THE DEPLOYMENT GAP · TWO-SIDED
Technology's bad week fell on the spenders, not the builders
Grant Bishop's view reads the week as the cost of the artificial intelligence (AI) build landing on the companies that pay for it, which sharpens our standing view that AI spending is running ahead of the revenue it brings in, rather than overturning it.
Bottom line
- Did this week's fall in technology shares say something about the AI build itself?
- Our answer is that the losses landed on the companies paying for the build, while the suppliers, Vertiv, GE Vernova, Quanta Services, KLA and Amphenol, closed higher, which sharpens our view that AI spending is running ahead of the revenue it brings in rather than overturning it.
- Grant Bishop's view: A guidance cut or a shrinking backlog at the suppliers, or a rate rise at the Federal Reserve's December meeting, would change that.