Nasdaq 100 Flat Since October as AI Trade Stalls, Hyperscalers’ Capex Tops 2% of GDP
David Woo warns AI trade has stalled, with Nasdaq 100 flat since October and half its stocks below key moving averages. He notes hyperscalers such as Meta will spend over 2% of U.S. GDP on AI capex this year, a cost seen as outweighing expected returns.
1. AI Trade Loses Momentum
David Woo highlights that the tech-heavy Nasdaq 100 has shown zero returns since last October, with only 50% of its components trading above both 100-day and 200-day moving averages. He characterizes this extended consolidation as a potential precursor to a deeper downturn in tech shares.
2. Hyperscaler Capex Link Breaks Down
The historic correlation between AI-related capex spending and hyperscaler stock performance has reversed, as increased outlays now coincide with share declines. Woo describes rising expenditures on memory chips, cooling systems and data-center buildouts as cost pressures rather than signals of higher returns.
3. Implications for Meta Platforms
Meta Platforms is among the four largest hyperscalers set to invest over 2% of U.S. GDP in AI capex this year. Such heavy spending may pressure profit margins and investor sentiment if revenue growth fails to keep pace with the elevated cost base.