Asymmetrical Bets
· Asymmetrical Bets
· July 02, 2026 at 14:04
· ⏱ 6 min read
| Read on Substack ↗
Summary
The article argues that rapid, compounding earnings growth in AI infrastructure companies is compressing forward P/E ratios, making stocks that have risen in price actually cheaper than they appear. This creates a valuation gap that investors anchored to trailing earnings are missing, but the specific trade ideas are behind a paywall.
•The semiconductor sector trades at 20.2x forward earnings, technology hardware at 26x, yet some individual companies within these sectors trade at fractions of those multiples.
•Forward P/E compression occurs when earnings triple while the stock price stays flat, turning a 40x multiple into 10x.
•Magnificent 7 hyperscalers have collectively committed hundreds of billions in CapEx over the next several years, with no sign of a pause due to competitive dynamics.
•Earnings visibility for AI infrastructure suppliers extends well into 2027 thanks to long-term supply agreements and take-or-pay contracts.
•The article contrasts the current AI cycle with the dot-com bubble, claiming that this time earnings have materialized to justify valuations.