AI compute shortage turning into a glut
The bear case argued for the semiconductor sector and Nasdaq is that diminishing returns in frontier AI models and a shift from training to inference will trigger a sharp slowdown in CapEx, leading to a massive compute glut.
The argument
The guest argued that incremental improvements in AI capabilities are shrinking, which will cause hyperscalers to slash CapEx. Furthermore, as the market shifts from complex training GPUs to commoditized inference chips, competition from multiple chipmakers will rise, undermining the winner-take-all valuations currently priced into tech stocks.
The thesis, stress-tested
✓ What validates it
- ✓Hyperscalers revising down CapEx guidance in upcoming quarterly earnings
- ✓Broadcom, AMD, or Intel reporting significant market share gains in inference chips over NVIDIA
▸ Risks discussed
- ▸Regulatory crackdowns on AI could accelerate the downturn faster than market forces
- ▸Strong market momentum and retail trading could keep tech valuations elevated longer than expected
Hear it yourself
"episode is brought to you by the Tucarium Corn Fund, ticker CORN. Let's get into it. Very pleased today to be joined by David Wu, independent economist known for his game theory based forecast on global markets and geopolitics. David, welcome to Monetary Matters."
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