- Michael Allison, CFA
- Dec 29, 2025
- 1 min read
📈  Chart of the Week 12/28/2025
By Michael Allison, CFA
Valuation of Hyperscalers
The Chart of the Week shows, at least according to Carlyle, that the big AI spenders have returned to a sustained level of relative overvaluation - meaning that their P/Es are well above those of the rest of the S&P 500.
In my opinion, in the near to intermediate term, there’s more risk to their earnings multiples than their earnings.
As these companies are transitioning from asset light to asset heavy enterprises, with significantly increased capital expenditures related to their AI spending, the stocks would very well re-rate lower to be more reflective of the fundamentals of free cash flow that is becoming significantly impaired by that cap ex.
This is a topic we’ll delve into much more in the coming year, but my New Year’s Wish is the Goldilocks scenario where any downward pressure on the multiples of the largest names happens in an orderly fashion where other names in the investment universe perform better, not just in relative terms, but in absolute terms as well.
Hey, a fella can dream can’t he?
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