AI CapEx narrative protects tech from valuation cracks
The guest argued that the massive capital expenditure on generative AI by mega-cap tech companies will continue to support the stock market because growth narratives cannot be easily disproven.
The argument
Despite value investors warning that the scale of AI spending could end poorly, the guest argued that tech companies must speak the language of growth to succeed. Because a growth story 'has just not happened yet,' it remains highly resilient to fundamental skepticism.
The thesis, stress-tested
✓ What validates it
- ✓Continued expansion of capital expenditure guidance by major cloud providers
- ✓Sustained low realized correlation among top S&P 500 tech components
▸ Risks discussed
- ▸An eventual macro liquidity shock or inflation spike could force these highly uncorrelated tech stocks to trade in high correlation again, as seen in 2022
Hear it yourself
"For a tech story to work, it has, though, to speak the language of growth. And by spending on generative AI, they are speaking the language of growth. So what I'm telling you, Dean, is that as much as a value investor can look at the AI CapEx magnitude and say, oh my god."
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