In Tom’s view, Apple is the most impressive company ever built, and he still wouldn’t buy a share at today’s price. The upside isn’t there anymore. That’s the difference between a phenomenal company and a great investment.
The same caution applies to businesses people get excited about, including in crypto and AI. You have to know the price, and whether the underlying business supports that valuation. The real risk in AI isn’t that the technology fails, any more than the internet failed. Individual companies that were overvalued and never generated revenue failed. Valuation is the most important part of any investment decision.
Key points
- A great company can still be a poor investment if the price is too high, as in the Apple example.
- Excitement about a business, including in crypto or AI, is not a substitute for knowing the valuation.
- The bigger risk in a boom is overpaying for companies that never earn their price, not that the technology itself fails.
- Valuation should be the first filter in the decision.
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