For our end-of-week wrap - and market soundbite - we present you a striking admission from JPMorgan's top tech trader Ron Adler (full note available to pro subs), who may have just popped the AI bubble.
Within megacap tech, long-only supply (i.e. selling) started to build into the end of August and has continued into early September; the general lack of demand has been similarly notable. While we have seen that supply today, it's absorbed much better with SPX <4450 (and as AAPL provides multiple excuses to trim/press, that money is likely remaining within the megacap cohort). There has been growing demand (HF and LO) in larger cap software (e.g., CRM, ADBE, ORCL) while the SMid-cap/AI-centric names remain better for sale (and just the broader macro environment hasn’t seen much improvement/change).
Shorts have been working, and hedge funds haven't minded the move lower in the market; amidst the weakness, volumes continue to muddle along (and struggle to break above >10B shares).
The AI hype continues to wane (see: AI earnings). Companies spent much time on AI during earnings calls/analyst days, and now it's time to start putting up results. Anecdotally, the experience of these products has underwhelmed users, and the novelty could wear off quickly. Yes, there's a "cool" factor and real-world use cases, but aside from executives in leather jackets, it's unclear how most will monetize and implement. That will take place in the next 12 months, but investors are already growing a bit anxious.
So far, there have been few learnings from the conferences this week (ZH: he is referring to the Goldman Communacopia & Tech conference, which is fully summarized for pro subs in the usual place), and while things seem “fine,” there has been little to get excited about. Media continues to see shorts cover from shorts pressing, as investors *hope* for some truce between CHTR & DIS.
Stepping away from AI and the fading hype, we turn to Goldman's weekly recap where we find something else striking: the slow money buyers are on strike - in fact they are selling - while the fast money is modestly bid. Here is the EOD Equity Color note from Goldman trader Mike Washington.