Major investors are fighting back their fears of an AI bubble and skyrocketing tech valuations, asserting that the present AI boom is supported by actual profits and record-breaking cash flow.
In a discussion at one of the conferences, the executives of General Atlantic and Coatue insisted that the future prospects of AI and big tech are highly optimistic.
A New Kind of Tech Cycle: “Hyper-Scaler Advantage” Changes the Equation
Philippe Laffont, the founder and portfolio manager of Coatue Management, emphasized that comparisons between today’s AI surge and the dot-com bubble are misguided.
According to him, the biggest change between 2000 and 2025 is the rise of what he calls the “hyper-scaler advantage.” Companies like Alphabet, Microsoft, and Amazon collectively have the capital power to invest more than $500 billion into AI infrastructure next year alone. Unlike the speculative startups of the late 1990s, these are massive firms generating extraordinary levels of cash, backed by real customers and real demand.
Laffont noted that the largest technology companies are now on pace to generate close to $1 trillion in free cash flow annually, and they are doing so without relying on debt. That level of profitability and financial discipline, he explained, did not exist during the dot-com bubble, when most players had little more than ideas and investor hype.
Today’s AI boom, in contrast, is being built by companies with long, consistent records of earnings, durable competitive advantages, and the ability to self-fund their expansion.
Even with these strengths, Laffont acknowledged the need for caution in the face of swift valuation jumps. He pointed to Oracle’s dramatic price swings, soaring from $150 to nearly $350 before grinding back toward the $220 range, as an example of how quickly big tech stocks can move. But those short-term swings, he stressed, do not change the long-term fundamentals of the industry or the scale of the AI transformation ahead.
General Atlantic: AI Investments Are Paying Off Early
Bill Ford, Chairman and CEO of General Atlantic, echoed Laffont’s confidence in the sector. Although his firm primarily invests in private markets, he said the strategies and moves of the major public companies shape the entire investment scenario.
In Ford’s view, understanding what companies like Google, Microsoft, and Oracle are doing is essential even for investors who never buy their stocks. He explained that the giants are setting the pace for innovation and allocating capital at levels smaller companies cannot match.
Ford revealed that General Atlantic has been “pretty aggressively” integrating AI across all 200 of its portfolio companies. From customer support systems to coding workflows and digital marketing operations, AI is already producing measurable returns, even though it believes the industry is still in the very early stages of value creation. He described this period as the “front edge” of what AI will ultimately deliver.
The concern some analysts have raised over a “circular AI economy,” in which major tech companies invest in and buy from one another, did not worry Ford. He argued that the spending reflects conviction rather than artificial inflation.
He said the companies are fighting for a massive long-term prize, and real earnings and revenue are backing the investments they’re making today. Also, he added that the Magnificent Seven’s sharp jump in valuations has come with equally strong earnings growth, making the rally more stable than many critics claim.
Buffett’s Alphabet Bet Signals Renewed Faith in Tech
Confidence in the long-term prospects of the AI sector received another significant boost when Warren Buffett’s Berkshire Hathaway disclosed a new stake in Alphabet. The move surprised many observers, given Buffett’s long-standing regret over not investing in Google earlier. At the 2019 Berkshire annual meeting, Buffett and Charlie Munger publicly admitted they had “screwed up” by not buying Alphabet when its advertising dominance was already clear.
Alphabet has surged to become the best-performing large tech stock of 2025, reversing the narrative from early in the AI race, when some analysts argued that Google had fallen behind competitors after the messy introduction of Gemini.
Now, with rapid model improvements and stronger AI execution, the company’s rebound has been swift and powerful. For many investors, Berkshire’s decision confirms that the AI boom is being led not by speculation but by durable business models and strong economic fundamentals.
Why Lower Compute Costs Won’t Burst the AI Boom
One of the most compelling arguments presented at Delivering Alpha came from Laffont, who addressed the fear that falling compute costs could erode AI revenues. He said the opposite is likely true. Using the economics equation P × Q, price times quantity, he explained that even if the price of a compute token falls dramatically, the volume of compute consumed could grow so fast that total revenue continues rising.
He compared compute to gasoline for an engine: when the price drops, people simply use more. As AI models become cheaper to run, demand will expand across industries, including software automation, robotics, autonomous vehicles, manufacturing, healthcare, and consumer devices.
Laffont said the elasticity of demand, the degree to which usage increases as prices fall, is “almost infinite,” meaning total spending on computing could keep climbing for more than a decade even as costs decline.
That kind of growth, he argued, is not characteristic of a bubble. It is the hallmark of a transformative technology spreading across every sector of the economy.
A Market Built on Earnings, Not Euphoria
Although the volatility is testing investors nerves, the Nasdaq is just marginally below its all-time high and has risen by over 245 percent since its pandemic low. JPMorgan Asset and Wealth Management CEO Mary Callahan Erdoes, who was also on a different panel, encouraged investors to put their fears of an AI bubble aside and think about the massive potential opportunities of the next decade.
The consensus among the biggest voices at Delivering Alpha was clear. The current AI market is not a recreation of the dot-com bubble. It is an era characterized by economically sound businesses, actual increases in earnings, fast adoption of technology, and an unprecedented influx of investment into infrastructure that will drive the world economy in the coming decades.
Even the most influential investors in the market, so far, claim to be alert, though not concerned but strongly believe that the AI boom is not yet over.