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. Alphabet's $25 billion data center and energy deals, in light of current trends.
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Nevertheless, Conversely, This podcast was recorded on July 16, 2025. 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. However, Google's $25 billion energy deal, in today's market environment.
But first, are we in a market bubble. Lou, I remember Cloudflare trading for 100 times its sales at the peak of the market in 2021.
What the re reveals is stock then fell 80% in six months (remarkable data). Today, Palantir is trading for 110 times sales. The stock is over $150 per.
Additionally, Robinhood, 25 times sales at $100 per, in light of current trends. It looks a 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. My go-to stat here is the S&P 500 is currently trading at 25 times earnings.
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. I'm being selective.
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. Additionally, 8% increase in electricity prices over the past 12 months, in this volatile climate.
That was reported just yesterday (noteworthy indeed). AI is an energy hog. We know that Rachel utilities have been a boring way to make money for decades, 1, 2, 3% growth.
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.
Additionally, In addition to that $25 billion data center and AI infrastructure investment, Google's also spending $3 billion to modernize two hydropower plants in Pennsylvania, and that's designed to facilitate the power demand from AI and data centers in the area.
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).
Brookfield Renewable is going to bring on 8,000 megawatts of capacity in 2025 alone.
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.
The evidence shows equipment costs as much as $400 million for a single piece of equipment. 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. Furthermore, But the stock is down 10% today because they were a little cautious 2026, saying they couldn't confirm.
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.
That's unchanged. 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.
Now, they gave guidance for the current quarter that missed expectations, and they warned that there might be the possibility of no growth in 2026.
Nevertheless, But it's not quite as bad as it appears at first glance. In contrast, They forecast Q3 quarter revenue of between 7. Nevertheless, 4 billion euros and 7.
Nevertheless, 9 billion euros at the upper end of that tier. I was just shy of the market expectations of 8 (something worth watching), in this volatile climate.
3 billion euros for Q3, considering recent developments.
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. They're preparing for growth in 2026.
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). Stocks up 6% as we're recording. 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 beat estimates of 22.
8 billion, adjusted earnings per of $2, given the current landscape. Additionally, That was compared to analyst estimates of $2, in today's financial world.
That came with raised guidance for the year, as well, up 5. Additionally, 4%, at the midpoint.
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.
Broken down by segment, their innovative medicine segment, which is essentially their pharmaceutical, grew 4, in light of current trends. 5% year over year.
The analysis reveals ir medical device saw sales climb more than 7%. 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.
That's been a $10 billion-plus drug annually in recent years.
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).
Nevertheless, I will also say that management noted a revision in the impact of tariffs to 200 million. Additionally, Moreover, That was versus the 400 million that they were previously jecting.
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).