Fully agree with the thesis here over the long run for sure, but to your point, we melt up first imo. Not many people are talking about the geopolitical tensions of this too...e.g what happens to the Indian Services sector of which 70% is made up of IT Services / Outsourcing (makes up about 50-55% of Indian GDP) > what is the impact downstream on some of the social tensions between Pakistan and India?
The credit cycle / AI cross-collateralization point is the thing most thematic investors in this space are under-weighting. It's not just that Mag7 earnings yields are negative vs. S&P ex-Mag7. It's that the foreign capital flow engine funding those multiples (globalization surpluses recycled into US equities) is being eroded by the same AI efficiency the market is pricing in. That's a structural feedback loop, not a cyclical wobble. The counter-argument worth stress-testing: the equipment and infrastructure layer of the AI supply chain (TSMC, ASML, AMAT) is still being driven by a multi-year capex commitment cycle with locked-in orders, meaning even if demand softens at the application layer, the equipment layer has 12–18 months of forward visibility baked in. Does the credit cycle risk you're describing hit the platform layer (NVDA, hyperscalers) before or after it hits the enabler layer?
Fully agree with the thesis here over the long run for sure, but to your point, we melt up first imo. Not many people are talking about the geopolitical tensions of this too...e.g what happens to the Indian Services sector of which 70% is made up of IT Services / Outsourcing (makes up about 50-55% of Indian GDP) > what is the impact downstream on some of the social tensions between Pakistan and India?
The credit cycle / AI cross-collateralization point is the thing most thematic investors in this space are under-weighting. It's not just that Mag7 earnings yields are negative vs. S&P ex-Mag7. It's that the foreign capital flow engine funding those multiples (globalization surpluses recycled into US equities) is being eroded by the same AI efficiency the market is pricing in. That's a structural feedback loop, not a cyclical wobble. The counter-argument worth stress-testing: the equipment and infrastructure layer of the AI supply chain (TSMC, ASML, AMAT) is still being driven by a multi-year capex commitment cycle with locked-in orders, meaning even if demand softens at the application layer, the equipment layer has 12–18 months of forward visibility baked in. Does the credit cycle risk you're describing hit the platform layer (NVDA, hyperscalers) before or after it hits the enabler layer?
This article is the product of yet another AI booster.
In contrast, we have something a bit more realistic:
https://www.wheresyoured.at/oracle-openai/
https://www.wheresyoured.at/haters-guide-oracle/
https://www.wheresyoured.at/why-everybody-is-losing-money-on-ai/
https://www.wheresyoured.at/data-center-crisis/
https://garymarcus.substack.com/p/how-agi-is-nigh-doomers-own-goaled
https://garymarcus.substack.com/p/does-openais-new-financing-make-sense
etc.
Decent report
The Concentration Cascade & The Diversification Illusion
https://aquavis.substack.com/p/the-system-series-demographics-decisions-451