Company Interview / Why Morningstar is favouring the barbell over bubble strategy

Key points:

Preference to rebalance from overweight growth back to a barbell of growth and value Concern over speculative excess in AI, space, uranium, robotics and hardware View that a mooted US$1.8 trillion SpaceX IPO valuation is significantly above base-case estimates

Dave Sekera from Morningstar sets out a cautious stance on the powerful rally in US growth and AI names. Sekera notes the US equity market is still trading at about a 5% discount to Morningstar’s composite fair value measure, so he prefers remaining invested in equities. However, he now favours shifting from an overweight-growth position back to a barbell between growth and value, expecting higher volatility in the second half of the year.

AI-related growth stocks are described as driving two-thirds of recent US market gains, with technology names up almost 36% since late March. Sekera highlights growing speculative signals across space stocks, uranium, robotics and commodity tech hardware, and points to heightened enthusiasm ahead of a potential SpaceX IPO. Morningstar’s base-case analysis reportedly values SpaceX at roughly half the US$1.8 trillion level suggested by market chatter, implying significant overvaluation risk in his view.

Sekera flags Bloom Energy ($BE) as Morningstar’s most overvalued covered stock, trading at more than a 300% premium to fair value despite strong projected growth. He also names memory and storage players such as Micron Technology ($MU) and SanDisk as vulnerable to the AI boom’s cyclicality, arguing current prices appear to assume elevated revenues and margins persist far beyond a typical commodity cycle.