During a recent episode of Equity, Rebecca Bellan spoke with Alok Sama, a seasoned professional with experience at Morgan Stanley and SoftBank Group International. They touched on Apple’s recent iPhone 16 lineup reveal, emphasizing the incorporation of AI-powered features. Sama expressed his views on the current AI hype cycle, pointing out that the true impact of Apple’s announcements is yet to be fully realized. He mentioned the significantly high valuations of companies in the AI space such as Nvidia, Anthropic, OpenAI, and xAI, questioning whether this indicates an impending AI bubble burst.
Sama shared his perspective on the valuation of AI companies, citing Nvidia’s performance and valuation as being in line with their revenue and profit growth. He compared Nvidia’s forward earning multiples to historical figures, highlighting the difference in valuation metrics over the years. Sama also discussed the significant investments made by top AI players like Nvidia and Microsoft into companies like OpenAI, emphasizing the interconnected nature of these investments and the tech ecosystem.
Drawing from his upcoming memoir, “The Money Trap: Lost Illusions Inside the Tech Bubble,” Sama explored the psychology of investment hype cycles prevalent in the tech industry. He discussed the shift towards valuing companies based on growth projections rather than traditional metrics like revenue and profits. Sama recounted instances where valuation discipline influenced investment decisions, citing examples like Facebook and ByteDance. He emphasized the importance of balancing risk aversion with investment enthusiasm in today’s market landscape.
Sama reflected on the evolutionary nature of tech investing, highlighting the lessons learned from past valuation missteps. He discussed Masayoshi Son’s experiences with investments in Facebook and ByteDance, showcasing the impact of valuation discipline on long-term outcomes. Sama stressed the need for VCs to consider business models alongside growth predictions, cautioning against succumbing to groupthink mentality prevalent in hype cycles.
The conversation between Rebecca Bellan and Alok Sama provided insightful perspectives on the evolving landscape of technology and investment. Sama’s experiences at Morgan Stanley and SoftBank Group International offered valuable insights into the AI ecosystem, tech valuations, and the psychology of investment cycles. As the tech industry continues to evolve, it is crucial for investors to maintain a balance between risk aversion and investment enthusiasm, learning from past mistakes and adapting to the changing dynamics of the market.