Brad Gerstner of Altimeter: Market Correction Healthy, No Tech Bubble

The recent pullback in technology shares represents a healthy correction after a significant surge, according to Brad Gerstner, founder and CEO of Altimeter Capital. Speaking recently, Gerstner highlighted that the Nasdaq’s impressive 40% climb since April warranted a period of consolidation.

“The market was looking for a reason to take a breather,” Gerstner noted, adding that the widespread selling observed across the market this week was a natural reaction to elevated valuations, particularly within the artificial intelligence sector. The S&P 500 experienced a decline of nearly 3% this week, while the Nasdaq saw a more substantial loss of 5%.

Altimeter Capital, known for its tech-focused investments, held a considerable position in Nvidia leading up to its earnings announcement. However, the firm strategically reduced its overall exposure last week as the tech rally gained momentum. Nvidia is scheduled to report earnings on November 19th.

“We rolled back our overall exposures at the end of last week because we felt like the market was pretty pumped up,” he explained. Gerstner also pointed to signs of weakening consumer spending, suggesting that the market might experience further consolidation before the end of the year, ahead of Q4 earnings reports.

Despite the recent volatility, Gerstner dismissed concerns about a market bubble. He drew parallels between the current artificial intelligence boom and previous technological “supercycles,” such as the internet, social media, and cloud computing, all of which ultimately surpassed initial expectations despite periodic corrections.

“My experience living through three supercycles — internet, social media, and cloud — they all ended up far bigger than we thought,” he stated. He views the current period as a necessary “digestion phase,” which he believes is beneficial in preventing the formation of a potentially unsustainable bubble.

This “digestion,” or cooling-off period, could allow investors to reassess fundamentals and differentiate between companies with true long-term potential and those simply benefiting from the current AI hype. Further, it provides an opportunity for companies to demonstrate sustainable business models built around AI, beyond simply integrating it as a feature. The challenge will be to show how AI can drive real revenue growth, improve efficiency, and create new competitive advantages.

Analysts will be closely watching Nvidia’s upcoming earnings call for signals about the strength of the overall AI market and the company’s ability to maintain its dominant position. Beyond Nvidia, the performance of other AI-centric companies will be critical in shaping investor sentiment and determining whether the current correction evolves into a more prolonged downturn.