No. of Recommendations: 9
Just in the last few years we’ve seen mini booms and busts in:
Semiconductor chips
Vaccines
A land grab for engineering talent
Warehouse and distribution centers
GLP-1 weight loss drugs
The Metaverse buildout
Electric Vehicle investments
Environmental, Social & Governance initiatives
Most recently, data centers and power (this one is still squarely in boom phase)
Throughout history, humans have reliably swung from extreme to extreme, but it sure seems like the sums being devoted to these mini (or not so mini in some cases) booms is substantially increasing over time.
Some of the biggest spenders in AI are Microsoft, Amazon, Alphabet, Meta, Nvidia, and Oracle. Those six stocks represent about 27% of the S&P 500. If those stocks pull back 50-75% on average during the down leg of this capital cycle it would pull the index down 15-20%. That’s before considering the fear and contagion that may spread to similar sectors or trigger an actual recession in the economy. JP Morgan recently estimated that 41 AI-related companies make up 47% of the S&P 500’s market capitalization. The other 459 stocks represent 53% of the index. The S&P 500 has essentially become an artificial intelligence ETF, and we’ll see how that goes if the current spending spree proves overdone. It may work out just fine, and it may follow the patterns of history, time will tell.
https://open.substack.com/pub/eaglepointcapital/p/... 