Throughout the last decade (or last 15 years, really), FAANG stocks (and QQQ) have consistently overperformed the market/index funds, with roughly comparable maximum drawdowns relative to even the S&P. It was clear to many of us technophilic early adopters even in the late 2000s that Amazon/Google were going to take over the world (though I'd replace Netflix with NVIDIA as NVIDIA is just more innovative), and their returns have massively outperformed the market, with much smaller drawdowns. COVID only accelerated the returns from FAANG - however - with their monopolization (and penetration into all markets, reducing what upside risk there is left), I'm not sure if FAANG has as much market capture, going forward, as there was 5-10 years ago. I know some have said that it is safe to invest in "singularity stocks" like the cloud - ones that have non-zero chance of precipitating the singularity (or feeding into the data-heavy thesis that accelerationism happens when you have more data/compute power/better algorithms, and only tech-heavy companies have really embraced this trend - some even liken Tesla's valuation to one that you can only understand if it were a "tech stock").
This year has pretty much accelerated the growth of all "new technology" stocks too (eg everything and anything to do with "new tech" exploded in value => to be fair ALL the "meme stocks" performed well), but many are now that they're overvalued and the upside risk to them is not as high as they used to be. Ark Invest is the closest thing there is to a "hedge fund" that tries to understand "new technology" (even traditional hedge fund people like Bill Ackman and Ray Dalio aren't technophiles or well-versed in "technology" => it's known that hedge fund people tend not to outperform the market on long timescales, but a surprisingly small percent of them are like, technophilic), and it has had amazing market-beating returns over the last few years (where you don't have to spend that much time paying attention to it). Also, despite technophilia, the ARKK funds haven't really beat index funds pre-COVID (similarly to solar ETFs, which somehow exploded post-COVID for who-knows-what reason)
You have to look at companies with managers who constantly keep up with new technology/trends (rather than dig into what has always worked for them) and who can be expected to never stagnate.
I'm a little concerned about post-COVID overvaluations across the "tech sector" (especially given the "stagnation hypothesis" that many, particularly the Thielosphere, is concerned about), but I would still put some into QQQ, as QQQ has vastly outperformed index funds (but QQQ may be in a bubble itself). John Hussman has sounded the alarm for years, but if you were paying attention to him, you would have lost out on the returns over the last 5 years. I've observed that most of the high-profile companies that have recently IPO'd (especially in the tech sector) and which have rapidly-growing userbases have had much higher returns than most other companies - just look at how far up Twilio and Slack and Spotify and Cloudflare have gone up. Many recent biotech companies that have targeted CRISPR have also gone way up but they're more at risk of a sudden catastrophic drop if a clinical trial doesn't pan out.
Many I know are bullish in cryptocurrency [particularly BTC\ethereum] again, esp given the prevalence of money printing/devaluation as a response to the COVID crisis (and perhaps as an easier/more politically feasible way to "get money into the economy" than is higher taxation ), and since BTC is near ATH and still nowhere at risk of being at a bubble.
A heuristic I might use: What products/technologies are the smartest/most innovative people (eg those at DeepMind) using? [eg note how viciously smart people in AI have massive salaries and actually, like, use their salaries on smg] Their resourcefulness + financial resources will only improve with time, and them having higher ability to have frictionless workflows (minimizing the amount of time they spend on unnecessary logistical things such as upgrading their PC/changing homes/buying a new car/backing up data/preventative medicine/etc)+ collect data + store energy for data centers + make use of these massive datasets depends on them having access to certain resources (be it energy, speed, technology, SSDs, advanced materials). Think of what they will be like 10 years in the future, and of the materials they will use to maximize their ability to make money-time (or money-time-energy) tradeoffs. Sufficiently resourceful companies will never saturate - they will figure out how to create demand in areas where previous demand was not thought of as existing (kind of like how if you create enough products and advertise them to people, you may convince them that they have a "need" they might not have thought out themselves). If you use this valuation in itself, you wouldn't be surprised at the massive increases in NVIDIA/AMD/GOOGLE/LRCX/GLW/cloud stocks/whatever..
[given current tech valuations, I feel that materials science is the sector that has the most potential to improve/advance, and I am somewhat invested in LRCX/MU/AMAT, but I feel like there still isn't, like, an equivalent to "big tech" for the materials science sector - there isn't a huge market [yet] for photonic or neuromorphic computing, for instance. This is overdue, and it's possible that "AI" can catalyze a massive shift in materials science innovation that could lead to fast AI takeoff]. Also, with quantitative easing and other novel financial instruments (such as potentially cryptocurrency fintech), we may be able to more quickly "manufacture ourselves" out of recessions/crises than before, without being overly dependent on politics or which party wins the white house and dictates tax policy => this flexibility is also why a great depression a la 1929 is unlikely to happen ever again).
I like Colby's article. And in general I put significant weight on these kinds of arguments. However, I also put significant weight on the hypothesis that Industrial Revolution-level economic change and growth is coming sometime in the next few decades.
And it seems like the very companies that appear overvalued by the metrics Colby is looking at would be the most likely (existing) ones to capture a disproportionate share of the returns from AI.
If there's some way to square the two views that suggests something other than just buying the market (indexing), I'd be interested to hear it.