The AI trade’s weird little problem
Paul Meeks of Freedom Capital Markets says the AI boom still has plenty going for it: earnings are solid, spending is real, and the capital pours in like the hype machine never learned how to sleep. But there’s a catch — the trade has a reputation issue, and that can matter almost as much as the numbers when markets are feeling twitchy.
Why rates are the buzzkill
The bigger worry, though, is U.S. interest rates. When rates climb, debt gets pricier, and that’s a headache for AI infrastructure builders that rely on borrowing to fund giant data centers, chips, and all the plumbing behind the AI arms race. Longer-duration tech names can also get squeezed when the discount rate rises, because future profits suddenly look less shiny in present-value land.
What investors should watch
The setup here isn’t “AI is broken.” It’s more like “AI is still a great story, but the market may not be in the mood to hear it.” If the trade stays politically noisy through the U.S. midterms and rates keep biting, the group could remain volatile even while fundamentals hold up.
Big picture: this is less a thesis death spiral and more a valuation stress test. The AI winners may still win — they just might have to do it the hard way.