Brian G
Engineer & CFA, Trend-Based Market Analysis
US large-cap stocks look set to bottom as sentiment has swung to extreme fear. AAII bulls minus bears is the lowest since the April 2025 tariff war, which marked a huge bottom. Per Ryan Detrick, CNN Fear & Greed is near extreme fear and AAII bears jumped 14% to 53%, the most in more than a year. The massive spread between dumb- and smart-money sentiment a month ago has closed. Buy, buy, buy. x.com x.com x.comÂ
Far less inflated valuations and significant AI earnings make US equities unlike the dot-com market top. AI/SI spending may still be overexuberant. Rates and yields have returned to historical averages; more oil through the Strait of Hormuz and from OPEC and Russia should lower oil and inflation. The market may not have bottomed yet, but falling yields, steady rates and the midterms passing should let it climb the wall of worry. x.com x.com x.comÂ
Debt-funded AI building is making tech stocks vulnerable to a 25-30% pullback as rates and energy prices rise. AI company borrowing reached $466B this year versus $101B a year earlier; weekly default-insurance trading on seven AI names rose from under $2B in July to over $9B in September. Keep cash for lower prices, though 30% earnings growth and a 19x market multiple argue this is not an AI bubble. x.comÂ
US stocks face a potentially bigger selloff as rising inflation compounds concerns about AI spending. PCE inflation reached a four-month high of 3.6%, increasing pressure on the Fed to raise rates; Alphabet shares fell after disappointing earnings, slowing ad growth and more than $51 billion of quarterly capital investment. x.comÂ
US large-cap equities look near a bottom because hedge-fund positioning suggests forced selling is in its final innings, not economic deleveraging. By many measures this is one of the largest hedge-fund equity deleveraging events in 30 years; AI positions built over 18 months are being unwound in 75 days. Yet profits are growing about 20% year over year, AI compute demand exceeds supply, and the S&P 500 has barely moved. Contagion has reached credit, multistrats and European bonds. x.comÂ
US large-cap equities stay a buy because an uninterrupted AI narrative is strong enough to overcome adverse macro developments. Core inflation in the high 2s or low 3s is not a big risk; stocks, the Fed and a sideways 10-year yield show little concern. As long as AI capex is not slowing, macro remains a dominated risk. A pullback is overdue, but its likelier catalyst is AI-related, such as a megacap like Meta cutting capex or open models reviving ROI questions, which would change the view. x.com … Show more
Rising inflation, costlier AI infrastructure financing and growing Iran escalation risk point to the final major S&P 500 correction before the biggest phase of the AI boom. The index is near its 125-day average; its last break below in March was followed by another 10% drop. Keep cash ready: the next sell-off will create generational buying opportunities as neoclouds and hyperscalers turn infrastructure spending into explosive revenue and earnings growth. x.comÂ
Inflation and interest-rate fears, not an AI slowdown, are driving the selloff in AI stocks. The market and Fed are reacting wrongly to AI's rapid growth and value creation. Apart from year-end tax-loss harvesting, there is no reason to sell; this should pass and holders should come out stronger than ever. x.com x.comÂ
Hyperscalers' forward P/E has contracted 20% even as estimates ramped, making it rare to see things get much worse. Rising GPU rents and new lows in availability make the AI fears a fade; hyperscalers should lead. The next two weeks will be gut-wrenching amid the OpenAI raise, Anthropic S-1, Fed, midterms and mutual-fund selling into year-end, but that is the time to buy. x.comÂ
Expensive borrowing makes debt-funded AI projects harder to justify, pressuring AI stocks and the S&P 500. Inflation keeps pressure on rates. If Republicans lose Congress after the midterms, Trump could rely on executive action to speed permits, power projects and existing funding programs, keeping AI investment moving despite expensive money. Tech and risk assets could catch a bid if earnings hold and bond yields settle; Fed cuts remain uncertain. x.comÂ
Strong AI demand and hyperscaler spending make the selloff a mid-cycle correction despite neocloud financing stress. Widening CCC spreads expose leveraged firms to higher borrowing costs; US competition with China supports AI buildout. The base case is a bottom in roughly 5-7 days, then stabilization and eventually a broader reversal, though some projects may fail and valuations compress. IREN, Cipher, Nebius, Applied Digital, Micron, AMD, ASML and Intel are worth gradually accumulating. x.comÂ