Is the AI Trade Over? The Bear Case Against Hyperscaler Spending

**SPEAKER_1** (0:01)
This is Invest Talk from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Justin Klein.

**Justin Klein** (0:16)
Good afternoon, fellow investors, and welcome back to another edition of Invest Talk. This is our Tuesday, June 9th, 2026 edition, and appreciate you all tuning in in an interesting market. Once again, I talked about this over the weekend on my YouTube video about how Friday was the potential for an inflection point in markets.
You know, we go for a lot of time during the year. We go, I want to say boring periods, because there's always stuff to talk about, always things to learn, but from a trend perspective, the trend is your friend until it ends.
And it's usually boring while the trend is in place, but then it always ends. And that's when the excitement starts in my book, because then you say, okay, now that is broken. How is the market rotating? Where are the new opportunities? Not only to buy, but also to trim, to sell, to take profits. These are those moments where you wake up and you say, okay, what is my portfolio look like? Where has risk grown? Where are the opportunities I can rotate into? How can I take advantage of these relatively rare moments in markets where the market is shifting underneath your feet? And you need to be on balance and aware and assessing the situation so that you know, you don't fall through the cracks, shall we say. So, that's what I'm going to talk about a lot on today's show, which is what is happening in the equity markets, in the bond markets, in the economy.
It's going to impact your portfolio and market movements for, I think, the balance of the year. I think we're at that point where, okay, things are different now. The narratives that drove the market for the past, let's call it, since the beginning of the quarter, right? Two plus months, two and a half months, roughly. The market bombed in March. That was all about, you know, bottom of March was always control pullback, nothing crazy, but all about the impact of the Iran War. The last two months have been, ah, Iran War, no big deal. It's all about AI. It's all about these hyperscalers, all about memory stocks. It's all about chip stocks, software is dead, all of that. Guess what?
That's behind us. There's a new narrative being pushed in markets, a new narrative that will drive flows. And it all started on Friday. So a lot to unpack for this hour.
I'm Justin Klein and my goal here is to help you become a better investor by answering your finance and investment questions. Whatever's on your mind, don't hesitate to reach out and give me a call at 888-99-CHART. And heads up, our next new wealth webinar is set for Tuesday, June 30th from 12 to 1 p.m. Pacific time. The title is Beyond the Yield, How to Invest for Your Income Needs. You can sign up as always over at investtalk.com. And just to bet, I'll talk about today's Mark performance and run down the show topics for the hour. But as usual, we'll tackle this first caller question now.

**SPEAKER_3** (3:27)
I was hoping you guys could give your opinion on Primoris Services Corporation, the ticker is PRIM.

**Luke Guerrero** (3:35)
I've been looking at it now.

**SPEAKER_3** (3:36)
I think it looks good, but looking to see if you guys can give your own opinion. If you guys do think it looks good, if now's a good time to buy, thanks again. And we'll listen on the show.

**Justin Klein** (3:47)
Looking at Primoris PRIM is the symbol. This is, let's see, what are we at market cap wise? 6.6 billion, so kind of a small to mid cap name. What do they do? They're engaged in provision of construction, fabrication, maintenance, replacement, and engineering services. The utilities and energy space, their business has boomed in the era of AI, and they provide a lot of services that help build out these data centers. Symbol is PRIM. Earnings this year, it's supposed to be down 14%, but back up 22% next year. And the issue for me here is relative strength. It's only 27, so this topped back in, it looks like the earnings in May, early May, May 6th, maybe after it was May 5th, I don't know. But it fell dramatically from a high over $200 per share at the close on May 5th, to a low on May 6th, close around $100.
So quite the drop. What's interesting here is that it rallied a little bit, but never broke into the gap, the high of that sell-off day, and has rolled over once again, down big today, down 14.7% on the day. To me, that speaks very loud. What I'm seeing is a free cash flow, $164 million, well off its high from $500 million. It currently has a market cap of $5.6 billion, with about a billion and a half in debt, net debt. To me, that's the issue. Is the cash flow is not good enough? Its profitability is good, but historically its return equity is a bit lower than the low teens. Right now, it's the mid-teens, so it's over earning a little bit.