Inflation Is Coming For The Overcrowded AI Trade

Rising inflation is draining global excess liquidity, leaving the overcrowded and expensive AI and semiconductor sectors highly vulnerable to a sharp derating.

Key Takeaways

• 1.Excess liquidity is declining as global inflation accelerates, creating a challenging backdrop for equities.
• 2.The semiconductor and tech hardware sectors are the most overcrowded and 'hyped' based on earnings expectations and institutional ownership.
• 3.Semiconductors have become the most expensive sector relative to bonds, with a negative equity risk premium.

Table of Contents

• Semiconductors Is the Most Hyped Sector
• AI Sectors Are Very Crowded
• Excess Liquidity Is Falling Again
• Inflation Is Eating Away at Excess Liquidity
• Commodity Inflows Keep Charging Higher
• Almost All Commodities Are Now Rising
• Inflation Is on Its Way Back
• Semiconductors Is Most Expensive Sector vs Bonds