Alger's Ankur Crawford: Not worried at all about a possible bubble in equity markets

Key Concepts

• Secular vs. Cyclical Trends: The debate over whether AI-driven growth is a long-term structural shift (secular) or a temporary, repeating economic pattern (cyclical).
• CAPEX (Capital Expenditure): Funds used by companies to acquire, upgrade, and maintain physical assets like data centers and hardware.
• Compute Shortage: The fundamental supply-demand imbalance where the demand for AI processing power exceeds current supply.
• Deconvolution of Valuation: The analytical process of separating stock price appreciation driven by earnings growth (fundamentals) from that driven by multiple expansion (investor sentiment/speculation).
• Industrial-Based Economy: The shift from a consumer-led economy to one driven by industrial investment in AI infrastructure.

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1. Market Outlook: "Don't Fight the Tape"

Anchor Crawford argues against the "Bubble Trouble" narrative, advocating for the strategy of "Don't Fight the Tape." She maintains that despite the rapid run-up in AI-related stocks, it is too early to label the current market as a bubble. Her core thesis is that current earnings numbers for AI-related companies are still low relative to their long-term potential, and she expects this growth trajectory to persist for at least the next two to three years.

2. The Secular Nature of AI Investment

Crawford presents a strong argument that the current AI boom is a secular change rather than a cyclical one.

• Evidence: She points to the sustained increase in CAPEX. Having previously predicted rising CAPEX for 2025, 2026, 2027, and 2028, she confirms that the industry is currently in the midst of this cycle.
• The "Compute" Bottleneck: The primary driver is a fundamental shortage of "compute." Because the entire supply chain must adjust to meet this massive demand, the investment cycle is expected to extend well into 2028.
• Strategic Advantage: She notes that the market’s tendency to view this as cyclical—rather than secular—creates buying opportunities for investors who recognize the long-term structural transformation.

3. Economic Shift: Consumer to Industrial

A significant perspective presented is the transition of the U.S. economy.

• The "Baton Pass": Historically, the U.S. has been a consumer-led economy (with the consumer accounting for two-thirds of activity). Crawford observes a shift toward an "industrial-based economy" driven by AI.
• Decoupling: Because this AI-driven industrial sector has its own unique cadence, it is becoming less dependent on traditional consumer spending patterns, effectively creating a "very, very separate AI trade."

4. Deconvolving Stock Performance

Addressing concerns about "parabolic" stock moves (e.g., Micron), Crawford emphasizes the importance of deconvolution:

• Earnings vs. Multiples: She argues that many investors mistakenly view stock price increases as purely speculative. However, when one deconstructs the data, it becomes clear that for many companies, earnings revisions have kept pace with or exceeded stock price moves.
• Valuation Stability: If earnings estimates for 2027 and 2028 rise in tandem with the stock price, the valuation multiple remains stable or even shrinks. She asserts that there is a "big swath of companies" where the fundamental numbers have moved up faster than the stock prices themselves.

5. Synthesis and Conclusion

The main takeaway is that the AI market is currently in a phase of structural, long-term growth fueled by a persistent shortage of compute power. Crawford dismisses bubble fears by highlighting that the current market rally is fundamentally supported by massive, multi-year CAPEX commitments and earnings revisions. By shifting the focus from consumer-led metrics to industrial-led AI infrastructure, she suggests that the current market environment represents a fundamental "sea change" in the global economy, justifying the continued upward momentum in tech stocks.