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In part 1 we talked about the increasing stress on the consumer, and how the broad index seems to be ignoring it.
But that when you look under the surface, the average individual stock is doing much more worse than the overall index.
More than 1/2 of the stocks within the S&P 500 are down 20% or more from their highs.
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The indexes are being propped up by the AI buildout.
The spending is massive.
The Wall Street Journal just published an article about the spending on AI.
Between 2025 and 2032, we’re projected to spend nearly 3.7% of GDP on AI.
U.S. GDP is about $32 trillion
Over 8 years, that’s about $256 trillion
3.7% of that is $9.5 trillion on AI
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That squares pretty well with Goldman Sachs’ estimates:
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We have seen this kind of thing before.
In the late 1990’s the internet was changing how people worked, shopped, communicated, and more.
The growth of internet users was astounding.
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This rapid growth, and the obvious growth that would come in the future also required a massive infrastructure build out.
Telecom companies like WorldCom, Global Crossing, and Qwest laid hundreds of thousands of miles of fiber.
Equipment makers like Cisco and Lucent couldn’t keep up with the demand for switches and routers.
They ended up massively overbuilding their networks.
By 2001, 5% or less of the fiber buried in the ground was being used.
Companies like Global Crossing and Worldcom went bankrupt.
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Companies like Microsoft and Cisco took a decade or more for their stock prices to recover.
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