The Joys of the AI Trade
Life used to be simpler, cleaner. It wasn’t long ago when all investors needed to worry about was the macro and if and when a new plague was about to lay waste to the global economy. We’d spy on the girth of Greenspan’s briefcase for clues of looming FOMC policy and break apart iPhone’s with hammers to see what chips were inside of them, attempting to ride the wave of technological innovation. After all, investors have always loved tech — the advancements of it improving the lifestyles of humans — offering us wanton entertainment and venues for profit.
Until now.
Nowadays the media and much of the blue collared cadre of people despise AI to the point where they actively assist short sellers in placing bullshit news in order to hurt the trade. They talk up China as if it were an unassailable moat perched atop a citadel, operating their AI on shoestring budgets and without power! How can we possibly compete with the Chinese? IMPOSSIBLE.
Did I mention the debt? Oh boy, we are taking out so much debt for AI the poor zebras inside the Federal Govt cannot issue their bonds anymore. No one wants them — because they’d prefer to own META paper instead.
Did I mention how once AI is sentient it will immediately construct a robot army to kill all humans? Yes, this is what we’ve been told, perhaps more of an attestation of how we think about ourselves, rather than what some fucking AI (or SI rather) powered robots tends to feeeeeeeel about us.
Did I mention how AI is going to render all jobs to be obsolete, leaving a lower caste of recent graduates on the preverbal bread line indēfīnītus?
Here’s FT on Thursday claiming OpenAI was on pace to only report $50b in annual sales, down from the expected $70b, a mere 40% shortfall.
Once this news hit, bolstered severely by the catamites on X and CNBC — stocks swooned lower — forked in the head by AI shares tumbling a cool 7%.
Then it turned out the entire ordeal was one big misunderstanding.
In spite of all this rancor, most AI stocks continued lower on Friday, amidst a general market rebound — under a newly woven bear narrative of “this trade is so fragile, anything can hurt it.” Ergo, and it goes without saying, this is the extreme fuckery we are besieged by on a daily basis — the fucking AI trade and the bears who hate it.
So how do we deal with this brand of extreme horseshit?
Aside from tracking down the bears and offering EXTREME punishment to their persons, it seems the only course of action is to ensure some diversification. This will of course reduce ribald returns if and when the AI trade eventually wins — but it’ll also provide some reduced volatility for every Zerohedge hyperscaler CDS tweet and/or Bloomberg, FT evergreen agenda to take a wrecking ball to this nascent industry.
Outside of investing in fiber optic cables and servers, the traditional defensive ballasts serve a purpose in healthcare — names like JNJ, ABBV (long both) or perhaps an allocation into some healthcare/biotech ETFs can suffice. Normally the banks offered safety and comfort, but with rates skyrocketing so has credit risk and the perception has certainly dimmed on many a bank.
Consumer goods are uninvestable, since GLP1s have turned Americans into dieting manlets, uninterested in stuffing their big rotund faces with chocolate pies anymore. Ironically, the best defensive areas of the tape appear to be in the companies that are building out AI themselves — the spenders aka hyperscalers, and of course software — because the bears love to pretend AI will just go away and the world as we knew it will return soon.
Mag7 is all the rage now — loved by bulls and bears alike — since whenever capex slows the hyperscalers will benefit from an improved balance sheet! This really is shit tier thinking, brimming with fear — but it’s not entirely illogical in this polarized environ. As a matter of fact, sometimes we must give into the market and set aside our opinions for the sake of profit. In this case, until the hyperscalers can prove profound ROI on their investments — the bearshitters and evil people in the media will continue to hold sway over our beloved AI investments and semiconductor marvells (double entendre alert), so it is wise to hedge against it to prepare for all eventualities.
See you fuckers next week.
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