PayPal Co-Founder Levchin: 'Silicon Valley Rapidly Becoming Bipolar'

Friday, 29 Aug 2014 08:16 AM

By Dan Weil

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Many financial commentators have been saying for months that a bubble is brewing among valuations for young technology companies.

And Max Levchin, a PayPal co-founder and chairman of Yelp, partly agrees. Some of the tech companies deserve their lofty valuations, and some don't, he told CNBC.

That assessment comes the same day that The Wall Street Journal reports that Kleiner Perkins Caufield & Byers has agreed to an investment in messaging service Snapchat that would value it at $10 billion.

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

"I think Silicon Valley is rapidly becoming bipolar," Levchin said.

"There are some amazing runaway successes such as Uber, or even [gaming company] Twitch [recently acquired by Amazon] that are just truly one of a kind, very valuable. And what valuations investors are putting on them — people are paying the premium that they deserve,"

On the other hand, "there's a whole bunch of companies that are drafting off valuations that absolutely do not deserve those kinds of numbers. But because some giants like these exist, they can enjoy the valuations," Levchin said.

Meanwhile, mutual fund manager John Hussman, president of Hussman Investment Trust, thinks there's an overall stock market bubble now and that it might be worse than the bubble that burst in 2000.

That's because back then the bubble was mainly in the tech sector, while now the bubble is spread across all sectors "in a way that makes valuations for most stocks actually worse than in 2000," Hussman warned in a recent market commentary.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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