Here at Ouroboros Group we believe a self-referential vortex of strange loops is the key to exceptional market depravity and thus dream demon returns at rates essentially double those of typical simple ouroboros techniques and paradigms.
—from 2018's Unicorns Backing Their Own VCs? Welcome to Peak Tech
More on cousin marriage in September 2024's "ChatBots Are Not The Be-All And End-All Of Artificial Intelligence".
From Sherwood News, July 31:
The AI capex tree is growing to the sky, lifting profit expectations for a host of companies.
I didn’t hear no bell.
Two knockout earnings reports from tech heavyweights, Microsoft (MSFT) and Meta (META), aren’t just causing their stocks to soar this morning — they’re lifting the entire AI complex.
These companies are blowing away analysts’ expectations in large part because of their AI capabilities. And if something is making you money, you’re willing to invest even more into it. Especially if some recent tax tweaks are making that even easier to finance.
Microsoft’s guidance of $30 billion in capex for the current quarter implies a run rate of $120 billion for fiscal 2026. Meta hinted that fiscal 2026 business investment could approach the $100-billion mark.
Zuckerberg? We know he’ll spend billions on just about anything. Nadella? Well, that’s a different story. Outside the DeepSeek freak-out, perhaps the top source of worries about an AI capex slowdown this year centered around the cloud giant maybe having too many data centers.
The AI tree of capex is growing to the sky — and this tree's branches are poised to grow even closer to the sun very soon, as it doesn’t yet incorporate this recent guidance from these two hyperscalers.
All that capex is the earnings of other major companies. And we’re seeing the impact of this continued commitment to spending billions upon billions rippling through the AI supply chain in premarket trading....
....MUCH MORE
As reiterated in January 7's:
"Everything (retail) Nvidia Announced at CES 2025"
Reminder: We believe AI is a bubble and have made the decision to ride the bubble.
June 18, 2024: Nvidia's Financial Dominance (NVDA)
For the last year we have been referring to the AI phenomena as a bubble, perhaps not so much in financial terms but rather in terms of the psychology, the speculative frenzy. It's true in Nvidia's case, the stock could be cut in half and still be discounting the future with a 2-3% discount factor i.e. 33 to 50 times free cash flow.
However! Despite this we have been pitching a "Ride the Bubble" approach to the stock for over a year (we have an almost full decade with this one but it was in the last thirteen months that we thought it bubblelicious). Here's a July 1, 2023 post:
....So, we are faced with the decision whether-or-not to play a dangerous little game, riding the bubble knowing full well it is a bubble, or retiring to the sidelines.For now one of our favorite economists with one of our favorite stories.
Here's the version hosted at MIT:
This paper presents a case study of a well-informed investor in the South Sea bubble. We argue that Hoare’s Bank, a fledgling West End London bank, knew that a bubble was in progress and nonetheless invested in the stock: it was profitable to “ride the bubble.” Using a unique dataset on daily trades, we show that this sophisticated investor was not constrained by such institutional factors as restrictions on short sales or agency problems...
The two most important parts of the paper "II. Hoare’s Trading Performance" and "III. Causes of Success" are definitely worth a couple minutes....
*****
....We'll have more on the big stories, autonomous vehicles, agentic AI and humanoid robots later today.
Mr. Huang believes they are each trillion dollar+ addressable markets.*We reiterated the ride the bubble pitch a few more times, despite some trepidation.note: stock prices should be divided by 10 to adjust for the most recent stock split.January 19, 2024 at $594.91 "AI: Lessons From The South Sea Bubble".
February 6, 2024:
The stock is down $11.87, so a little less than half yesterday's up-move. $681.45 last after trading as low as $663.00 (down $30.31 and almost the entire Monday $31.72 up-move.) Unfortunately there is a gap on the chart at $660 so it didn't completely fill. Nervous-making....By-the-bye, that $660 ($66, new style) is the "cut in half" number.
March 6, 2024:Earlier this morning the stock got to $889.68 and we are still pitching the "ride the bubble" approach—up $220 since the last mention, Feb. 6—but that could change anywhere between today and the end of the NVDA GTC conference (Mar. 21)....If interested in some of our history with the big dog there are links embedded in January 2024's "Nvidia expands its reach in China’s electric vehicle sector" (NVD
Finally, as Adam Smith put it in his book on the 'sixties bull market, The Money Game:
“Now you know and I know that one day the orchestra will stop playing and the
wind will rattle through the broken window panes, and the anticipation of this
freezes us. All of these kids but one will be broke, and that one will be the multi-
millionaire, the Arthur Rock of the new generation. There is always one, and
maybe we will find him.”
—As seen in February 2024's "JPMorgan's Jamie Dimon On The Business Case For AI: "This Is Not Hype" (JPM)"
