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AI trade must prove productivity gains next
The broader market remains highly dependent on the AI trade, which must now transition from CapEx spending to proving actual earnings and productivity gains across other sectors.
The argument
Liz Thomas argued that the biggest risk to the market is a potential slowdown in tech CapEx, though she views it as unlikely. She emphasized that the next phase of the AI trade requires companies to prove productivity and earnings growth, extending benefits beyond just the tech sector.
The thesis, stress-tested
✓ What validates it
- ✓Earnings reports showing margin expansion in non-tech sectors adopting AI
- ✓Sustained or increased CapEx guidance from major hyperscalers
▸ Risks discussed
- ▸Tech companies slowing down CapEx spending
- ▸Failure of AI integration to produce measurable productivity gains in non-tech sectors
Hear it yourself
"There's also a very adamant view amongst senator Wyden, chair ranking member of senate finance, that the president needs to go through Congress in order to reaffirm the USMCA or even to withdraw. And the administration totally disagrees. So when you speak with the trade negotiators in Canada or the trade negotiators in Mexico, they'll tell you that there's a dis disagreement between who they talk to on the Hill and the White House. And I think the takeaway from the last eighteen months or whatever is the president is gonna do what he wants to do, and he's not gonna ask congress for their approval of this deal."