CNBC commentary warns more pain may be coming for AI trade

The commentary pointed to Meta, where a huge prospective capital raise for infrastructure to support Muse undercut expectations that the buildout would be self-funded. It asked whether similar pressure could reach Microsoft and Alphabet on Wednesday or Amazon on Thursday, and said the downside now matters more than the upside. It also described a shift in investor preference toward consumer staples such as Kimberly-Clark, Coca-Cola and Procter & Gamble and away from chip equipment and storage names including Lam Research, Applied Materials, Broadcom and Seagate.

The commentary said the data-center boom is running into local resistance. Cities and states once bid for data centers, and towns with few jobs welcomed them, but early projects raised concerns about water use and higher electricity rates. Builders later realized they needed to pay cities to keep prices down and to provide bonuses to city workers, including teachers, but the commentary said the political damage had already been done ahead of elections. It said data centers had become less popular than Immigration and Customs Enforcement in some political discourse.

Nvidia remains at the center of the trade. The commentary called Jensen Huang a methodical champion of Nvidia's graphics processing units and said only Elon Musk had no reservations about buying them, pledging to use Nvidia chips exclusively. Other hyperscalers wanted Nvidia chips for clients that insisted on them, but also promoted their own custom chips. The commentary cited recent claims that Amazon's Trainium was superior to Nvidia in certain benchmarks and said it did not believe the claim.

The commentary said government support for the broader AI ecosystem was absent, except for a rescue of struggling Intel. It said Nvidia embraced the role of bankrolling data-center development, including through equity stakes and partnerships with so-called neoclouds such as CoreWeave, Nebius and Iren, which then bought Nvidia's latest chips. Server makers Super Micro Computer, Dell Technologies and HP Enterprise took whatever they could get, as did CoreWeave and other neoclouds. The commentary said skeptics viewed this vendor-financing arrangement as a weak link in the AI revolution.

That link came under strain when CoreWeave's stock began a sharp fall, with its high-yield debt identified as the culprit. The commentary said CoreWeave was a vital client and that much of its value seemed spoken for, even if its Nvidia chips lasted longer than their depreciation schedule. It said worries about CoreWeave's ability to service its debt grew as prospects for fresh money from the initial public offerings of Anthropic and OpenAI to help AI labs pay their bills appeared to move further away.

The commentary concluded that AI is not going away, but that few companies can pay for it because it makes so little money for all but Nvidia. It said the stock market now wants the complex stripped of its capital and compared the moment to the first collapse of the railroads, predicting they will be started again. It said nobody wants to be the last funder of data-center projects, a term it said encompasses a significant share of economic growth and the stock market.