Somebody has to walk me through why MSFT shares deserve to trade at 12x EV/LTM Revenue and 30x EV/LTM Cash from Operations. The “AI Hype” trade is not a valid answer.
MSFT shares are up 41% YTD largely on AI hype. AI revenues will not manifest quickly enough to justify the outrageous multiples sported by NVDA, MSFT, PLTR (a Services company) and so many others. Yet, this is what happens when fiscal and monetary policy pumps $ Trillions into the economy that are not tied to productivity. Those diluted Dollars find their way into the equity market and other asset classes causing bubbles to spring up everywhere.
It will take years to unwind this monetary policy excess. Don’t let the Fed fool you. Powell is no Volcker. Pre-COVID the Fed’s balance sheet sat at $4.2 Trillion. 4 month later it sat at $7.1 Trillion and peaked at $9.0 Trillion in March 2022. Today it sits at $8.4 Trillion. Hardly draconian monetary policy by any stretch of the imagination.
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