Stocks are sliding as fresh bubble fears seep into markets. Gold, silver, and crude oil are all down, too, while Treasuries and the dollar are up a tad.
Palantir Technologies Inc. (PLTR) has been one of the hottest stocks in the hottest sectors – Artificial Intelligence (AI). The AI software and services company just reported stellar third-quarter results. Q4 sales guidance of $1.3 billion also topped Wall Street estimates, as did its operating profit projections. Yet the stock slid in early post-earnings trading, with analysts suggesting the results weren’t strong enough for a stock with an incredibly rich price-to-earnings ratio of 230!
PLTR, NVDA (YTD % Change)
Data by YCharts
Speaking of valuations, the “Cyclically Adjusted Price-to-Earnings” ratio from economist Robert Shiller may be flashing a warning. This Nobel Prize-winning economist’s “CAPE” ratio includes built-in business cycle-related adjustments, leading some to prefer it to standard measures. The valuation gauge recently hit 40.5. It has only touched these lofty levels once in data that goes back to 1881 – the tail end of the the Dot-Com bubble. In fairness, though, it has been rising for years...and that hasn’t derailed the post-2022 bull run.
Michael Burry of Scion Asset Management fame is reportedly targeting AI stocks, though. The hedge fund manager is stacking put options on names like Palantir and Nvidia Corp. (NVDA) – and posting bubble warnings on social media. Burry rose to fame thanks to his wildly profitable bets against various housing and mortgage-related instruments during the Great Financial Crisis (as portrayed in the movie The Big Short). But his more-recent bearish calls haven’t panned out.
Finally, the company behind late-night and early-morning meals with catchy names like “Moons Over My Hammy” is going private. The 72-year-old diner chain Denny’s Corp. (DENN) will sell itself to private equity firm TriArtisan Capital Advisors, owner of the P.F. Chang’s chain. The $322 million deal will remove DENN shares from the public markets for the first time in almost six decades. Denny’s has struggled in recent years, but still has approximately 1,600 restaurants.
