Did The Bust Just Begin? | Jesse Felder
TL;DR
Macro analyst Jesse Felder warns that the AI boom is transitioning into a bust as physical constraints delay data center construction while accounting distortions and evaporating subsidies mask weakening demand, all against a backdrop of building stagflationary pressures.
🏗️ The AI Infrastructure Bottleneck 3 insights
Data center delays signal oversupply
Two-thirds of data centers scheduled for completion next year haven't broken ground, making it physically impossible for semiconductor revenue growth to match analyst projections.
Inventory glut forming at middlemen
Nvidia GPUs are backing up at distributors like Super Micro because data centers lack 'warm shells' to install them, despite $750 billion in AI buildout spending this year.
Accounting timing distorts earnings
Semiconductor companies recognize revenues immediately while hyperscalers delay depreciation, creating an artificial earnings boom that masks deteriorating fundamentals.
📉 Demand Destruction and On-Device Shift 3 insights
Subsidy-driven demand evaporating
Token consumption was artificially inflated by subsidized pricing from OpenAI and Anthropic at roughly one-tenth of true cost; shifting to token-based pricing is causing demand to drop sharply.
Edge computing undermines data centers
The rise of on-device AI—such as Apple Mac Minis and new chips from Dell and Nvidia—allows users to run models locally, reducing dependency on cloud infrastructure.
Internal skepticism signals malinvestment
Employees at Amazon and Google are reportedly mocking the value of internal AI implementations, indicating widespread corporate waste on unproductive tools.
⚠️ Macroeconomic Stagflation Risks 2 insights
Stagflationary pressures building
The NFIB survey shows small businesses simultaneously raising prices and slashing hiring plans—a classic precursor to rising unemployment combined with inflation.
Perfect storm for valuations
Extreme stock valuations pricing in indefinite growth are colliding with the potential AI bust and stagflationary macro conditions, creating a 'fraught situation' for markets.
🏛️ Political and Social Constraints 2 insights
Bipartisan data center backlash
Reno, Nevada recently enacted the nation's first data center moratorium due to soaring electricity costs, reflecting growing national opposition to the infrastructure buildout.
Environmental and grid constraints
Communities are resisting data centers due to air pollution from off-grid power generation and skyrocketing local electricity bills, creating additional barriers to construction.
Bottom Line
Reduce exposure to semiconductor and AI infrastructure stocks before analyst earnings estimates collapse under the weight of data center delays and evaporating token demand.
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