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AI’s Speed Crash: The Structural Bull Market Isn’t Over
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Investors and traders focused on AI and tech stocks.
TL;DR
AI stocks experienced a severe momentum crash, but the speaker argues this is a structural bull market correction, not a reversal. He advises waiting for better odds before re-entering, as the agentic AI buildout continues.
Key Takeaways
- AI stocks are experiencing a 'speed crash'—a faster, structurally different downturn driven by momentum and leverage, not a typical business cycle correction.
- The tech momentum factor saw its worst 18-day unwind since 1998, dropping 40%, indicating an unprecedented and rapid reversal in AI-related trades.
- The 'agentic AI' buildout has moved from discovery to digestion, meaning the initial hype is over, but the long-term infrastructure investment phase has just begun.
- Despite the AI selloff, broader S&P 500 earnings are strong, with beats like JP Morgan's 34% surprise, suggesting the economy isn't in recession and supporting a structural bull market.
- The speaker views the correction as a necessary digestion period that eradicates overleveraged positions, creating fairer odds for selective re-entry into AI names.
- Market dynamics have shifted from traditional 'manias, panics, and crashes' to 'bubbles, parabolas, and speed crashes,' driven by AI agents and non-emotional momentum trading.
In This Video
- 00:00AI Stocks Fall
Introduction to AI stocks falling and structural bull market.
- 00:56Peak and Midcycle Slowdown
Discussion of reaching a peak and midcycle slowdown in AI.
- 01:39Bubbles and Speed Crashes
Explaining bubbles, parabolas, and speed crashes in AI markets.
- 02:59Tech Momentum Unwind
Morgan Stanley tech momentum factor index shows worst unwind since 1998.
- 05:02Agentic AI Digestion
Firework show over; agentic AI moves from discovery to digestion.
- 07:26Portfolio Adjustments
Adjusting thematic portfolio due to new news and price movements.
- 08:35Earnings Surprises
Strong earnings surprises across sectors, GDP stronger than data suggests.
Questions & Answers
Why are AI stocks falling?
AI stocks are experiencing a speed crash due to a tech momentum unwind, with the Morgan Stanley tech momentum factor down 40% in 18 days, the worst since 1998.
What is a structural bull market in AI?
A structural bull market in AI means insatiable demand for compute and agentic AI buildout, despite short-term corrections like the current speed crash.
What is an AI speed crash?
A speed crash is a fast, parabolic move down in AI stocks, driven by momentum and leverage, unlike traditional crashes, and is part of a new market structure.
Is the AI bull market over?
No, the speaker believes the structural bull market isn't over; the correction is a digestion period after the 'firework show' of agentic AI moves.
What is the agentic AI buildout?
The agentic AI buildout refers to the ongoing development of AI agents, which is just beginning despite the recent market correction and speed crash.
Should I buy AI stocks now?
The speaker is buying selectively, like Micron, but advises waiting for better odds, as the correction may not bounce back immediately.
Key Terms
- Speed crash — A fast, parabolic decline in asset prices driven by momentum and leverage, distinct from traditional crashes.
- Agentic AI — AI systems that act autonomously to achieve goals, driving the current buildout phase in the market.
- Tech momentum factor — An index tracking the performance of high-momentum tech stocks, which saw a record 40% drop in 18 days.