AI trade hits a speed bump

Kim Khan· Host0:00

[intro music] Welcome to Seeking Alpha's Wall Street Breakfast, where we cover the top news for investors every morning. Good morning. Today is Tuesday, June twenty-third, and I'm your host, Kim Khan, filling in for Julie Morgan. Famed tech analyst Dan Niles is warning investors of a speed bump in the AI trade, arguing that the smart money should flow towards where AI dollars are being spent, namely semiconductors, rather than the hyperscalers doing the spending. The five major public companies invested heavily in AI, Amazon, Alphabet, Microsoft, Oracle, and Meta are all down year to date, while chip stocks are firmly in the green. Speaking on CNBC, Niles said corporate AI strategy has shifted dramatically. Just months ago, companies were focused on token maximization, encouraging employees to generate as many AI tokens as possible. Now the conversation has shifted to token minimization. "You can't blow through your entire AI budget in four months like Uber did and not have a problem when you report results and then guide," Niles said. The massive capital requirements tied to AI are forcing tech giants to raise significant amounts of debt and equity. SpaceX is down pre-market after tumbling more than sixteen percent Monday following the announcement of a twenty billion dollar bond offering. Niles said he is backing away from hyperscaler names and trimming semiconductor exposure despite the sector's strong performance. "My question is, well, if you're routing things to cheaper models, what does your September guidance look like?" he said. "That's where I see a speed bump coming up when these guys report and guide." Tech weakness is continuing this morning. South Korea's