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Daily Missive

Too Much of a Big Nothing

Loading ...Bill Bonner

August 5, 2025 • 4 minute, 44 second read


big techmarket concentrationmarket valuation

Too Much of a Big Nothing

“During the dot-com days, one could take just about any company public and reap fortunes. All you had to do was to make sky-high projections for growth, say you were in the Internet space, and go along with unscrupulous investment bankers and their analysts.”

— Vivek Wadhwa

August 5, 2025 — Two companies — Nvidia and Microsoft — each are worth more than $4 trillion. Together, that’s more than India’s and Japan’s combined annual output.

Price is what you pay, as Buffett puts it. Value is what you get. Our question for today: how much value will investors really get from the Magnificent 7?

Our Law of Conservation of Value tells us that prices cannot stray too far or too long from value. And value depends on output. Investors ought to be able to look to a future stream of income and from it earn their money back…and more.

Even in the dot-com bubble in 1999 the top companies were not as valuable or as concentrated as they are today. Nvidia, Microsoft, Alphabet, Apple Meta, Tesla and Amazon — together, these companies make up a third of the total US stock market value, an amount roughly equal to China’s GDP.

Part of the appeal of these Mag 7 stocks is that they are widely believed to be taking advantage of AI technology. In the case of Nvidia, of course, that is the central appeal. But the others are investing heavily in AI too.

In 2024 and 2025, Meta, Amazon, Microsoft, Google and Tesla will put more than half a trillion into AI. The revenue from these investments is expected to be around $35 billion. Amazon, for example, has invested more than $100 billion, which is thought to generate an extra $5 billion in revenue.

We don’t know how reliable or meaningful these figures are. What we do know is that they aren’t very impressive. As in the dot-com boom of the late ‘90s, AI is not paying off. This is an in-put story, with huge investments made in the hope of creating AI-based wealth. But so far, the output doesn’t measure up.

You can go to ChatGPT, for example, and pay for the service. Many people use it occasionally — including us. But few pay for it — also including us. This would be fine, except that so much investment has gone into AI development that anything less than spectacular results will look like failure. One estimate, from Goldman Sachs, for example, showed that the Mag 7 would have to produce $600 billion in extra annual revenue to make sense of their investment.

Michael Roberts:

So while the excitement of AI takes the stock market to new heights… a huge investment of money and resources, astronomical payments to AI trainers, and the construction of huge data centers [there]…so far no significant revenue has been generated and there is almost no profit. This is a steroid-friendly version of the dot-com bubble.

The appeal of the dot-com era was the idea that more information would lead to higher GDP growth rates with less need for capital investment. Costly trial-and-error expansion would be replaced by less costly, more precise, knowledge-driven growth, or so it was believed.

It didn’t work out that way. Productivity and growth rates generally softened throughout the 21st century. Capital investment went down. The Internet/Information Revolution did not compensate for the decline; it seems to have made it worse. The OECD adds detail:

In the last half century, we have filled offices and pockets with increasingly faster computers, but the increase in labor productivity in developed economies has declined from about 2% annually in the 1990s to 0.8% in the last decade. Even the production per worker of China, which once increased rapidly, has stopped. Research efficiency has decreased. Today, the average scientist produces less groundbreaking ideas per dollar than his colleagues in the 1960s. Despite the rise of intangible assets, total investment has generally been weak since the global financial crisis, which has directly worsened the slowdown in labor productivity.

Will that change with AI? Probably not. The defining curse of the Information Revolution was too much information. It piled up. It got distorted and misinterpreted. It took time and money to store and sort. And much of it was either false or useless.

Now cometh AI, adding to the too-much-info problem. Already, it generates news and reports that fill our in-boxes and waste our time. And an Israeli company just announced that it can twist and turn (distort) the news in real time.

Which leaves, at least for now, AI and the Mag 7 in an old-fashioned financial bubble. Stock prices are far higher than actual sales and profits can account for. So one way or another price and value will have to come back together. While it is not impossible that some breakthrough will lead to a big burst of productivity gains and growth, it is more likely that stock prices will fall.

Regards,

Bill Bonner
Bonner Private Research & Grey Swan Investment Fraternity

Continued Below…

P.S.: Bill’s insights echo ours – we’re still mindful that markets may not decline right away. And that any decline we do get may be of the garden-variety seasonal pullback.

But a high concentration in just a few stocks – widely owned by investors specifically, or as the biggest components of passive index ETFs – pose a growing danger.

And that’s not even taking into account economic concerns like a slowing job market, stubborn inflation, and President Trump’s ongoing Great Reset of the American economy, which will have some bumps along the way.

Hence our suggestion to take some profits off the table and increase your cash position slightly.

Your thoughts? Please send them here: addison@greyswanfraternity.com


The Useless Metal that Rules the World

August 29, 2025 • Dominic Frisby

Gold has led people to do the most brilliant, the most brave, the most inventive, the most innovative and the most terrible things. ‘More men have been knocked off balance by gold than by love,’ runs the saying, usually attributed to Benjamin Disraeli. Where gold is concerned, emotion, not logic, prevails. Even in today’s markets it is a speculative asset whose price is driven by greed and fear, not by fundamental production numbers.

The Useless Metal that Rules the World
The Regrettable Repetition

August 29, 2025 • Addison Wiggin

Fresh GDP data — the Commerce Department revised Q2 growth upward to 3.3% — fueling the rally. Investors cheered the “Goldilocks” read: strong enough to keep the music going, not hot enough (at least on paper) to derail hopes for a Fed pivot.

Even the oddball tickers joined in. Perhaps as fittingly as Lego, Build-A-Bear Workshop popped after beating earnings forecasts, on track for its fifth consecutive record year, thanks to digital expansion.

Neither represents a bellwether of industrial might — but in this market, even teddy bears roar.

The Regrettable Repetition
Gold’s Primary Trend Remains Intact

August 29, 2025 • Addison Wiggin

In modern finance theory, only U.S. T-bills are considered risk-free assets.

Central banks are telling us they believe the real risk-free asset is gold.

Our Grey Swan research shows exactly how the dynamic between government finance and gold is playing out in real time.

Gold’s Primary Trend Remains Intact
Socialist Economics 101

August 28, 2025 • Lau Vegys

When we compare apples to apples—median home prices to median household income, both annualized—we get a much more nuanced picture. Housing has indeed become less affordable, with the price-to-income ratio climbing from roughly 3.5 in 1984 to about 5.3 today. In other words, the typical American family now has to work much harder to afford the same home.

But notice something crucial: the steepest increases coincide precisely with periods of massive government intervention. The post-dot-com bubble recovery fueled by Fed easy money after 2001. The housing bubble inflated by government-backed mortgages and Fannie Mae shenanigans. The recent explosion driven by unprecedented monetary stimulus and COVID lockdown policies.

Socialist Economics 101