AI bottleneck stocks outperform hyperscalers
The guest argued that capital is rotating out of hyperscalers and into AI bottleneck and infrastructure stocks due to declining hyperscaler free cash flows despite massive ongoing CapEx.
The argument
While hyperscalers face slowing year-over-year spending growth rates, the absolute CapEx spend remains massive through 2030. This dynamic is expected to benefit 'bottleneck' infrastructure providers over the hyperscalers funding them.
The thesis, stress-tested
✓ What validates it
- ✓AI bottleneck stock indices continue to outperform hyperscaler indices
- ✓Hyperscaler free cash flows decline further in upcoming quarterly reports
▸ Risks discussed
- ▸High-yield credit spreads blowing out could halt the CapEx cycle
- ▸Slowing rate of change in AI spending could temper overall valuations
Hear it yourself
"financial advice or necessarily the views of BlockWorks. Our hosts, guests, and the Blockworks team may hold positions in the company's funds or projects discussed. As always, investments in blockchain technology involve risk, terms, and conditions apply. Do your own research. Alright. What's going on, everybody? Welcome back to another round of edition forward guidance. We are recording on the first week of the Kevin Warsh Fed. We just had the Kevin Warsh Fed. First FOMC meeting this week, and, we have to have a new name now."
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