Sean Peche, founder and portfolio manager at Ranmore Fund Management, has warned that the recent wave of blockbuster listings and capital raises linked to artificial intelligence may indicate that investor enthusiasm for the theme is approaching exhaustion.
Peche pointed to historical instances in which surges in share supply and high-profile transactions occurred near market peaks. He cited the AOL-Time Warner merger ahead of the 2000 dot-com top, Blackstone’s 2007 initial public offering before the global financial crisis, and the SPAC boom in 2021 as precedents for how such activity can coincide with market highs.
Within that context, he asked whether planned or rumoured giant listings tied to AI - including SpaceX’s proposed $1.8 trillion listing in June and Anthropic’s expected listing of roughly $1.5 trillion - could represent a similar apex of investor demand for the theme.
Peche also highlighted how large new share supply can soak up investor demand. He pointed to sizeable capital raises this year by SpaceX, Alphabet, Intel and Meta as evidence that fresh issuance has been substantial. He noted reports that OpenAI raised only $11 billion of an intended $30 billion in late October, and that the funding came at a lower valuation than initially sought.
“Perhaps investor appetite for the AI theme is finally satiated,” Peche wrote, reflecting concern that demand may be waning after a prolonged run.
Despite those concerns, Peche said such bubble worries have limited relevance for Ranmore’s fund because it overlaps with only 2% of the MSCI World Index. That low overlap, he argued, leaves room to find value in areas neglected by investors who have been chasing AI winners.
One area Peche identified as offering bargains is Asia. He contrasted the valuation of Spotify (NYSE: SPOT) with Ranmore’s holding in Tencent Music Entertainment (NYSE: TME). After adjusting Spotify for its cash position, he estimated the company trades at roughly 39 times earnings. By contrast, after stripping Tencent Music’s cash and its stakes in Spotify and Universal Music, Peche estimated that Tencent Music’s underlying business trades at about 6 times earnings.
He said that disparity - paying roughly 6 times earnings for Tencent Music’s core business versus about 39 times for Spotify after cash adjustments - provides an asymmetric investment opportunity. Ranmore also benefits from a sizeable cash and investment securities balance within Tencent Music that Peche views as a margin of safety to limit downside during market turbulence.
Those relative-valuation considerations, Peche argued, help explain why Ranmore is not overly concerned about any potential highs in the US market tied to AI momentum. The manager’s view is that selling pressure on non-AI names as investors rotate into AI has created mispricings elsewhere, notably in parts of Asia.
Peche’s remarks underline a shift in focus by at least one manager away from crowded AI exposures and toward regions and securities where price-to-earnings multiples and balance-sheet cushions suggest more attractive risk-reward profiles.