The ongoing inflation is stretching out interest rate cut expectations. Ultimately, against the backdrop of AI mega infrastructure, humanity has kicked off a massive cycle of wealth transfer.
The key turning point in this phenomenon was the onset of the US-Iran war. The continuous rise in oil prices has heightened inflation expectations. The market is cash-strapped, but capital is afraid of missing the next big wave. Thus, Google, META, and Amazon have stepped in to pump up the absolute leader in AI stocks, NVIDIA, directly causing a surge in semiconductor company earnings. During this phase, everyone was joking that the US stock market is just the seven giants and AI models signing contracts to pump up stocks.
However, the ongoing order fulfillment has led to a severe imbalance in the supply and demand for storage, making the Korean stock market a direct beneficiary of the storage shortage, which has turned into a frenzy in the Korean market. Meanwhile, the Japanese stock market, which provides raw materials for chip companies, is also experiencing a rally due to the continuous supply of high-end materials.
We underestimated the insane spread of this AI mega-cycle. Beyond semiconductor chips, Chinese optical module companies receiving a large influx of orders have started to ramp up. With confirmed orders, high demand, and high profits stacking up, the semiconductor tech in the US, storage in Korea, materials in Japan, and optical modules in China are resonating together. This AI industry's bull market has already been established, and everyone on and off the bus understands that although these companies are already borrowing against their future earnings for the next three years, it doesn't stop them from making money at this moment.
As we reach the end of the US-Iran war, the high inflation brought by the war is still transmitting. However, the actual implementation of interest rate hikes will significantly squeeze development. In the current market of tight liquidity, an AI industry is truly starting to siphon off from other sectors.
Consumer stocks in the US stock market have long ceased to rise. Value investing deity Buffett's Berkshire has underperformed the S&P by over 10%, with the S&P lagging behind the Nasdaq, which in turn is trailing SMH, and SMH falling behind DRAM. The software companies in the US stock market also reflect a bearish trend. The advantage of holding stocks in the US is treating shareholders like people. In this context of strong profitability among large companies, even if they’re being drained, they’re not too far removed from value investing.
The Korean stock market shines the brightest, and the Korean populace loves high leverage, which is why we often see deleveraging scenes in the Korean market, especially with circuit breakers hitting both limits up and down. Essentially, Koreans are quite exuberant and crazy.
The structural bull market in the Chinese stock market has emerged amidst the chaos. Chinese stock investors face the toughest conditions—initially expelling foreign capital, followed by a wave of IPOs draining money. Quantitative traders are entering the scene to reap profits, leaving behind mostly long-term holders of blue-chip stocks. As the economic downturn begins, the stock market index has dropped to historical lows. When no one has confidence, the government intervenes to stabilize the market, opting for blue-chip stocks to stimulate the banking and insurance dividend funds. As the market stabilizes, we frequently see sectors like gold, rare earth, military, securities, new energy, new consumption, and real estate recovering, but none of these sectors lasts. Chinese investors have the highest endurance globally; in this situation, many are still holding infrastructure stocks, waiting for the index to rise and a full bull market. This time, however, the market is cutting off, and instead of a full bull market, it has turned into AI draining each sector indiscriminately. Whether a company has earnings or not, if it’s not related to AI, it gets drained. In the current A-shares, you must stand in the light and remember the core. As long as you use AI to analyze any AI stock in A-shares, it seems particularly unreasonable in price, yet it is genuinely making money. Companies outside this lane, no matter how excellent their performance, won’t see their stocks rise. Money that goes into AI will mock those investing in other value plays; even if you’re the Chinese Buffett buying Labbub, you'll still be laughed at...
AI, this bloodsucker, won't give up the last drop of blood from carbon-based life forms. After Bitcoin entered a bear market, it became particularly fragile, bouncing back 10% only to drop 20%. The profit-taking sell-off has shifted into AI infrastructure stocks. Former mining sites have transformed into data centers, and crypto exchanges are bringing US stocks directly to the doorstep of cryptocurrencies through brokerages and RWA. Those project teams issuing tokens have also turned their profits into shares of AI. Market makers are starting to harvest violently. The winners in this zero-sum game of crypto are quickly running towards AI with the hard-earned money of retail investors. While everyone acknowledges the investment vision of the FTX founder, did they not realize that the money he invested was all from crypto users? A thief getting caught only proves that there are many more thieves doing the same thing, which is also why many people are leaving crypto. The original intention and funds of this industry are shifting towards AI...
When all of this is happening, we know the pace of AI is accelerating, while non-AI assets are becoming 'old school.' Beyond the stock market, we also find that the economies of people in various countries are struggling. Everyone wishes for rapid AI development to replace human jobs while being anxious about tomorrow's breakfast money. The fact is:
The world is voting with money; humanity is at a crossroads. We are experiencing the growing pains of economic downturn and the rapid development of AI. As an individual, one must choose what the next key direction will be.