AI Stocks Trade at Low Valuations Despite Gains, Analyst Warns of Data Center Bubble Risk

According to Business Insider, market analyst Tom Essaye recently flagged that artificially low price-to-earnings ratios on AI-related stocks may signal investor concerns about cooling data center buildout. While major indices like the S&P 500 trade at 21.5x forward P/E, several AI chipmakers show lower valuations: Nvidia at 21x despite a 44% 12-month gain, Micron at just 10x with a 770% surge, and Broadcom at 24x with a 51% advance.

Essaye warned that if AI adoption disappoints and major cloud providers like Alphabet scale back infrastructure investments, it could trigger cascading order cancellations across the supply chain. Oracle's 25% stock decline since June 1 exemplifies rising investor anxiety over mounting data center capital expenditures.