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Market Outlook

Today's Market

Summary

The current AI-driven CapEx cycle is fueling semiconductor stocks’ outperformance while US hyperscalers face mounting balance sheet risks and underperformance.

Hyperscalers like Meta, Amazon, and Oracle are trapped in the AI narrative, issuing debt and risking negative free cash flow to sustain AI investments.

Semiconductor companies benefit from hyperscalers’ relentless spending, but their recent explosive growth is unsustainable due to industry cyclicality and rising input costs.

I expect hyperscalers to underperform short-term but regain dominance long-term, while semiconductor stocks face significant downside once AI CapEx normalizes.

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Semiconductors are keeping the market afloat

Even though we are living through a challenging geopolitical context in which oil prices could stay higher for longer and food prices might increase significantly, the S&P 500 (

Analyst’s Disclosure: I/we have a beneficial long position…