A quick stop on the way to work! AI should be compared with the PC revolution rather than the dot-com bubble | Park Se-ik, Chesley Investment Advisory [Chesley AI / 26.10.31 Sat]

An independent exercise, not a statement by the video creator or verification of every claim in the video.

Can the stock price fall even if earnings double?

Assume a hypothetical company has earnings per share of 20 and a price-to-earnings ratio of 60, implying a price of 20 × 60 = 1200. If earnings per share double to 40 under the same accounting basis and annual earnings-period definition, but the valuation multiple falls to 25, the price becomes 40 × 25 = 1000, a decline of about 16.67%. This is a price return assuming no dividend. Platform growth and a positive return from the purchase price are separate questions; compare earnings growth with changes in the valuation multiple.

Check for yourself

1. Are the earnings measured over the same period and both forecasts or both actuals, with share-count changes reflected in per-share figures?
2. What growth expectations are already priced in, and how could competition or discount-rate changes reduce the multiple?

Limits of application

This hypothetical arithmetic uses neither actual NVIDIA or Microsoft earnings and multiples nor a target price. It assumes positive per-share earnings and excludes dividends, taxes, exchange rates and trading costs. It determines neither a fair multiple nor the future price path.