DATA & FIGURES
Microsoft down 33% from its recent highs, Meta down 28%, and Tesla down 20%. Meanwhile, Bitcoin has slumped about 50% from its October all-time high, currently trading at $63,889.72, down 1.30%. In contrast, memory-chip maker Sandisk has surged roughly 800% this year, and the Global X Artificial Intelligence & Technology ETF is up about 140%.
THE SCENARIO
The AI-driven growth story of the Magnificent 7 is facing a reality check, as investors begin to question the enormous cost of the AI arms race. The cash required to feed the growth is rising even faster, with Google parent Alphabet, Amazon, Microsoft, and Meta expected to spend a combined $725 billion on capital expenditures this year.
DIRECT QUOTE
"The story today is not just about concerns over AI spending. It is also about capital rotation." — James Van Straten, Author
BBN INSIGHT
The rotation out of the Magnificent 7 stocks and Bitcoin and into companies that provide the infrastructure for the AI boom is a significant shift in investor sentiment. As the AI arms race continues to escalate, investors are seeking opportunities in companies that can provide the necessary infrastructure to support the growth.
MARKET REACTION
The market has reacted to the rotation out of the Magnificent 7 stocks and Bitcoin, with Bitcoin down 1.30% to $63,889.72, and the Magnificent 7 stocks also experiencing significant declines. In contrast, memory-chip maker Sandisk has surged roughly 800% this year, and the Global X Artificial Intelligence & Technology ETF is up about 140%.