Pavel Bandilov, Managing Partner at NEO Ventures, “In Development”, 31.07.2026
Investors have started to tell technology companies apart by their financials, because capital spending has been a major concern for some time and is now showing up in the results. Investors are losing patience because, almost five years after AI arrived, the returns still are not there. Investors and companies are out of sync on timing. Companies believe AI will lift productivity and create new professions. Investors agree, but say that in the short term the costs are simply too high. That was the view of Pavel Bandilov, Managing Partner at NEO Ventures, on “In Development” on Bloomberg TV Bulgaria, hosted by Georgi Mesrobovich.
Most of the tech giants reported negative free cash flow this week, meaning their operating cash no longer covers their investment spending.
“Microsoft and Alphabet made the difference. Microsoft’s free cash flow is shrinking, but it is still positive.”
Investors are losing patience because, almost five years after AI arrived, the returns still are not there, Bandilov observed.
Valuations today are badly inflated. During the dot-com bubble a P/E of 10-20 was considered high, while today companies such as Walmart and Caterpillar trade at 40-50, which is alarming, he noted.
“Being an investor these days is no easy job.”
Apple is an indirect victim of the AI boom, which has pushed up the price of chips and memory and is squeezing its margin. The second problem is that we did not see the usual strong sales in China.
Amazon and Microsoft are profiting from AI not as distributors of the service but as sellers of data center capacity, which is the trend of this earnings season. Growth in their cloud businesses is very strong.
“Market volatility comes from the market’s own imperfection.”
From this point of view, investors and companies are out of sync on timing. Companies believe AI will lift productivity and create new professions. Investors agree, but say that in the short term the costs are simply too high, the analyst pointed out.
Yet companies keep pushing capital spending because they are locked in fierce competition with one another. On the other hand, there are Chinese models at a far lower price. Consumers, however, do not care who the winners will be.
In the US Treasury market we saw 2-year yields fall, meaning no rate hike is being priced in, while 10-year and especially 30-year yields rose, meaning the market expects inflation down the road.
Circular deals in the AI sector are starting to worry investors. So is the use of financial engineering that keeps debt off corporate balance sheets, noted the Managing Partner at NEO Ventures.
“All of this puts investing with reason, not emotion, front and center.”
Diversification is also very important. Incidentally, it explains the high valuations of Walmart and Caterpillar that I mentioned earlier, since investors want exposure to something other than AI.
“Diversification always works in turbulent and uncertain times.”
Watch the full conversation in the video.
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