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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