Michael Jensen @GenesisGains: "Hello everyone, The market continues..."

Denmark

Hello everyone, The market continues to behave as if liquidity can solve every problem — and right now almost all of that liquidity is flowing into one place: AI and semiconductor stocks. Since the March lows, the move has been extraordinary. The $NSDQ100 has surged from roughly 22,700 to above 30,100 in barely two months, driven largely by an explosive rally in AI-related names. $MU (Micron Technology, Inc.) has become one of the clearest examples of just how extreme this momentum has become, with the stock adding hundreds of billions in market value in a remarkably short period of time as investors rushed into anything connected to AI infrastructure and memory demand. The AI story itself is real. Productivity gains, automation, cloud expansion, and data center demand are all powerful themes. The problem is expectations. Markets are now pricing in a future where AI spending grows almost endlessly while profits accelerate forever. History usually becomes uncomfortable when markets start believing in “infinite upside.” What’s especially interesting is that several cracks are already appearing under the surface. GPU rental prices have started falling sharply, some large companies are quietly reducing AI-related spending, and software firms are discovering that replacing humans with AI is not always as cheap or efficient as expected. In many cases, the costs of verification, errors, and infrastructure remain enormous. At the same time, the broader U.S. economy is sending a very different signal. Consumers are becoming more cautious as higher energy prices and inflation continue to pressure household budgets. Retail spending is softening, several defensive/value names are underperforming badly versus tech, and companies exposed to the consumer are starting to feel the pressure. The divergence between AI enthusiasm and the real economy is becoming increasingly difficult to ignore. Meanwhile, markets may also be underestimating the inflation risk tied to geopolitics and energy. As long as uncertainty around the Strait of Hormuz remains unresolved, $OIL prices stay supported and inflation expectations remain elevated. That complicates the outlook for the Federal Reserve and makes aggressive rate cuts far less likely than many investors hoped earlier this year. What also stands out is how narrow this rally has become. A small group of mega-cap tech and semiconductor companies now accounts for an enormous share of total market performance. The $SPX500 keeps climbing, yet many stocks underneath the surface are no longer participating. That type of concentration can work for quite a while — until suddenly it doesn’t. None of this means AI is “fake.” Far from it. AI is clearly a transformative technology. But markets often overshoot reality before fundamentals eventually catch up. We saw it during the dot-com era, crypto mania, EV speculation, and countless other cycles before that. For now, momentum remains incredibly strong, and betting against euphoric markets too early can be painful. But the combination of stretched valuations, rising concentration, inflation pressure, and slowing consumer demand suggests that volatility risks are quietly building beneath the surface — even while headline indices continue making new highs.

Not investment advice. The author may have financial interests in the mentioned instruments.