Summarize

Investor enthusiasm is rebalancing.
By Joe Weisenthal and Tracy Alloway

June 26, 2026 at 12:05 PM EDT

Hello and welcome to the newsletter, a grab bag of daily content from the Odd Lots universe. Sometimes it’s us, Joe Weisenthal and Tracy Alloway, bringing you our thoughts on the most recent developments in markets, finance and the economy. And sometimes it’s contributions from our network of expert guests and sources. Whatever it is, we promise it will always be interesting.
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Here’s what Tracy’s thinking about…
Yesterday, I talked a bit about a subtle-ish shift in how the market is pricing in the AI trade and I think it deserves some more attention as it seems to be intensifying.
In short, you’re seeing a rotation out of the big AI hyperscaler plays that have been spending seemingly endless amounts of money on the new tech, and more towards the businesses that are producing the things needed to enable that tech in the first place. That’s one reason why the chip-heavy European MSCI tech index is now outperforming the software/platform-heavy US MSCI equivalent.
If you want to see the theme more clearly, Nomura has created a basket of what it calls “AI enablers versus AI hyperscalers.” As you can see, AI enablers are now vastly outperforming the hyperscalers:
Source: Nomura
In essence, if we go back to the old gold mining cliché, the hyperscalers are the equivalent of gold mining exploration companies. Everyone got excited about the prospect of discovering gold in the hills of Silicon Valley and invested a lot of money in the gold mining companies themselves. Now, as reality sets in, they’re realizing that gold mining is expensive and dirty and competitive and maybe gold isn’t as valuable as they thought anyway. Maybe not every company in the world can or wants to buy gold nuggets. So investors are now moving their money out of the gold mining companies themselves and into the picks and shovels companies that make the stuff that enables gold exploration in the first place.
The key thing here is still scarcity. There simply isn’t enough supply of DRAM, GPUs, to meet demand, which means the companies that make these AI picks and shovels are seeing both volume growth and pricing power at the same time.
The result is a classic pull-forward of earnings. Revenues and profits that might have materialized gradually over several years are instead arriving all at once. And investors are responding accordingly by expressing the AI/gold theme a little differently. More money is going into the stuff that’s showing earnings growth today, and less is flowing into the speculative stuff that’s promising huge earnings growth tomorrow. That isn’t to say that money wasn’t flowing into the picks-and-shovels plays before — it obviously was — but that the balance of AI investor enthusiasm has tilted even more towards them. It’s notable for instance, that Google, Meta, Amazon et al. haven’t been able to reach new highs recently, even as the overall S&P 500 is still pretty close to its record.
In other words, the trade has evolved from mostly “buy the platforms” to more “sell the spenders and buy the suppliers.” It’s less about who will win the AI race in the long run, and more about who is getting paid from it right now.
Of course, you have to ask how long the hyperscalers will be able to justify the spending on AI/gold exploration that’s been enabling that earnings pull-forward in the first place. But it’s notable that the market right now seems to be treating AI less like a story about future pricing power and more like one about present-day bottlenecks.
What Joe is thinking about today
10 years ago, there was still a lot of interest in the various consumer sentiment metrics. And then around 2022 people were talking about them a lot, because of the disparity between growth (red hot) and sentiment (terrible). Since then though, people have mostly lost interest in these measure.
My guess is that people assume two things. One is that everyone will just say they’re unhappy. And the other is that all of these economic sentiment measures are just political surveys in disguise.
Today we got the final June reading for the University of Michigan Consumer Sentiment Index, and it was all exactly how you would expected. Overall sentiment is low. Current conditions are low. Inflation expectations are high. Very few people think it’s a good time to buy a house or a car. People expect higher interest rates and higher gasoline prices. And on and on.
One thing I do find interesting (and this isn’t really relevant to the latest month) is the general upward trend in job anxiety. If you look over the last 30 years of the question, in which they ask people whether they are worried about themselves or their spouse losing a job, you see a couple things. Two of the spikes happened during crises (Covid and the GFC) and then the other spike was in 2003, the so-called “jobless recovery” coming out of the dot-com bust.
Bloomberg
Again, what is notable to me is the general elevation in the number. The recent month showed a modest dip. So far we really haven’t seen any kind of big wave of job losses. Actual hard data is overall quite solid and some of it is even pointing to reacceleration.
There’s nothing counterintuitive going on here though. Given the overall mood, given the fact that the Fed isn’t easing anytime soon, and obviously given the AI discourse, it would be surprising to see any widespread labor market optimism.
On the podcast
When the Strait of Hormuz closed, people were talking about how it would be the mother-of-all oil disruptions. Massive global shortages were predicted. Multiple people went on the record predicting that without a quick opening, we would see the price of Brent surge to over $200 per barrel. One of those forecasters was Rory Johnston, founder of the Commodity Context newsletter. So why did the disaster scenario not play out as expected? On this episode we talk with Rory again about what actually happened, and what we learned about the oil market over the last roughly four months.