'Deadly Combination' Triggered For Stocks, 'Bitcoin Is Finished' Warns Economist | David Woo

Investors now punish AI infrastructure spending increases

The definitive correlation between higher AI capex and stock performance has broken down, with Microsoft, Amazon, and Google shares dropping on increased spending guidance.

Hyperscaler spending driven by fear not returns

Companies are investing out of FOMO rather than expected ROI, as data center construction costs soar while monetization remains uncertain.

AI monetization struggles intensify with ad wars

OpenAI's pivot to advertising signals weak subscription growth, while Google's free AI search features cannibalize paid demand across the sector.

Slowing growth meets higher interest rates

Woo identifies lower growth combined with higher rates as a deadly combination for stocks, with Magnificent Seven earnings growth decelerating on a four-quarter moving average.

Stretched valuations face slowing earnings momentum

With the NASDAQ flat since October and no catalyst to drive prices higher, Woo argues the market can only move lower given current multiples.

Manufacturing uptick reflects tariff repricing not demand

The ISM manufacturing bounce likely represents inventory restocking and preemptive tariff-related price hikes rather than organic economic expansion.

Powell likely stays to block Trump dovishness

Jerome Powell may remain Fed Chair through 2026 to prevent Trump from appointing a super-dove, eliminating prospects for monetary stimulus.

Congressional opposition kills fiscal stimulus prospects

Bipartisan resistance to tariffs and inability to override vetoes makes direct fiscal stimulus like rebate checks politically impossible before midterms.

Rotation into early-cycle winners assumes impossible stimulus

Current outperformance in materials, industrials, and small caps relies on Trump delivering massive stimulus that Woo argues faces insurmountable institutional constraints.