Is AI a Bubble? The Trillion-Dollar Spending Problem Investors Can't Ignore

SPEAKER_1 (0:01)

This is InvestTalk from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Luke Guerrero.

Luke Guerrero (0:15)

Good afternoon, fellow investors, and welcome to the Friday the 13th. Yes, Friday, November 13th, 2026 edition of InvestTalk.

What a week it has been. Certainly, there has not been an absence of market moving news. Definitely a whipsaw if you look at the indices.

SPEAKER_3 (0:39)

But you know what?

Luke Guerrero (0:40)

Regardless of what's going on in the world, our mission remains exactly the same each and every day because we come here and we meet in the hopes of helping to make you a better and more informed investor. To that end, before we talk about the stories we're going to discuss today, before we run down the market performance, why don't we kick it off by answering this caller question now?

SPEAKER_3 (1:04)

Hey, Justin and Luke, I just want to say your podcast is awesome and very helpful for me. Quick question on Siemens stock. Overall, it's a good stock to buy.

What do you guys think about this? Thank you so much. Bye.

Luke Guerrero (1:17)

All righty, let's take a look at Siemens stock. That is S-I-E-G-Y is the ticker. It's an over-the-counter ADR for a Munich, Germany based industrial technology group. What they do is they make factory automation and industrial software for electrical companies, for data center infrastructure, trains, rail systems, as well as having a majority share in what once was a healthcare business that they are now spinning off. In their most recent quarterly report, looks like orders were at a record 34.9 billion euros in Q4. Revenue was 83.4 billion for that year. Free cash flow hit a record. Their digital industries business saw a Q4 revenue of 5.6 billion dollars. That was up 10% with a margin of 20.9%.

I mean, that all looks pretty solid to me. It's one of the reasons why the stock is up 10.07% year to date, up 14% over the past 52 weeks. I mean, the price action has been pretty solid recently. On that print, you saw the stock rise about 3%.

On November 12th, it did give back some of those gains.

But the bull case here is essentially that with his record orders, with his record cash flow, with the insatiable demand for data centers, for electrification, for industrial AI, software leverage, that they will be able to meet these midterm targets that they have guided up towards. And then in turn, give capital back to shareholders in the form of dividends, in the form of buybacks. I think oftentimes when you look at the top line, you can sometimes ignore what's going on underneath. We talk about that all the time. And so orders were a bit lumpy, so focused towards large data centers. Obviously, anytime you unwind part of your business, that quote health in your segment is what it's called, that's gonna be a bit complex, could be a share overhang.

And with all this, it's trading at about 21 times priced for the earnings. It's nearly as expensive as it has really been in a really long time. You know, I get that with it just closing on a record fiscal year with orders up. But I think the main question for me is valuation after the run and how durable those data center orders are going to be. I think you see a lot of that in Q1 in February, obviously the AI trade has been rocked in many ways. So for me, I think it's a little bit pricey right now. So I would keep it on the watch list for now. That is Siemens AG thanks for the call. We got a lot of ground to cover in the next 45 minutes or so, but I want to talk a little bit about what Justin touched on yesterday, which was why are home prices still high as we see listings piling up? Obviously the housing market is complex. Justin did a solid rundown there yesterday. He also answered a listener question on a ticker TTC, which is ToroCo. If you want to hear that answer or learn more about the housing market, I encourage you to check out yesterday's episode. And remember the best way to never miss an episode of InvestTalk is to subscribe wherever you get your podcasts.

Today we are going to shift gears and talk a little bit about AI. More specifically, if there is a trillion dollar problem that investors can't ignore, namely is AI a bubble? Data centers are being built at a record pace, spending on infrastructure is accelerating, valuations for AI related companies have soared to sky high levels. So given what has been happening, given a little bit of this rotation we have been seeing, are we going to see returns on this massive build out that will really ever justify the investments that have been made? We also have some voice bank calls ready to play, including one on various investment options, namely different types of assets to invest in. Another on Craneshare CSI China Internet ETF, that's ticker KWEB. And as always, some questions from the comment section of the InvestTalk YouTube channel and some website questions from investtalk.com as well. We're headed into a break. It is a quick one. Please remember you can call in time and you leave your questions on the InvestTalk voice bank. But if you're listening via our live stream or on Time 1220 in the Bay Area, you can call now live at 888-99-CHART.