Did The Bust Just Begin? | Jesse Felder

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**Jesse Felder** (0:45)
So I think we're right there. We're seeing a lot of these data centers being already delayed for this whole year. We've seen tons of delays cropping up. Now, we're starting to see the first cancellations.
To me, this is the writing on the wall. This is why we're starting to see more volatility in the tech sector, and you're starting to see analysts start to reprice these things. So as it becomes more obvious, you'll see it more manifest in price, but I do think it's actually playing out right now already as we speak.

**Adam Taggart** (1:26)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Today's guest has been warning for a good while now that the current bull market in stocks is in its final innings. In fact, he thinks the AI boom may be right now in the process of metastasizing into the AI bust. It's not all doom and gloom for investors though. He's quite bullish on commodities and the stocks of the companies that produce them, which he sees as set to experience a multi-year boom from here.
For a full update on his outlook, we welcome back to the program macro analyst, Jesse Felder, founder and editor of the respective market research firm, The Felder Report. Jesse, thanks so much for joining us today.

**Jesse Felder** (2:08)
Always great to be with you, Adam. Thanks for having me.

**Adam Taggart** (2:10)
Well, thanks for coming back on, my friend. All right. Well, look, why don't we just start with just a check-in on your latest macro and market assessment here, Jesse. I gave a recap there in the intro of what you've said when you've come on the program in the past. But in the here and now, with stocks still pretty close to all-time highs, a new factor since we last talked there, Iran war going on here, obviously a ton of capital just both flooding into the AI space and being spent into the economy by the AI space.
When you look at it all from a 30,000-foot view, what's your current assessment, both of the macro side and the market side?

**Jesse Felder** (2:51)
Yeah, I think we're in a prolonged topping process in the stock market. That's taken longer obviously than I thought it would take for it to play out, especially with this latest move in semiconductors, this final blow-off phase, I think is what we're in the midst of. I still do think this is all in the midst of a major topping process.
Earnings growth is extreme and it's being extrapolated out into the future indefinitely.
But a lot of that is just accounting, you can't really call it accounting shenanigans, but it's the timing of a tech build-out boom, where revenues are recognized immediately and expenses are recognized later on and those expenses are just ramping up dramatically with three-quarters of a trillion dollars, I think, this year and spend on the AI build-out. You have all these companies, NVIDIA, most notably, recognizing now the memory stocks, dramatic revenue growth, earnings growth. But none of those things are being recognized by the hyperscalers in terms of depreciation. So you have this earnings boom, and everybody says, look, earnings are awesome. Stocks should be going up, but it's really a timing issue. At the same time, I think it's fascinating that we have this extrapolation of earnings and revenue growth indefinitely out into the future. At the same time, all of these data centers that are really where all these chips are going to go, are being delayed or canceled in a lot of in several instances. So it's pretty obvious to me that right now, the market is pricing a future that is over the next several years, it's already clear that it's impossible to achieve what analysts are pricing out over the next two, three years.
Already, you have a lot of NVIDIA suppliers and these types of companies that are being stuck, and NVIDIA sells the GPUs to middlemen like Supermicro, who build up inventories and kind of create, build the racks and things like that, sell them on to the data centers. But the data centers aren't ready to accept all that inventory yet. I think there's been statistics that show two-thirds of all the data centers that are supposed to be completed next year, haven't even be broken ground yet. So there's no possible way they're going to be completed next year. Where are all these chips going to go? We're rapidly running into a point in time, where a lot of this revenue growth is going to, analyst estimates are going to have to come down rapidly. Just because of the physics of it is not going to happen. So I think you have that on one side of things, which is a really important component of this AI bubble. Same time, you have macro things going on too, it really looks like we have a stagflationary scenario building. We had the Small Business NFIB Survey come out this week and showed, small businesses are raising prices and dramatically reducing plans to hire people. So that is a good leading indicator of rising unemployment and rising prices, which is the definition of stagflation. So we have these stagflationary dynamics, obviously, that are partly at least driven by the war in Iran.