It’s Probably a Bubble, But There Is Plenty Else to Invest In (Ben Inker)

GMO's Ben Inker argues that AI-related stocks exhibit classic bubble characteristics, with the S&P 500 trading near its 2000 Internet Bubble valuation peak on multiple measures including CAPE, price/sales, and price/book. Inker frames the current environment as most analogous to the 2000 Internet Bubble rather than the 2007-8 Everything Bubble or the 2021 Duration Bubble, because non-U.S. equities, deep value stocks, and liquid alternatives still offer reasonable expected returns independent of whether AI is a bubble. He argues that an 'agnostic investor' — one uncertain whether a bubble exists — can build a diversified portfolio that avoids meaningful AI exposure without sacrificing long-run expected returns. GMO's Benchmark-Free Allocation Strategy, currently allocated roughly 50% stocks, 28% liquid alternatives, and 20% Treasuries, carries a projected 6.5% real return under GMO's base forecasts versus 0.2% real for a 60/40 global benchmark. The strategy has returned +20.8% net of fees since end-2021 versus +6.8% for the 60/40 benchmark. Inker highlights specific speculative excesses including Rigetti Computing and D-Wave Quantum trading at 1,007x and 318x sales respectively, and Thinking Machines raising capital at a $50 billion valuation within roughly three months of a $10 billion raise.