‘The Third Delusional Epoch Of The Tech Industry’

As I have noted here for the past few months, the narrative surrounding generative AI has shifted dramatically.

'We're in the midst of the third delusional epoch of the tech industry. Yet, unlike crypto and the metaverse, everybody has joined the party and decided to burn money pursuing an unsustainable, unreliable, and environmentally-destructive boondoggle.' https://t.co/c8Kim5vpK1 pic.twitter.com/40Eat3im8A
— Jesse Felder (@jessefelder) September 16, 2024

This is starting to lead to a shift in estimates of the major players’ potential profits.

"Today the average EPS growth rate among AI ETF constituents has fallen from 18% to just 5%, below the S&P 500." https://t.co/riVNqNM5L7 via @dailychartbook pic.twitter.com/jXq1uNBpZD
— Jesse Felder (@jessefelder) September 18, 2024

It’s also playing catalyst for a shift in investor risk appetites.

Momentum in stocks is back and has been a consistent precursor to further gains.

That doesn't mean everything agrees. One curiosity that sticks out is the lack of risk appetite across markets. Credit spreads are wider than they should be, currencies are volatile, gold is… pic.twitter.com/ORralQZDap
— SentimenTrader (@sentimentrader) September 19, 2024

Eventually, it may play catalyst for a reappraisal of the best way to play the massive boom in tech spending.

'Investors are looking for the next derivative on AI. While hardly a zero-carbon fuel, natural gas can be used more efficiently to reduce emissions and fuel data centres.' https://t.co/VjMHRkxZwm
— Jesse Felder (@jessefelder) September 16, 2024

Because, while the hype around the potential for Big Tech to profit from AI remains just that, the increased demand its buildout puts on many commodities is all too real.

'The growth of AI will exacerbate a looming shortage of copper, a metal vital for the clean energy transition. Data centres themselves are becoming incrementally less copper intensive, but getting the electricity to them, that is copper intensive.' https://t.co/woVTZF6OAp
— Jesse Felder (@jessefelder) September 16, 2024

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The Macro Winds Are Shifting
What The Shift To ‘Fiscal Dominance’ Means For Markets
‘The Revenge Of The Old Economy’