The hyperscalers won't stand for the price gouging.
That's the message in today's price action in the Nasdaq. There has been a tug of war this month between -- as ZeroHedge calls them -- the AI check writers and the AI check receivers.
Yesterday, we saw a trio of announcements of megacap tech companies being forced to hike prices just after Micron revealed a sensational quarter. The implication is that all of their money is going towards memory chips that are in short supply at the moment and that memory sellers are using that dynamics to hike prices in the order of 4x.
That's capitalism.
But capitalism also solves those problems and the market is saying that the prices hikes have gone too far and that action is coming. That could mean that one hyperscaler drops out of the race, the pace of the buildout slows down until the supply chain catches up, or memory sellers accept lower margins in order to keep their customers from building their own fabs.
The two-mostly likely high-spenders to pivot are Microsoft and Meta. Not coincidentally, their shares are up 4.8% and 2.4% today, respectively. Amazon is also up 2.4% as it has a strong underlying business and doesn't need to succeed on AI to justify its multiple.
In contrast, Micron is down 3.9% and the semiconductor ETF is down 4.8%. This ultimately boils down to picks-and-shovels versus mines and there has to be some kind of balance or there is going to be a brutal whipsaw.
The thing is, there isn't going to be an answer until something changes on the fundamental side. So we will continue to see this kind of volatility as the skirmishes continue to play out and everyone tries to time the big shift.
