Super (Bowl) Crash

First re-iterate the risks from the last blog post:

$7 Trillion metals collapse

BofA Sell signal @Max Bullish

Bitcoin/Crypto collapse

Rotation to recession

Tech Implosion ex-AI

Collapsing Economy

Now we add to those risks the collapse of the leading AI stocks including Google, Sandisk, Western Digital, Seagate, KLA Tencor, Lam Research, Micron et al.

As of this writing the VIX is above 20 and the Tech sector is at critical support. After hours, Amazon just raised their capex guidance by 50% to a ludicrous $200 billion. Recall last week Meta doubled their capex guidance to $135 billion. Then on Wednesday this week Google raised their capex guidance from $115b to $185 billion. Today Google imploded on the news, however it rallied back towards the close. It's an existential race for bankruptcy.

We've never seen such idiocy in our lifetimes.

The seeds of disaster are inadvertently encapsulated within this IBD Big Picture article published after the close on Wednesday. I'm not sure that's what the author intended.

To paraphrase the article: big institutions and hedge funds are dumping mega cap Tech stocks to buy mid-cap cyclical stocks which are going parabolic - particularly in energy, regional banks, and transports. Which should be the obvious result because the market cap of Tech stocks dwarfs the market cap of those cyclical sectors, so obviously the mid-caps would go parabolic.

But the bigger question is how can the AI bubble be sustained when the largest funds are ALL selling the AI bubble at the same time? It makes ZERO sense, hence it's Wall Street consensus. The same way that buying metals in January was consensus before that groupthink trade spontaneously exploded.

As we see in this regional bank chart, the EXACT same cyclical rotation took place in Q1 2022 and it didn't work. Obviously.

Now we see the NDFI risk to regional banks has more than doubled since 2022 and the attendant bank run.

Getting back to the imploding AI bubble:

Here we see leveraged semiconductors are deja vu of 2024 but VIX remains complacent indicating NO reach for hedges by hedge funds. They are unhedged funds.

There is no jobs report tomorrow, because once again the government is shut down. This perpetual intermittent government shutdown means the market has been in the dark about the economy for almost the entirety of the past four months. It's fucking ridiculous and a disaster for markets. But a paradise for Trump acolytes. No government no problem. Until you find out your new job is dumpster diving for a living.

As a proxy for the official jobs report which was due out tomorrow (delayed until whenever), today we got job openings which have imploded back to early pandemic levels:

Putting it all together in one chart and you see that investors are rotating into economic cyclicals while the economy is imploding. This is now a K-shaped collapse.

Job openings confirm the Cass Freight Index meanwhile Transports are on a one way trip to the sun.

In summary, the Artificial Intelligence bubble is imploding due to the greatest idiocy we have seen in our lifetimes.

Why? Because as I have said all along, AI has no ROI.

But don't take my word for it:

"There’s a number haunting the artificial intelligence space: 95%. As in, 95% of generative AI pilots are failing"

The solution is peace, love, understanding, and good parenting skills, according to Nvidia CEO Jensen Huang"

“I get questions like … ROI,” Huang said. “I wouldn’t go there.”

We now have a $5 trillion tulip bubble that's collapsing like a cheap tent.

Believe it. Or believe the bull shit. And live with the consequences.

Sadly, Darwin's Law doesn't spare delusion.