AI summary
Summary of article:
Citrini Research believes that AI trading has lost momentum, and the sharp decline in Asian semiconductor stocks confirms the fund’s rotation, and investors should turn to the real economy and relative value targets.
Citrine Research, a highly respected independent research company, announced that the “AI trading” popular in recent years has come to an end, and the conditions of the Asian stock market on the 5th reflected this reality. The company believes that instead of being attracted to AI stocks in the future, when inflation is sticky and interest rates are rising, it is better to bet on undervalued real economy stocks.
This wave of capital rotation away from AI stocks has been seen in Asian stock markets.south korea and Japanese semiconductor index stocks both fell to 5th place, and traders who were doubtful about the outlook for AI stocks turned tohong kong and consumer and Internet stocks in mainland China. South Korea’s Kospi index fell more than 5%, while Hong Kong’s Hang Seng index closed up 3.6%. Memory chip stocks Samsung Electronics and SK Hynix declined, while Chinese internet giants Tencent andalibaba This increase was more than 6%.
On the 5th, Intel fell 3.7% in pre-market trading, and AI chip leader Nvidia also fell 3.1% in pre-market trading.
MarketWatch reported that Citrini Research is an independent research company whose macro and thematic research reports are highly valued by investors. This year’s analysis report on the situation in the Strait of Hormuz and the future development of the AI industry are both fascinating. This latest “Theme State” report was released the day after the US midterm elections, boldly predicting that “capital expenditure growth has peaked.”
“AI trading” faces many headwinds
The report’s arguments are supported by solid data. The article reports that the annual investment amount of hyperscalers is approaching US$1 trillion, while the annual recurring revenue is only one-fifth of this amount. This suggests that future growth should either reduce capital expenditures, increase revenues, or both.
Citrini explained that the problem investors now face is that many of today’s bets on AI have become long-term bets, betting on the size of the total addressable market (TAM) in 2030.
In addition, hyperscale cloud players are extracting all available funds from the market by issuing massive amounts of new stock and debt. The Democratic Party’s landslide victory in the March 3 election has increased the risks in building AI data centers. Future data center construction will face headwinds, including higher costs and greater difficulty obtaining permits, which will raise more questions for AI stocks that have previously benefited from power and chip supply constraints.
Citrini also expressed concern about the token price war started by OpenAI and Anthropic this summer, which proves that cutting-edge AI models are now becoming commoditized (meaning each company’s products have the same functions, leading to declining prices). Citrini’s analysis found that through competition and “disintermediation” (due to the poor outlook for the “software as a service” industry), AI is now beginning to be negatively impacted.
It is recommended to adopt real economy shares instead
So, how can investors adjust their portfolios to reflect these new realities? Citrini recommends betting on real economy stocks, such as traditional software stocks with stable cash flows, financial stocks, leisure and entertainment stocks, and energy stocks.
The Citrini team believes now is also the time to look for relative value and recommend engaging in “pair trading,” such as long HUDA and short AMD, long Oracle and short Nebius, long Samsung and short SK Hynix, and long META and short Alphabet.
Based on the relative strength of the US economy, improving wages and stubborn inflation, Citrini’s current optimistic consumer goods stocks include: cosmetics stocks Victoria’s Secret and ElfCosmetics, as well as leisure and entertainment stocks IMAX, Cinemark and MGM Resorts (MGM Resorts).
Summary FAQ
-
The company pointed out that the capital expenditure of ultra-large-scale cloud players is close to US$1 trillion, but the revenue is only one-fifth, indicating that valuation and recovery pressure are increasing, and the AI theme has shifted from short-term development to long-term bets in 2030.
-
Semiconductor stocks in South Korea and Japan fell sharply simultaneously, reflecting the market’s weak outlook on AI; Money flowed into consumer and internet stocks in Hong Kong and mainland China, boosting the Hang Seng index and creating a clear sector rotation.
-
Citrini recommends switching to traditional software, finance, leisure entertainment and energy stocks with stable cash flows. You can also make long HUDA, short AMD and other pairing transactions to make profits through relative value rather than single bets on AI themes.
