AI Trade — Show-Me Quarter for 2027

Two clocks are running on the AI trade, and this week they point in different directions. The short one says sell: Korea fell 8.5% overnight with a trading halt, the chip fund is 20% below its June high and the Nasdaq-100 sits on a major support line. The long one says the build-out is intact into 2028: TSMC reported its sixth record quarter in a row this morning and ASML said on Wednesday its machines are sold out for two years. Which clock is right for 2027 will not be decided by the chart. It will be decided by the earnings reports of the next three weeks — this is the show-me quarter for the whole AI complex.

The fear: 2000's fibre, again

In 2000 the telecom companies laid more fibre than anyone could use. The traffic came — but years later, and most of the companies that paid for the cables did not live to see it. The fear in the market now is the same gap in a new form: hundreds of billions going into AI chips, data centres and power (capital spending, or capex), while the money from using AI (the running costs companies pay, or opex, and the apps built on top) arrives later than the bills.

On Wednesday Barclays gave that fear a number. It cut Dell, HPE and NetApp to neutral and said it sees no "meaningful AI inflection" in company spending: businesses put about 5% of their IT budgets into AI, and only about a quarter of that goes to hardware, as reported by CNBC. Their recent sales growth, it argues, comes mostly from passing on higher memory prices. Dell fell 11.3%, HPE 8.3%, NetApp 7.0%. The rest of the build-out went with them: CoreWeave −15.5%, Oracle −8.8%, AMD −5.7%.