Below are some of the most interesting things 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.
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As Bank of America demonstrates (via Callum Thomas), the stock market has been co-opted by the AI trade in a way we haven’t seen since the peak of the Dotcom Bubble.
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Much of this is due to the financial success of the companies selling “picks and shovels” into the AI gold rush. However, as Bloomberg reports, that gold rush may be running out of ore: “Almost half of the US data centers planned for this year are expected to be delayed or canceled.”
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The ability to source power and electrical equipment is one issue. But, as Peter Berezin notes, it may turn out that “efficiency gains” will also have a dramatic impact on demand.
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These dynamics, along with the stagflationary effects of the Iran war, may already be starting to show up in earnings forecasts. “Slower-growing but still-positive analyst optimism might seem benign, but the slowdown could signal that the earnings picture is starting to sour as investors come to grips with the inflationary and anti-growth implications of higher oil prices,” reports Albert Edwards.
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As Man Group puts it, “Investors are facing the potential impact of a sustainable energy shock colliding with an AI market correction.”
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