Is there an AI bubble? Why BlackRock's Rick Rieder says no.

Many on Wall Street have raised concerns about an artificial intelligence (AI) bubble developing in the stock market (^DJI, ^GSPC, ^IXIC), but BlackRock (BLK) global fixed income chief investment officer Rick Rieder says he's not worried about an AI bubble in the public or private markets.

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Video Transcript

00:00 Speaker A

Well, and you said rent maybe going out the risk spectrum a little bit. Does I mean, you didn't say the word bubble, but I'll say the word bubble because it's been uttered by almost everybody lately. Is that I mean, are we looking at that level of speculative behavior, you think?

00:10 Speaker B

No. No. I so, I should when I say no, you know, the big companies today, the ROE, these companies are throwing up. I actually went through the earnings that came out last week and I was looking at the free cash flow that these companies are throwing off.

00:26 Speaker B

It's like nothing I've ever seen. If you take free cash flow, just the companies, it was a Google, Meta, Microsoft, and you look at the amount of, not just revenues, not just cash flow, free cash flow after you've spent on CAPEX, they're creating major companies every quarter. And then the multiple, I mean, you look at they're trading at 20, 25, 26 times earnings.

00:46 Speaker B

Now, you know, I see a lot of deals, particularly in the private markets that are no cash flow, no revenue for the next two or three years.

00:55 Speaker B

you know, and by the way, some are good business models. My guess is most of them will fall away, similar to what you saw in the actual bubble back in 2000 when you didn't have any cash flow, you certainly didn't have any revenues.

01:05 Speaker B

That I um, so that anyway, so I do see some of that in the private markets, but generally in the public markets, I don't think I don't think it's overdone.

01:12 Speaker A

Are the private credit markets to I mean, let's leave aside the sort of tricolor First Brands situations that we saw. Elsewhere, do you think there are problems in private credit?

01:22 Speaker B

You know, you know, from a systemic point of view, no. We do a load of financing in real estate, commercial, Resi, bilateral credit, bilateral finance. Generally not. I will say things that get auctioned off. Like whenever there's a big financing and gets auction off, but somebody wants to put their name on something that gets auctioned. Like I look at the levels, sometimes it's through the the public markets and think who is, why would you ever do that?

01:44 Speaker B

There is some stuff in there around the edges and like financing software. You know, what's going to happen with software and AI. There's some stuff around the edges that I think are tricky, but not a systemic, you know, like we saw in prior decades.

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