Below are some of the most interesting articles, quotes and charts I came across this week. Click here to subscribe to our free weekly newsletter and get this post delivered to your inbox each Saturday morning.
The narrative of a dramatic narrowing in the stock market market into the “Magnificent Seven” has officially reached the mainstream media.
Market value of S&P 500 companies https://t.co/yqVjwXHCzK pic.twitter.com/pRqJsCedl5
— Jesse Felder (@jessefelder) January 22, 2024
What is less widely appreciated is that the AI arms race driving it is very costly and has yet to show much potential for profit.
"Despite my enthusiasm that there is a new angle with AI, I worry a lot that this vicious cycle that I'm trapped in could get even more vicious." -Satya Nadella https://t.co/1OwAWyZ5Xh
— Jesse Felder (@jessefelder) January 22, 2024
In fact, much of the AI hype powering Big Tech stocks may be driven more by financial shenanigans than by genuine economic potential.
This is what happens when you “invest” with “credits” that allow you to goose your own revenues. As long as that is allowed, expect it to continue and expect way more. And expect a massive mess in the end. https://t.co/zKjFbvd0CE
— Bill Gurley (@bgurley) January 18, 2024
From purely a technical perspective, such a significant narrowing within the stock market is anything but bullish.
The tape is still healthy, so technical warnings are just that – a warning.
But they're starting to add up. Not enough to be terribly concerning just yet, but it's time to start watching for a cluster to develop in the weeks ahead. pic.twitter.com/Q4vTizM1rF
— SentimenTrader (@sentimentrader) January 23, 2024
And if the AI profits don’t soon materialize, it may be difficult to justify the lofty valuations the Big Tech stocks carry today.
'The Nasdaq 100 valuation has disconnected from real rates.' https://t.co/ybfCrHirMd via @SoberLook pic.twitter.com/AnwPHVOgXI
— Jesse Felder (@jessefelder) January 23, 2024
