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Some of America's most respected investors are warning of an impending massive stock market crash. Listen carefully to these snippets, and then I'll show you something amazing. This is, in my opinion, the biggest investment bubble in American history. The stocks that have risen the most, the AI sector, and other exciting papers with the biggest moves, historically should fall the most.
From these unprecedented levels, a 70% drop would not be unexpected. If you must own stocks, own them outside of America. Do not own US stocks. You mentioned the dot-com bubble earlier. Are we now in a dot-com bubble 2.0 ? Oh, it's much bigger than that. The scale of AI development compared to TMT development in 1999-2000 is many times greater, even as a percentage of the economy.
Now let me tell you the other side of the story, because the reality may surprise you. Despite Jeremy Grantham's warning about a possible bubble in the US market, GMO's latest SEC 13F filing shows that its largest US holdings include Microsoft, Alphabet, Johnson & Johnson, Apple, Meta, Lam Research and Amazon.
Simply put, GMO is heavily investing in the same American tech companies that are supposedly at the center of this giant bubble. It seems that long-time chief investment strategist Jeremy Grantham and GMO's portfolio managers are not communicating with each other, as the contrast becomes even more pronounced when we consider the opinion of Tom Hancock, GMO's head of focused equities and one of their senior portfolio managers.
Hancock recently called Nvidia the biggest opportunity in the market right now. He argues that Nvidia's profits have grown so rapidly that its valuation is becoming increasingly attractive. In my opinion, the market as a whole may be expensive, while individual companies in that market may still be attractively valued.
Speculative AI stocks without earnings may be in a bubble, while established AI companies with strong revenues, cash flows, and competitive advantages may remain sound long-term investments. So, calling the entire market a bubble is unjustified. History teaches an important lesson here. Since 1980, the S&P 500 index has experienced an average decline of approximately 14% during each calendar year.
Despite these regular declines, the market still showed positive annual returns in most years. This means that market corrections are not unusual events . This is a normal part of long-term investing. Remember the collapse of 1987 . The Dow Jones Industrial Average fell 22.6% in one day, the largest single-day percentage drop in its history.
Investors believed that the financial system was falling apart . However, the market eventually recovered, and many high-quality companies reached new highs. The dot-com crash teaches us a more difficult lesson. The NASDAQ index fell about 78% from its peak and took about 15 years to return to that level.
Many speculative internet companies have disappeared completely. However, the Internet as such was not a failure . Companies like Amazon survived the crash and eventually became some of the most valuable businesses in the world. Investors who understood the difference between an important technology and an overvalued company were ultimately rewarded.
The 2008 financial crisis was even worse. The S&P 500 index fell about 57 % from its peak in 2007 to its low in March 2009. Big banks went bankrupt, unemployment skyrocketed, and many believed that another Great Depression had begun. But investors who bought profitable companies during that period became participants in one of the most powerful bull markets in history.
Then the "Covid" crash happened. Between February 19 and March 23, 2020, the S&P 500 index fell by approximately 34%. Business ground to a halt, travel stopped , and the global economy was in sudden crisis. However, by August of the same year, the index had regained its previous high. Microsoft, Nvidia, and many other technology companies emerged from that crisis stronger than before.
The lesson is not that every dip should be bought blindly. The dot-com crash proved that weak businesses can collapse and never recover. A real opportunity arises when the share price of a strong and profitable company falls while its long-term profit potential remains unchanged. That's why I focus on revenue growth, profits, cash flow, competitive advantage, and valuation, not just scary headlines.
Given these factors, three companies stand out to me , and number one is Nvidia. During a gold rush, the safest profits usually go to companies selling picks and shovels. Not every prospector looking for gold. Nvidia is playing this role in the artificial intelligence boom. Thousands of companies are competing to create the best AI models and programs.
No one knows which of them will ultimately win. But almost every serious player needs a powerful computing infrastructure. And Nvidia provides these necessary tools. Its GPUs perform AI computations, and its networking hardware connects thousands of processors into massive computing clusters. Nvidia 's CUDA software helps developers use these systems effectively.
This combination creates a holistic platform that is difficult for competitors to replicate. Another important advantage is the relatively short economic life cycle of AI equipment. Data center operators typically depreciate servers, GPUs, and similar equipment over approximately 4–6 years. However, the real competitive timeframe may be even shorter, as each new generation delivers better performance, faster processing, and lower cost of AI tasks.
This creates a constant update cycle. Microsoft, Amazon, Alphabet, and Meta can't just buy a GPU once and use the same hardware forever. They must continue to build capacity and replace outdated systems to remain competitive . Microsoft recently reported that roughly two- thirds of its quarterly capital expenditures went to non-durable assets, mostly GPUs and CPUs.
While Nvidia won't get every dollar, it shows how quickly AI infrastructure needs to be expanded and updated. The AI “ gold rush” will have its winners and losers. But Nvidia doesn't need to second-guess every successful AI application. It makes money by supplying “ pickaxes, shovels, and industrial equipment” needed by almost anyone looking for digital gold.
Promotion number two—Micron. Micron supplies the memory needed to power advanced computing systems. A powerful AI processor cannot perform useful work without fast memory. High- bandwidth memory feeds massive amounts of data to GPUs, while DRAM and NAND store and process information in data centers, computers, cars, and mobile devices.
Micron's latest quarterly revenue reached approximately $41.5 billion, representing a year-over-year growth of 346% . Operating cash flow reached 25.4 billion. Free cash flow reached 18.3 billion, and operating margin increased to approximately 81 %. These are extraordinary figures. More importantly, Micron is trying to reduce the traditional cyclical nature of the memory industry's " boom and bust" cycles .
The company has signed 16 strategic agreements with customers, covering about 20% of DRAM volume and a third of NAND volume for the period of the agreements. These contracts reportedly include financial commitments from customers worth 22 billion. They provide better revenue visibility, guaranteed purchase volumes, and create better protection against sudden price drops.
Wall Street analysts have noticed these changes. JP Morgan raised its price target to 1540. Morgan Stanley increased its target to 1200. Vbush raised it to 1400, and Saska raised its target to 2000. However, Micron shares are trading at only 12–13 forward earnings multiples . Micron will remain cyclical, and today's unusually high margins won't last forever.
However, AI makes advanced memory a strategic component, not a basic commodity. This structural change deserves a higher valuation than the market has traditionally given to Micron. Promotion number three—Microsoft. Microsoft controls one of the most powerful business ecosystems in the world. Its products include Azure, Windows, Microsoft 365, Teams, GitHub, LinkedIn, and the growing Copilot family of AI tools.
This gives Microsoft something that its competitors don't have. Direct access to hundreds of millions of consumers and business users. In the reporting quarter, revenue reached approximately 82.9 billion, growing by 18% year-over-year. Microsoft invests about 190 billion annually in expanding its computing infrastructure.
These costs put pressure on short-term cash flow, but also create the capacity needed to meet future demand for AI. The company owns the cloud infrastructure, corporate communications, and software that customers use every day . Therefore, it can profit at several levels of the AI economy . At about 23 times forward earnings, Microsoft is trading below the valuation typically associated with its quality, recurring revenue, and competitive position.
Nvidia provides the computing power. Micron provides the memory. Microsoft transforms this infrastructure into products that businesses and individuals use. These companies go hand in hand with the progress of humanity. They support scientific research, medical discoveries, education, transportation, automation, and the creation of entirely new industries.
A market correction could lower their prices, and no investment is guaranteed. But if their profits continue to rise as valuations fall, fear will create opportunity. That's why Nvidia, Micron, and Microsoft are three companies I want to own despite the volatility. Not because their stocks will move up in a straight line, but because their technologies are becoming increasingly important to the future of the global economy.
This is my personal opinion , not financial advice. Please do your own research before making any investment decision.
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