AI companies face compressed valuations despite analysts' expected earnings growth
Business
AI companies like AMD, Marvell, and Bloom Energy are having a tough time this earnings season.
Even though analysts expect another quarter of strong earnings growth, their valuations have compressed sharply this year.
Wall Street is cautious: just posting strong numbers might not be enough for these high-priced stocks to bounce back.
US Treasury yields hurt AI valuations
The main issue? US Treasury yields are at their highest in decades, so investors aren't willing to pay extra for future growth.
As Dauvin Peterson puts it, AI firms get "very little credit" for expected profits.
Plus, since these companies need lots of cash for infrastructure, higher borrowing costs hit them harder.
Now they have to prove they can keep growing, even when money isn't cheap and easy.