Just about a month ago, when Wall Street first realized the existential threat that China's (far cheaper and much more efficient) DeepSeek technology posed to the grand AI narrative - which has almost singlehandedly pushed stocks higher for much of the past two years - we speculated (so to speak) that Wall Street's forecasts for Mag7 capex may be just a... tad excessive.
There is so much grassroots excitement about AI, in iOS 18.3 Apple is forcefully including everyone into its AI product since nobody will do so on their own.
— zerohedge (@zerohedge) January 29, 2025
But yeah, $300BN in capex. pic.twitter.com/sjdDiXexMi
And for a few hours, Wall Street did the same, sending tech names plunging, and NVDA crashing the most on record, wiping out nearly a trillion dollars in market cap in a single session. But it didn't last, and the very next day Wall Street held a masterclass in mass delusion, whereby the narrative of collapsing capex was promptly goalseeked away with some 19th century deus ex machina called Jevon's paradox, which simply states that if the price of a technology tumbles its widespread adoption will more than make up for sunk capital costs (try explaining that to Global Crossing). Or something along those lines... and while HFT algos had no idea what any of this meant, the fact that momentum shifted from sell to buy was enough - and in the ensuing 4 weeks everything ripped straight up, as if the entire embarrassing DeepSeek episode had never happened and everyone forgot all about it.
