Market valuations depend on hyperscaler CapEx
The guest argued that the broader stock market's valuation and earnings growth are unsustainably dependent on aggressive hyperscaler CapEx spending.
The argument
Excluding AI infrastructure and energy, S&P 500 earnings growth is effectively flat. The guest warned that because the second derivative (the rate of growth) of this CapEx is projected to slow by 2027, current aggressive multiples could face severe compression if spending expectations are impaired.
The thesis, stress-tested
✓ What validates it
- ✓A sequential decline in CapEx guidance from major hyperscalers
- ✓S&P 500 forward earnings estimates beginning to tail off
▸ Risks discussed
- ▸A re-acceleration of non-AI economic sectors could offset a CapEx slowdown
- ▸Hyperscaler CapEx spending could exceed current aggressive estimates through 2027
Hear it yourself
"well above well deviated above long term means. And, typically, when you have that kind of deviation, markets are going to find a reason to correct, and and all it needs is a reason, some reason. It may not even be a big it may not even be that big of a reason, but all of a sudden, the market's off. Welcome to thoughtful money. I'm thoughtful money founder and your host, Adam Taggart, welcoming you here at the end of the week for another weekly market recap featuring my good friend, Lance Roberts, the portfolio manager with deja vu."
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