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Will AI Choose Violence?

Will the AI bubble choose violence...?

"AI growth prospects are getting increasingly challenged and there are palpable risks of an AI Capex bubble. The CAPEX cycle typically takes 4-6 quarters of expansion followed by 2-4 quarters of digestion. We are in the 5th one, meaning FCF pressure could come soon. Building the grid will also take time, and it looks like we are lacking the manpower to avoid a datacenter bottleneck. Looking for tech sales revisions to turn negative to time the bubble’s top" (GS trading desk)

NVDA Capex cycle corrections can be violent

It is not uncommon for NVDA to correct 50%+ when capex rolls over (2006, 2010, 2018..).

Source: GS trading desk

 

Only a blip so far

Semis vs S&P500. The red cross marks where we are now.

Source: Deutsche Bank

 

Chat-GPT, is this true...?

Earnings expectations for AI stocks are falling. Chart shows 12m forward year - over - year change in earnings.

Source: BofA Quant

 

Bubbles often burst

Investment benefactors are often not the big winners.

Source: BofA

 

Where's my ROI, dude...?

Hyperscalers are expected to drive most of capex growth for the S&P 500 in 2024. Hyperscalers = MSFT, AMZN, GOOGL, META.

Source: BofA Quant

 

History lesson for CAPEX growers

Capex growers have historically underperformed.

Source: BofA Quant

 

Mag7 vs the rest

This chart needs little commenting.

Source: Goldman

 

Mag 7 vs the rest: Earnings edition

Yet another chart that needs little commenting.

Source: GS

 

Tech vs the rest

Deutsche: "On a relative basis, we see the gap in earnings growth shrinking and in turn closing the gap in sector positioning"

Source: Deutsche Bank

 

Long Magnificent 7 the most crowded trade

Question: What do you think is currently the most crowded trade?

Source: FMS

 

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