00:00Good morning to you. So the tech theme, how would you sum up what we've seen and how it plays
00:05out
00:05into next week? We've got a lot of hyperscaler earnings. Next week I've become obsessed as you
00:09were in that clip we just showed on CapEx, but you think it's a bad thing if CapEx falls. On
00:15the
00:15other hand, it was a bad thing in TSMC numbers when CapEx went up too much. So I wonder if
00:19we're
00:19looking for something kind of Goldilocks on CapEx. No, I think the reason my biases on CapEx falls
00:24being negative is because, as you know, I think we're in a massive AI bubble. So the question is
00:28where we are in that AI bubble. And I still think we're not on the bubble popping, even though the
00:32price action. We were on the show yesterday, we talked about how we expect chip stocks to fall
00:35into next week. But I actually think probably next week will likely be the end of it because we'll
00:38get the hyperscaler earnings. I'm going to explain that like in a moment because my bias is all the
00:42earnings so far shows that we're not cutting back in CapEx yet and we're not seeing significant cuts
00:46yet. But I think when we see those plans start to change, that's the end of the AI trade and
00:50it all
00:51goes wrong. To me, my bias is still as it's been since May that we're in that volatile endgame.
00:55And as I said, in prior bubbles, that volatile endgame has tended to last six months.
00:58I have no idea if that's a standard thing because we've got too few kind of sample size to kind
01:03of
01:03check if that's standard. But I think that's, you know, I kind of go what's likely the next
01:06earnings season. Now, the one qualifier where I say likely, and maybe this is the bubble popping,
01:10is that interesting enough, and I think this is, I only just noticed about 20 minutes ago and I
01:14haven't seen it much else there. Token revenues, token costs fell to a three-month low again
01:20yesterday. And, you know, that turn over from the end of June is kind of matched with the chip stock
01:25strain. And if that's kind of putting pressure on the CapEx plans. And so maybe that's an early
01:30indicator that this actually price action reflects a non-public change in fundamentals,
01:34as in maybe there are more conversations to be having on closed doors about cutting CapEx that
01:39haven't been announced yet because of that fall in token expenditure. So sometimes what happens in
01:43markets is price action actually leads the public fundamental change, and there's a risk of that.
01:48But I don't think so. The earnings so far imply we're still getting CapEx expenditure.
01:51I mean, maybe this is Chinese competition as well. There's a lot of that.
01:54As you talk about the falling token costs, remarkable stats in Bloomberg reporting showing
01:59that U.S. companies now, 60% are using open source Chinese models. 60% of U.S. companies are
02:06using
02:06open source because of that massive price differential versus the frontier labs.
02:11Ultimately, this is a commoditized service for the vast majority of stuff that's going to happen.
02:15And that's why, you know, this is why I think it's a completely ridiculous AI CapEx bubble.
02:20Like, the whole underpinnings is slightly insane. It doesn't make sense, but it's when it turns.
02:25Is there a world in which, though, the bubble doesn't burst, but money rotates and it broadens
02:30out and you get greater depth and that we have a comfortable rebalancing?
02:34No, in terms of this specific bubble. And I think the bubble is the CapEx plans.
02:39So I'm not saying stock markets have to collapse because lots of stocks aren't cheap, right?
02:42But the point is that the most important stocks have been very expensive and based on this AI CapEx.
02:48So indexes will suffer, but they... So the bubble will have stock market implications, yes,
02:53and they'll be negative. But, you know, what I'm saying is the intense point of the pain.
02:57Like, Korea is a good example at the moment. And again, I don't think that's popped yet.
02:59But the dramatic collapse of Korean stocks that yet have seen like a pretty marginal dip
03:05in kind of global indexes is kind of what I expect, just scaled up on a global basis when it
03:10pops.
03:11But it is an AI CapEx bubble rather than a stock market bubble.
03:14And so it's when that AI CapEx bubble happens that all the AI sector gets suffers.
03:19They're the biggest name in the index. They're the most dramatic so it has pain across the index.
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