In this week’s video, I argue that we remain in the middle of a secular AI trend funded by companies with the cash and contracted revenue to see it through but that markets are now extended after a huge run making the risk two-sided. The S&P closed up 88 basis points on the week yet is stretched, momentum suffered a sharp unwind, and the equal-weight hyperscaler basket (Meta, Google, Amazon, Microsoft) has slipped below its 20-day moving average. When the spenders stall, the tape is telling you it’s tired.
The warning signs are correlation breaks. The bottom layers of the five layer AI infrastructure cake are seen through semis and industrials. Industrial momentum has rolled over with a MACD sell signal, and global markets, especially Korea and Japan are diverging from a US market still pinned near all-time highs. Momentum shifts tend to cluster around regime shifts.
The deeper point is that this is a physical-world capex cycle, not a software one. By year-end only ~18% of an estimated $8 trillion buildout will be spent, and the bottlenecks are already visible: HBM, racks, liquid cooling, copper, substations, gas turbines. Bottlenecks create cost inflation; cost inflation creates delays; delays create revenue-recognition risk. Add the largest weekly US crude draw since 1982, a Fed repriced ~100bps hawkish, and CPI/PCE drifting toward 4%, and you have a 1970s-style regime: rising oil, rising rates, multiple compression.
This isn’t a call to abandon the trade, it’s a call to respect risk/reward: favor platform and connectivity names over memory, treat the independent power producers and Nvidia as the defensive side of AI, and watch the handoff toward tokenization and crypto.
Timestamps
- (00:00–01:47) Setup: a secular AI trend with no free lunches, why correlation breaks are the warning sign worth watching after a huge run.
- (01:47–03:43) Tradable index and concentrated portfolios in the works with Morgan Stanley; the case that AI is now driving the entire market and economy.
- (03:43–05:33) Markets: S&P +88bps but extended; hyperscalers stall below the 20-day moving average; the 1970s regime template, rising oil, rising rates, multiple compression.
- (05:33–08:04) A sharp momentum unwind; monthly and weekly RSI above 70; the historic breakdown between software and semiconductors.
- (08:04–13:16) The two sides of the AI trade (semis + industrials); industrial momentum cracking with a MACD sell signal; global divergences in Korea and Japan.
- (16:04–18:17) Fed repricing ~100bps hawkish; the 10-year up ~75bps since the Strait of Hormuz; a stronger dollar the S&P keeps ignoring.
- (18:17–25:39) Inference revisited a year on; Google I/O’s parabolic token growth; retail crowding into memory (Roundhill DRAM ETF); Vera Rubin memory spend +435%.
- (25:39–30:34) The biggest bet in corporate history: only ~12% of an $8 trillion physical buildout is done, and bottlenecks are already here.
- (30:34–37:25) Oil inventory draws, the largest weekly US crude draw since 1982; CPI/PCE drifting toward 4%; where the real regime inflection point sits.
- (42:13–59:50) Memory vs. platform trade (Marvell, Nvidia, Intel); the handoff to crypto and financial-system redesign; Vistra and the IPPs as defensive AI; the 100/25/10-name thematic portfolios.
