12.12.25 - Doubts on AI are mounting

Doubts around the AI trade intensified this week after earnings from two key players.

Oracle shares plunged nearly 11% after reporting weaker-than-expected quarterly revenue, weighing on the broader AI complex and dragging down names such as Nvidia and Micron.
Yesterday, in extended trading, Broadcom fell around 4.5%. While results beat expectations, investors focused on CEO Hock Tan’s failure to convincingly address concerns that Google, its largest customer, could increasingly design chips in-house.
Additional pressure stems from rising memory prices, which may squeeze margins, and uncertainty around whether Broadcom’s reported chip deal with OpenAI is binding.

Markets: AI related stocks under pressure

• Equities: mixed with tech stocks sharply lower

• Bonds: Reflation trade moves yields higher, US 10-year substantially higher back close to 4.20%

• Gold: keeps rising touching with mounting uncertainties, touching briefly USD 4’350/oz

• USD: without big moves today

• Cryptos: slip broadly with Bitcoin falling back below 90k after a short intraday recovery rally

• Volatility: VIX edges higher

My View: The AI narrative is shifting from unlimited growth expectations toward more scrutiny on revenues, margins and customer concentration. Valuations in parts of the AI space remain more than stretched, leaving almost no room for disappointment.
As a result, I maintain short positions in selected AI stocks with high valuations and crowded allocation, viewing current developments as a confirmation that the AI trade is entering a more volatile and differentiated phase.

Disclosure: no allocation in Broadcom and Oracle

Become a member to access more valuable market updates like this