Fund Manager: Wall Street Is Using the Wrong ‘E’ to Judge AI Valuations

On a caller occurrence of the Animal Spirits podcast titled Talk Your Book: AI Is Not a Bubble, Alger portfolio manager Dr. Ankur Crawford made a deceptively elemental statement that cuts against astir of the existent statement implicit AI valuations: investors are arguing astir the price-to-earnings ratio without archetypal agreeing connected what the net really are.

"The archetypal happening you request to get close erstwhile you deliberation astir valuation is the E. Only past tin you travel up with a PE," Crawford said. She runs a concentrated 30-name portfolio and targets companies she believes tin treble oregon triple implicit a astir three-year horizon. She contends that sell-side models are linear extrapolations bolted onto an exponential capex cycle, leaving Street estimates "just excessively low" crossed the AI proviso chain.

The Case Study: GE Vernova

Crawford pointed to GE Vernova (NYSE: GEV) arsenic the cleanest illustration. Only 3 companies marque combined-cycle state turbines globally, GE Vernova holds astir a 3rd of that market, and pricing has doubled from astir $1,250 to $2,500 per megawatt successful nether a twelvemonth arsenic hyperscalers scramble for steadfast power.

The financials enactment the framing. Q1 2026 gross came successful astatine $9.34 billion, beating the $9.3 cardinal consensus, portion integrated orders jumped 71%. The Electrification conception booked $2.4 cardinal successful information halfway instrumentality orders successful a azygous quarter, much than each of 2025. Backlog deed a grounds $150 cardinal astatine year-end 2025 and grew $13 cardinal sequentially successful Q1. CEO Scott Strazik told investors the institution expects to scope astatine slightest 110 GW of combined state turbine backlog and slot reservations by year-end 2026.

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The banal has tally hard, up 72.84% year-to-date and 132.18% implicit the past year, trading astatine a guardant P/E of 40x. Crawford's constituent is that this aggregate is built connected statement EPS, and statement has missed Vernova's gross each 4th shown successful the data, with beats ranging from 0.36% to 9.17%.

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