Orders for AI hardware keep growing, as TSMC's October sales jumped 60%, CoreWeave lifted its spending plans and Applied Materials expects another record year in 2027. The shares have still fallen hard while the S&P 500 edged up. Microsoft lowered data center spending after delays at Iren, and Democrats' planned AI bills after the midterms raised fears of a slower buildout.
Updated Nov 14
Semiconductors, Semiconductor Equipment & Materials, Electronic Components and 5 more industries
The reasoning of the connection that opened this thesis. It is not updated.
The closest parallel is the 2000-2001 fall of Cisco and Nortel, versus Corning and Amphenol. Cisco fell 89% from its peak. Corning fell too, but its fiber shipments went on for 18 months after the peak, because phone companies had already ordered and were mid-build. A falling share price at the platform company does not at once stop a physical build-out already in motion. A second parallel came in the 2022 crypto collapse. Nvidia's chip sales to crypto miners dropped sharply, but cloud companies' demand for its chips was not affected, because the two pools of demand were separate. Here, cloud AI spending is the main source of demand, and it rests on multi-year plans rather than quarter-to-quarter mood.
Nvidia's falling value may be an early warning, not a late one. Big investors who watch supply chains closely may expect cloud spending delays before they are announced. The weakest assumption here is that cloud spending plans hold. Large cloud companies have slowed building in the past when returns disappointed. If revenue per AI chip installed misses internal targets at Microsoft Azure or Google Cloud over the next two quarters, spending cuts follow fast, and the case for these suppliers collapses. The result that would change the picture is Microsoft or Google cutting its spending forecast by more than 10% in its next earnings release.
119 for · 23 against
Nvidia's stock falls about $1T in market value, bringing its valuation back to where it was before the AI boom. Mood across the AI supply chain turns negative as investors assume demand is collapsing.
Investors sell AI infrastructure suppliers in cooling, power delivery and dense connections along with Nvidia. They assume these suppliers' sales will shrink as Nvidia's valuation does. That link is wrong. Their sales come from AI chips already on order, not from how investors value Nvidia's future earnings.
US industrial and tech firms that supply data centers with cooling, power gear and fiber and copper links have orders filled for several quarters. Those orders come from cloud spending plans set before Nvidia's fall. As cloud companies confirm the plans over the next 1-2 quarters, these suppliers' low share prices could catch up. Vertiv and similar suppliers with over 30% of sales from data centers stand to gain.
Average move since Tenji added each name: -23.1% · S&P 500 since the thesis opened Jul 8: +1.2% · 2 of 20 names moving with the thesis
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