A fly in the AI capex ointment

For all the tariff talk this year, there is a compelling argument that all the weakness in US stock markets is really just Mag7 euphoria fading, in part because of confusion about how AI will play out.

I’m a big believer but there will be an ebb and flow and this might be the flow phase or it might be a bubble popping (at least in a few names).

It’s worth remembering that 25 years ago this week, Goldman Sachs released a note titled: B2C Internet: The End of the Beginning. It urged investors to rotate out of business-to-consumer (B2C) internet stocks and into more sustainable plays. The same month, Robert Shiller released is book “Irrational Exuberance” that argued tech stocks were overvalued.

Before that, there were other trickles of skepticism.

What’s the parallel to today?

In the last 24 hours there have been incredible model releases in Gemini 2.5, a new DeepSeek foundational model that beats everything and OpenAI releasing insane image generation capabilities. Despite that, the market is unimpressed. Meanwhile, Goldman Sachs’s Asian team yesterday revised down its AI training server outlook.

We revise down our Rack-level AI Server volume forecast due to the combined reasons of product transitioning and uncertainties of demand and supply. We now expect 19k/ 57k of rack-level AI servers (in 144-GPU equivalent) for 2025/ 26E, down from previously 31k/ 66k in 2025/ 26E.

Now, this isn’t exactly alarming but it’s slower, it’s a change in the second derivative at the very least. Goldman still sees US cloud services providers raising capex by 41% y/y in 2025 but that slows to 15% in 2026. For China, they see it leveling off at +4% in 2026 and stabilizing there.

The 2000 Goldman Sachs note symbolized the shift from “growth at all costs” to “show me the money” in tech investing. Will we be seeing the same thing in AI? Is that time now?

Nasdaq futures are flat today but Nvidia shares are down 1.8% premarket.

h/t @SquirrelMacro

This article was written by Adam Button at www.forexlive.com.