Is the Stock Market in Bubble Territory?

The analysis demonstrates Valuations are stretched, but is it a bubble

In this podcast, Motley Fool contributors Travis Hoium, Lou Whiteman, and Rachel Warren discuss that as well as: The AI and energy news, amid market uncertainty

Conversely, ASML's earnings

Furthermore, A surprising report from Johnson & Johnson

Bold predictions this earnings season To catch full episodes of all The Motley Fool's free, check out our podcast center

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Additionally, A full transcript is below

Travis Hoium: Is a market bubble farming right under our noses, in this volatile climate

Motley Fool Money starts now

I'm Travis Hoium, joined by longtime Fools, Lou the legend Whiteman, and from an undisclosed location somewhere in Europe, Rachel Warren (quite telling)

Furthermore, Today, we're going to get to ASML and Johnson & Johnson's earnings results, which came in overnight

But first, are we in a market bubble

Moreover, This tells us that feels a little a bubble

However, Are we in a bubble

Lou Whiteman: Look, Travis, there's always a bubble somewhere (an important development)

Valuations they look stretched

On the other hand, On the other hand, That's well above the 20-year average, 16 times earnings

Moreover, That's frothy

I do think you need to keep that in mind

For example, I think Hidden Gems just sold down some of its position in Arista Networks based on high valuation

You keep that in mind

However, But here's the thing, in today's financial world

Can remain at high valuations for a long time

I'm not running for the exits, in today's market environment

Furthermore, I'm looking for opportunities out there in areas financial services and income stocks

I'm keeping that in mind, I'm adjusting as we go, but I also want to stay in the market

Rachel Warren: I don't think I would say that we are in a stock market bubble, but I do think it's an important point to discuss (quite telling)

We're looking at valuations of a lot of companies right now, in particular, given current economic conditions

I think it's easy to be concerned that there might be a bubble forming, given the current landscape

We've heard a lot of analysts make comparisons to the

At the same time, Com boom, of course

However, There's a lot of excitement that we're seeing in the base in particular, right now

This's being driven by the AI revolution, whether it's data center companies, chip companies, or software-based platforms Palantir, as you mentioned, that are boosting their with AI-driven services

This's where so much of the market seems to be focused

This leads to the conclusion that tells us that 's also a time where a lot of the modern pace of innovation is tracing back to right now, in today's financial world

Nevertheless, Meanwhile, You look at a company Robinhood, in today's financial world

You've got the broader resurgence of interest in crypto that's benefited the platform

This demonstrates that 's expansion into Europe, stock tokenization, and crypto futures

Those are just a few catalysts

I will say, I think it creates a situation where many valuations are heightened, bably in some cases, for more than a given company's intrinsic worth, amid market uncertainty

But I don't think that that valuation dynamic is true across the board (which is quite significant), in light of current trends

Moreover, I think you can look at other industries where valuations are much more reasonable, find quality accessible es

For that reason, I don't think we're in a broad stock market bubble

But are valuations too high in some cases

I think that's the case

I think it's more important than ever for investors to be discerning when evaluating the intrinsic worth of companies, making sure it's the right fit for their personal portfolio, thinking, where's your money (this bears monitoring)

At the same time, What is the true monetizable here

Does it have those durable value-driven tailwinds for the company's growth

However, I think those are the questions that we have to ask ourselves as investors

Travis Hoium: Sounds the final answer is, we're bably in a bubble somewhere

We just don't know exactly where it is

I want to get to one of the companies that's involved in potentially inflating bubbles

That's Google and their AI news

We'll do that after a quick break

Potential bubbles, let's turn to artificial intelligence, and Google announced $25 billion in data center and energy deals in the PJM, which manages electricity across 13 states from New Jersey to North Carolina, all the way over to Chicago (something worth watching)

This comes on the heels of Energy's biggest inflation numbers in quite a while

That was reported just yesterday (noteworthy indeed)

However, But does the recent change in artificial intelligence and the energy needs there, does that change anything

In contrast, Does that change the way that you look at the utility space in any way, given the current landscape

Rachel Warren: For me, personally, I wouldn't say that this changes the trajectory of my interests in the energy space

I will say, it's not a space I gravitated toward

There are plenty of fellow fools who do

Nevertheless, But if anything, as an alphabet investor, this makes me more excited the investments this company is making that I think can help cement its continued leadership and strides in the AI space

Moreover, One thing to bear in mind, PJM is the biggest electric grid in the nation

Conversely, Its coverage area includes the world's largest data center market, that's located in Northern Virginia

We're at a time where PJM and other viders are really struggling to keep up with rising electricity demand amid the AI boom

AI training, particularly for large language models and generative AI, it's incredibly energy intensive

A single generative AI query can require almost 10 times more electricity than a traditional Internet

Data centers are already consuming a notable percentage of the nation's electricity

Un some other energy demands that can fluctuate, AI requires continuous operation

That means you need a constant power supply, in today's financial world

That strains existing grid capacity

There was a meeting that just happened yesterday at Carnegie Mellon in Pittsburgh

We have the president, his cabinet, and executives from a range of companies, including Alphabet, were there

There was a report that the companies there, including, of course, Alphabet's Google, announced a combined total of $90 billion in investments in data centers, energy, and power infrastructure, in today's financial world

On the other hand, From my perspective, that's the cost of doing for these major viders

But if you are interested in the energy space, I think it creates some nice tailwinds there

Travis Hoium: Lou, of course, Rachel mentioned the hydroelectric plants, and of course, Brookfield Asset Management was involved (this bears monitoring)

Additionally, They're the company that's behind a lot of electricity generation, not only in the US, but around the world, a lot of renewable energy

Is the takeaway here as simple as AI is a tide that is lifting all of these utility boats, and maybe we're going to lose the consumer overboard, or what are you taking away from

Lou Whiteman: No, my takeaway is not by the utilities

I'm not there yet, but the invest takeaway for me is you said it, Travis

Furthermore, It's Brookfield

Additionally, It's always Brookfield or something that

Look, I think the demand for energy, that trend is real

What the re reveals is leads to the conclusion that 's a long-term tailwind, but I don't want to invest in individual utilities

I don't to pick winners among geographies or jects

My way to take advantage of this trend is to buy into a company making investments all over the sector, giving me broad exposure instead of just an individual company

Look at the Brookfield Renewable Partners case (this bears monitoring)

That's the actual entity that Google's partnering with here (something worth watching)

I'm going to take my chances getting that broad exposure instead of focusing on any one individual company and hoping that they ride the wave, as well

In contrast, Travis Hoium: I think that's bably a smart way to look at it, and you get a nice dividend yield with a lot of those asset owners as well, amid market uncertainty

Next up, we're going to talk two of the big earnings reports of the day

However, Nevertheless, We'll do that after this break

ASML, which makes critical equipment for making chips, all the artificial intelligence chips, the chips that's bably in your smartphone today, considering recent developments

They reported earnings overnight, beat on the top and bottom line with 7, in today's financial world. 7 billion euros in revenue and 590 euros per in earnings

Market analysis shows was going to be a growth year

Lou, what are you taking away from this earnings report, in today's financial world

Lou Whiteman: Worth saying that, you said, these are really expensive machines

Even in the best of times, this is a company that's tough to judge quarter to quarter

You miss one dery, and it can throw off the quarter

You're going to have lumpy

You throw in tariffs, trade wars, and chip restrictions to China, and I understand the caution

Additionally, But I'm going to note here, CFO Roger Dyson attributed to this beat, this last quarter's beat to tariffs having "less negative impact than they anticipated

On the other hand, " I think there's a real chance this trend can continue where the uncertainty is there, but it turns out not as bad as they thought because there's just so much demand out there, and if so, I think growth in 2026 can eventually be put back on the table, whether it comes or not for long term individual investors, the underlying growth story here, the need for more and more advanced chips and therefore, the need for more the machines that can make them

I think Wall Street is overreacting today

I think this is still a great company with a great future up ahead

Rachel Warren: What's interesting this, Abi, as you noted, Travis, ASML, they beat on both the top and bottom line expectations

However, This was for their fiscal second quarter

Nevertheless, But it's not quite as bad as it appears at first glance

In contrast, They forecast Q3 quarter revenue of between 7

Taking a broader, more holistic look here, there are a lot of companies in the semiconductor industry that are facing similar headwinds as ASML is right now

There's a lot of uncertainty that's been created by the US tariff policy that remains the case

It's worth noting, management still expects their full year 2025 net sales to grow 15%, and they said that their AI customers' fundamentals are still looking really strong

Anything, management emphasized the continued uncertainty that's driven by macro headwinds, and that's a dynamic that competitors are contending with, too

In contrast, But the reality that they and other adjacent players are facing right now in many ways

Additionally, Meanwhile, It goes back to external factors that they can't control

In my opinion, you've still got a quality here

I think investors might need to moderate expectations (something worth watching)

If macro headwinds shift in the short term, but I think the company is well-positioned to write those out

Travis Hoium: Johnson & Johnson was the other big earnings report this morning (an important development)

Rachel, this was another double beat (quite telling)

They said, they don't need to do deals out of desperation despite a Paden cliff

Furthermore, What were your takeaways from the report

Additionally, Rachel Warren: It was a fantastic quarter for the

As you noted, a beat on both the top and bottom lines

The data indicates that y reported $23. 7 billion in revenue

That came with raised guidance for the year, as well, up 5

We had the chairman and CEO of the company say that their portfolio and pipeline is positioning them for elevated growth in the second half of the year with game-changing apvals and submissions and key disease verticals, including oncology, psoriasis, surgery, and cardiovascular, and they're looking to extend that as the year gresses

However, Those are fantastic figures for a company at this level of maturity

This's a that I will note has been acquisitive in recent years

That goes back to everything from their acquisition of Abiomed several years ago, where they acquired the world's smallest heart pump from that acquisition (something worth watching), in this volatile climate

Market analysis shows y recently closed the purchase of intracellular therapies

That solidified their neuroscience portfolio

Furthermore, One important thing to note, this was something that CFO Joe Wolk addressed in a recent interview

However, They're facing patent pressures, particularly on some of their key older blockbuster drugs Stelara (noteworthy indeed), in light of current trends

But management thinks that, really, the expected gap in revenue from the generic competition is not going to have a noticeable impact on the company, considering recent developments

That they're really well positioned to ride that out

Broadly speaking, going back to these recent acquisitions and their continued internal development pipeline (noteworthy indeed)

Now, there's still a lot of uncertainty drug tariffs that is lingering, and something that their CFO said is, we're still really waiting to see what the administration s in that regard

On the other hand, We're in an environment, of course, where there's a ton of uncertainty regarding tariffs and other cost pressures for es this one

I will say this is one of the most well-bolstered companies in the pharma industry from a cash perspective

Meanwhile, They're well-positioned to handle any headwinds that might come (quite telling)

They have an extensive domestic manufacturing presence that they are also looking to expand

This's also a company that has been paying and raising their dividend every single year for over six decades, given current economic conditions

The evidence shows 's a great company, in my opinion

Travis Hoium: To end the show, I do want to get bold with some predictions here

Now, we are long-term investors, so a one-day drop in stock is maybe not that big a deal

However, It might even be opportunity

ASML is one of these companies wide moat

Furthermore, It's down after earnings, maybe an opportunity for those long-term investors

Now I'm thinking opportunities Netflix in the Quickstar days, Meta's drop when it was getting fi (noteworthy indeed).