The Best Bear Case on AI (EP. 478)

Michael and Ben open with a striking claim: the current bull market may be one of the greatest of all time. The S&P 500 has delivered 15.7% annual returns in the 2020s, and from the 2009 bottom, the total stock market is up nearly 1,500%. But the most surprising data point comes from tech stocks: they have risen 65% since January 2025, yet their forward P/E ratio has actually fallen from 29 to 22. That combination—prices soaring while valuations compress—is unusual and suggests earnings are growing faster than stock prices. Ben calls this "a stones throw away from being one of the great bull markets ever."

The Bear Case That Actually Holds Water

The conversation pivots to AI, and specifically to venture capitalist Paul Kedrosky's recent interview, which Michael describes as "the best bear case that there is by far." Kedrosky's argument is not that AI is fake or useless—he acknowledges the technology is real, which is precisely why so much capital is flowing into it. His concern is about the scale and speed of spending relative to likely returns. The current AI investment cycle represents the largest capital expenditure as a percentage of GDP in history, and it has ramped up faster than any previous technology buildout. The question is whether the ROI will arrive in time to justify the outlays.