George Noble Calls SpaceX the Most Overpriced Company at Scale and Argues AI Spending Is a Misallocation of Capital

Host Paul Sweeney introduces George Noble, a figure the host describes as Hall of Fame-level in the market commentary world. The opening is largely introductory and includes a light exchange about the guest's standing among market voices.

Noble's firm promotes a two-day class running from 10 a.m. to 4 p.m., priced at $199, with the sessions available on replay. Noble says the aim is to democratize finance and that the class includes a named instructor, John Rook.

The host asks about Noble's recent market commentary, noting he has been making money on both the long and short sides. Noble says his results next year will not match this year's. He says he has refrained from making a big market call but is increasingly bearish, with higher conviction each day.

Noble argues that the market is a market of stocks rather than an index-level call, citing Peter Lynch's view. He says some companies are doing well and others are not, and that the economy is not the market, so stock selection matters. He adds that the AI trade has gone from bad to worse since their last conversation.

Noble ties the discussion to recent events, including higher oil prices and a ceasefire, which he says do not change the basic stock-picking point.

The host introduces the segment's central call, attributing to Noble the view that AI is the biggest misallocation of capital in history. Noble's summary is that it is a complete disaster with no return on investment, so investors should stay short.

The host asks Noble what investors should do, and Noble responds by drawing on historical lessons.

Noble cites a quote widely attributed to Mark Twain, though he notes it is not clear Twain ever said it: it is easier to fool people than to convince them that they have been fooled. He links this to a principle he attributes to George Soros: the way to make big money in the market is to figure out what the market believes is not true, and more importantly, to identify when investors will realize they have been had.

Noble says he believes the market is in the throes of that realization now, and that the market's view matters more than any individual's opinion, including his own.

Noble says that if listeners doubt his view, they should look at credit default swaps on Oracle and CoreWeave. He says CoreWeave's short position was a better trade at around 60 than it was at 107, because the company's fixed-income pricing is circling the drain. He says Oracle is in the same situation.

Noble says his firm has been short corporate names, which is its biggest position, and that it doubled down about two weeks before the conversation. He invokes Peter Lynch's approach of asking whether the story has been upgraded or downgraded, rather than reacting to whether a stock's price has gone up or down.

Noble argues that if AI is the biggest misallocation of capital, it would be a global economic challenge, given the total dollar amounts being invested and the ripple effects. The host suggests moving into safety and utility stocks, and Noble notes utility stocks have already risen on their own, adding that gold is the only hedge he knows against AI risk.

Noble recalls that during the 1999–2000 dot-com period, there was no profit model. He describes the bull case for AI as resting on a select group of AI companies that generate large, high-margin revenue, and asks whether this time is different. He answers that it is not, at least not for most of the field.

Noble cites reporting that about 1% of users at one company account for 80% of its revenue, and says a large share of AI spending is funded by venture capital firms that are losing money.

Noble also says that a friend who follows industrial companies globally has asked many firms what they are doing about AI, and that almost all said they would not use it, citing compliance and security concerns. He says that if companies do not adopt AI, the economics are upside down, since charging about $200 a month would be needed just to cover the cost of computing and energy, and he doubts a small number of paying customers can justify the spending.

Asked about SpaceX's earnings after Elon Musk's commentary, Noble says the jury is out but that he believes SpaceX is the most egregiously overpriced company at scale in the history of capital markets. He says that with a market value of about $2.2 trillion, it does not matter much whether revenue is $40 billion or $60 billion.

Noble compares the company to Scott McNealy's criticism of Sun Microsystems for buying companies at ten times revenue, saying SpaceX is trading at around 100 times revenue. He also points to a large unlock schedule of more than one billion shares coming due in the next week or two.

Noble acknowledges that SpaceX may be the company that breaks the mold, but says history suggests that buying it at this level is like taking a three-point shot from just beyond midcourt.

The host notes Brent crude near $112 a barrel, which Noble accepts may be arguably too high. Noble says his bullish view on oil is largely tied to the Strait of Hormuz. He says his firm turned bullish on energy in the past year, based on undervaluation, positioning and sentiment, and rejects a scenario in which the world is awash in crude.

Noble rejects the assumption that oil prices would collapse if peace broke out, saying the premise is not the case. He says energy makes up about 3.5% of the S&P 500 by market weight, while energy stocks with strong free cash flow, which he puts at 12 to 20%, are very cheap.

Noble cites depletion of about 4% to 5% a year and years of underinvestment, with trillions of dollars of capital expenditure not spent that is needed to find new energy supply. He says the lasting effect of the Strait of Hormuz disruption will be that economic actors realize it is not a secure oil source and develop supply elsewhere.

He says he hopes oil does not rise much further, since prices at $150 or $200 would raise the question of recession. He points to rising deferred oil futures contracts as a signal that stocks are following.

Asked how such disasters clear, Noble describes a simple sequence: prices fall, undercapitalized companies face their debt, equity becomes unattractive, and founders become miserable. He says a bubble clears in one of two ways: debt deflation, or a soft default in which policymakers devalue money by printing it, which he links to the price of gold.

Noble says that in a world awash in liquidity, pigs fly, and that the company with the most indebted balance sheet and highest operating leverage can look like the one to own. He says that when the tide goes out, that company is the first to be hit, which is why CoreWeave goes to the front of the bus.

He cites a line from Hemingway about going bankrupt slowly and then suddenly, and a line attributed to Soros or Kimera about giving people a time or a price but never both.

Noble says Will Danoff is stepping down at the end of the year after a very great career and has done a phenomenal job. He notes the fund's size is over $200 billion and says Danoff has become something of a victim of his own success, since at that size a manager cannot buy small oil and gas companies. Noble adds that Danoff's holdings have performed very well over a long period.