As hyperscalers evolve from capital-light, high-free-cash-flow businesses into increasingly capital-intensive enterprises, investors must reassess whether current valuations adequately reflect the financing demands required to sustain AI leadership.
At the same time, our research continues to identify a growing circular financing problem within the AI ecosystem. While circular financing does not automatically imply a negative outcome, it materially increases the risk of a significant unwind should AI infrastructure deployment slow.
As a result, we continue to believe the first leg of our “summer 1998-style correction” thesis remains a rotation out of AI stocks and into alternatives, with the next leg likely lower for the broader stock market.
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