Goldilocks and No Bears
The Artificial Intelligence Super Cycle is ending, and fittingly almost no one sees it coming.
Last week I discussed the Gamestop Retail trader FOMO melt-up:
"On Thursday [last week], volume registered off exchange at platforms that match orders from brokeragers, considered a proxy for retail activity, reached 51.6%. That surpassed the prior peak of 50% in January 2021."
"The rise in retail interest in stocks coincides with the return of meme stocks and Keith Gill, the retail-trading icon who goes by the moniker “Roaring Kitty” and drove the original mania three years ago before disappearing from social media in June 2021"
“The biggest equity owner, US civilian households, just chalked up a win vs. the bears”
It's another big win for bulls.
All good. But this week it wasn't all about retail dumb money chasing meme stock pump and dump schemes, this week is all about hedge fund dumb money chasing AI themed pump and dump schemes. Untold numbers of overpaid fools are now chasing a single stock into the stratosphere while the broader market and economy rolls over and implodes. Apparently, not one bullish pundit can remember the pandemic three years ago when the exact same Tech CEOs were claiming there was a widespread shortage of semiconductors. And then what happened? Every customer DOUBLE ordered just to ensure they would have enough inventory on hand. Which, had the effect of pulling forward years of demand until the bubble imploded. The same thing is happening today. All under the guise of "artificial intelligence".
Why? Because it's clearly not real intelligence.
Wall Street Madoff acolytes are calling this channel stuffing disaster "hyper scaling", as in Cloud data center providers are hyper-scaling to meet record AI demand. Unfortunately, there is no final market for all of this over-ordered equipment, because no one has a clue what to do with it that will make real money. It's clear that Tech CEOs and Wall Street always have to have a "theme" or is it a "meme" to drive investment in new equipment.
Nevertheless, it appears that this week is a catalyst for a blow-off top to the "Crack Up Boom and Bust" that the Fed set in motion at the beginning of May.
Despite another blowout quarter for Nvidia, the overall semiconductor sector ended the day negative in the biggest daily reversal since the March Nvidia AI conference. Which as we see, forms a double top:
Meanwhile, in other Ponzi markets, we just learned that the SEC has approved eight spot Ethereum ETFs.
Which is interesting, because Ethereum has yet to take out its high also from March let alone its all time high from 2021.
And we see it's third wave corrective, which means that over-confident Crypto bulls are about to get buried and no one sees it coming.
In summary, this month we have FOMO retail AND FOMO hedge funds at the same time.
What was fear at the lows of 2010 has now morphed into a clarion call to buy bankrupt junk stocks at the behest of pump and dump scam artists on Wall Street.
Just as the artificial intelligence cycle ends.
