We are in the middle of peak AI capex, and 2027 will likely see capex meet/ exceed current projections. Then the capex slowly decline and hit steady state around 2030.
Now, from the cloud era, and from what Andy (Amazon CEO) said there is a lag between the capex, revenue, and cash flow. So, expect FCF will be negative till 2028, and will be acute 2H of 2027. My expectation is Fed would have hiked rates another 3 or 4 times of 25 bps, and the inflation from the ongoing wars (Iran, and trade) will be high enough to impact consumer sentiment.
The AI trade could unwind by 2H 2027… predicting and trying to time the unwind is a fools’ errand. We all saw how quickly bottleneck trade spiked and crashed. But, I need some framework for my trading, even though at the end it is all pure luck.