Galaxy CEO Mike Novogratz: AI is 'the biggest bubble of our lifetime', urges investors to enter
Mike Novogratz, CEO of Galaxy Digital, stated at the Greenwich Economic Forum that artificial intelligence is 'the biggest bubble of our lifetime', while urging investors to enter the market. His reasoning is based on timing, not that the bubble is harmless.
He asserted that bubbles do not end in the current manner, claiming to know how bubbles end: they end violently, and it is not yet violent enough now. His valuation judgment is that AI-related stocks are still attractive based on price-to-earnings ratios and cannot be considered expensive. For those who are short, he suggested that if they haven't invested in AI yet, they might as well go home and put their heads in a bucket of ice water.
He dismissed the possibility of a policy slowdown. The US-China competition makes it difficult for Washington to slow down AI, even to the pace that builders themselves desire. He acknowledged the rising cost of long-term borrowing but believes it is not enough to interrupt this rally. On the day of his speech, the S&P 500 index reached a new high, with AI-related stocks being the main driving force, and Nvidia's market value approaching $6 trillion.
On the other side, some have called for a halt. Ray Dalio, founder of Bridgewater, referred to AI in Singapore as a typical bubble, claiming it is close to bursting. Bank of America strategists suggested using index derivatives for hedging. The Chief Investment Officer of DBS stated that Nvidia's forward P/E ratio is about 17 times, still far from the bubble range. Novogratz stands on the side of 'it is a bubble, but not yet at the end stage', not on the side that valuations are already expensive.
This is not the first time he has used the same phrase. In November 2017, he described cryptocurrencies as 'the biggest bubble of our lifetime' while maintaining a bullish outlook; Bitcoin peaked the following month and then fell over 80%, with Galaxy Digital recording a loss of $273 million in 2018. This time he has applied the same phrase to AI stocks, while the company's main business remains crypto trading, asset management, and infrastructure.
This is a call to action driven by events, not a new fund issuance. The buyers are funds willing to increase their positions in AI stocks on the premise of acknowledging the bubble, while the sellers are those treating Dalio's 'close to bursting' as a reason to reduce positions. Beneficiaries include chipmakers, computing power, and AI-weighted stocks already included in index gains; those under pressure include short positions and hedgers, as well as those who remember the crypto bubble as a template for exiting. The flow of money remains in public stocks, not leaving the stock market for safe havens.
Source: Public information
ABAB AI Insight
Mike Novogratz transitioned from Goldman Sachs partner to Fortress and took Galaxy Digital public in 2018, focusing on crypto trading and asset management. In November 2017, he publicly referred to Bitcoin as the biggest bubble of our lifetime while remaining bullish; the price peaked the following month and then fell over 80%, with the company recording a $273 million loss in 2018. This time, he has applied the same phrase to AI, with the only change being the subject from coins to stocks.
The capital path is not on the side he announced. Galaxy's money and client relationships are in crypto brokerage, custody, and market-making, and his comments on AI do not constitute a new investment. He aims to mobilize others' stock positions: P/E ratios are not expensive, Washington won't hit the brakes due to US-China competition, and rising long-term rates are insufficient to end the rally. Nvidia's market value approaching $6 trillion and the S&P 500 reaching new highs are the targets of this mobilization, not Galaxy's financial statements.
The analogy is to the 1999 'bubble hasn't gone crazy enough'. At that time, some funds continued to increase positions in networking equipment after acknowledging the internet's valuations were out of control, with Cisco still seen as a must-hold infrastructure before peaking in March 2000. Dalio's role this time is closer to those who identified speculative structures in early 2000. The industry position is at the end of an expansion phase: capital expenditures on computing power are still increasing, but pricing has shifted from startup financing to index-weighted stocks, with bubble labels and buy signals appearing simultaneously.
Structurally, this represents a transfer of pricing power. The definition of a bubble was originally in the hands of the bears; acknowledging a bubble equated to exiting. Novogratz separates the definition: a bubble can exist, but the end power remains with the bulls, provided that the violent end he refers to has not yet occurred and that P/E ratios have not deteriorated first. The mechanism is a decoupling of narrative and valuation tables. In the previous crypto cycle, the same phrase did not prevent an 80% decline; if this phrase is quoted again, the pricing power will depend on whether the P/E table breaks first or the end stage arrives first.
ABAB News · Cognitive Law
Acknowledging a bubble does not equate to relinquishing positions.
Changing the subject with the same phrase may change the market.
The end power is more valuable than the naming power; bubbles die from form, not from labels.