings follow-through,” he said. “This is not a two or three times price-to-earnings ratio. It’s profitable,” Ford said.

Both investors said they do not believe that even as the cost of computing falls, the resulting market would be zero, which could occur in a classic commodity commoditization scenario.

“It’s like gasoline to an engine,” Lafont said. “It’s strange, because if you say that as the price goes down, P x Q should go to zero, then even if P goes to zero, P times Q can be close to infinity,” he said, referring to an equation that shows that when the price of a product goes down, the total revenue opportunity goes down as well. Lafont said he believes the cost of computing tokens will come down dramatically, but that “the elasticity of what you can do with a low-cost token is almost infinite.”

“There is the potential to do so many things, not just with intelligence and software, but also with cars and humanoids and machines. I am quite optimistic that over the long term, over a decade or more, even if token prices fall, overall P×Q will continue to grow strongly.”