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🔥 Here’s What’s Happening Now

That’s what makes this so tough, big selloff on Friday, massive rally Monday, and selloff again Tuesday. Futures green this morning. After a massive amount last week, just not a lot of data to give the market direction.

I typically have a 10% (by Delta) hedge, it’s closer to 20% now. Not necessarily bearish but not really bullish either. Last week was a conscious decision to add hedges, this week I just haven’t taken anything off and my delta has expanded a bit. Without a catalyst seems like the path of least resistance is rangebound.

SPY holding between the 10 day MA and 20 day EMA. The 50 day is looming, we haven’t tested that since May. Watch all of the moving averages for a sense of direction…..

Going to be talking about AI capex the next couple of days as it is such a vital component of this market. Right now it’s full speed ahead. Some stats from Jefferies this morning…..

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1) META expects an additional ~$30B increase in FY26 Capex, implying another ~40%+ y/y growth driven by continuous capacity constraints;

2) MSFT expects AI-driven capacity constraints to persist through 1H, front loading Capex growth before moderating vs. FY25.

3) We now expect Big 3 + META & ORCL to spend $417B in CY25 capex, up 168% from '23;

4) AMZN saw the greatest revision in CY25 Capex ests post Q2 print, followed by MSFT.

🧠 The AI Boom = Potential Bubble in the Making

Jefferies wrote a report this weekend suggesting that we have an AI bubble in the making.

🔥 Key Quote:

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"The ongoing binge to invest in so-called large language models will result in a mis-allocation of capital of epic proportions…"

Jefferies is arguing that:

  • The current LLM spending spree is massively overextended

  • We’re headed toward a capex glut similar to the dark fiber buildout in 1999–2000

  • The bust — when it comes — could be bigger than the dot-com crash in some corners of tech

🧱 Historical Context: Dark Fiber in the Dot-Com Era

During the dot-com boom:

  • Telecom companies overbuilt fiber optic capacity, betting on infinite future data demand

  • When the demand didn’t materialize fast enough, we had mass bankruptcies, stranded assets, and massive equity wipeouts (e.g., WorldCom, Global Crossing)

Jefferies is suggesting the same dynamic is emerging in AI:

  • Too many GPUs, too many LLMs, not enough real monetization

  • Capital flooding into duplicative infrastructure (e.g., thousands of startups building GPT-4 clones)

  • Scarcity in power and demand, not in compute

🧭 Implications

🟢 Short-Term: AI CapEx Boom Still Drives Equity Alpha

Even if the long-term outcome is a blowup, right now:

  • There’s massive CapEx pouring into data centers, semis, infrastructure

  • Winners today: $NVDA, $SMCI, $VRT, $MOD, $AMRC, $PLTR

These names are still printing alpha, and Jefferies explicitly calls them out as the “picks and shovels” — the suppliers to the AI gold rush.

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⛏️ So you should stay long the CapEx arms dealers… but start thinking about the exit timing.

🔴 Medium to Long-Term: Risk of Overbuild and Valuation Compression

If this thesis plays out:

  • LLM commoditization = margin collapse

  • Cloud customers slow spending (already hinted by $GOOG, $AMZN earnings)

  • $NVDA-like multiples compress sharply as GPU utilization drops

  • Idle capacity = writedowns = earnings miss = de-rating

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🎯 Early warning signals to track:

  • Rising GPU availability (check waitlists)

  • Datacenter utilization metrics flattening

  • Lower marginal returns on new AI models

  • VC/PE pullback in AI infra

  • Pricing compression in foundation models (Anthropic, Cohere, etc.)

🧠 How to Position for This

1. Maintain Tactical Longs in Pick-and-Shovel Plays

  • Stay long $NVDA, $SMCI, $VRT, $MOD — but tighten stop-loss triggers

  • Focus on names that can monetize beyond GPU sales (e.g., $PLTR via platform stickiness)

2. Start Building a Strategic Short Book

  • Identify **LLM infrastructure companies with:

    • High CapEx

    • Weak monetization models

    • No competitive moat beyond brute compute

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Think: datacenter REITs chasing AI demand at peak buildout, or chip companies expanding supply into saturated verticals

3. Volatility Hedge Through Overcrowded AI Stocks

  • Long puts or put spreads on:

    • $NVDA (high IV but big notional payout)

    • $SMCI (highly reflexive, prone to blowouts)

    • $AI (C3.ai) — meme AI stock with minimal revenue backing

📊 Strategic Themes to Track

Theme

Trade

Short-term AI infra boom

Long $SMCI, $MOD, $VRT, $PLTR

Overbuild-to-bust thesis

Short $AI, $TSLA (Dojo), GPU startups

Foundation model glut

Short private LLMs if exposed via PIPEs, late-stage VC

Post-hype AI UX winners

Long $MSFT (Copilot), $GOOG (Gemini), $SHOP (AI UX)

✅ Bottom Line: Jefferies Isn’t Wrong — But It’s Not Over Yet

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This is 2000 Q3, not March 2000.
AI infrastructure is still booming — but you should start watching for the inflection point where spend overtakes utility.

The edge is in front-running the unwind, not fighting the boom too early.

Those who have seen me speak about our version of the classic Permanent Portfolio know that I think crytpo and precious metals should be a part of your portfolio…….

📈 Stock Corner

SMCI is going to be down big this morning on earnings. Watch the 50 day moving average for a potential undercut and rally…..

I had GPT do an analysis of the earnings report….

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Verdict: HOLD, with tactical risk management and a watchlist of catalysts.
SMCI remains a critical AI infrastructure play with enormous top-line growth potential, but this quarter materially weakens the bull case on margin stability, execution, and operational risk. It still deserves a seat in the AI portfolio — but with tight oversight and relative deweighting until conditions improve.

What to Watch Next

Margin stabilization — does gross margin stay sub-10%, or recover with expanded capacity?

Order flow clarity — was revenue timing a one-off, or a systemic issue?

Convertible bond dilution — watch how much equity gets created at low strike levels

New customers — if SMCI can diversify its revenue base, re-rating becomes possible

📬 In Case You Missed It

Interesting podcast yesterday talking about Space Force and all of the implications around having assets and weapons in space……

🤝 Before You Go Some Ways I Can Help

  1. ETFs: The Antidote to Wall Street

  2. Inside HEAT: Our Monthly Live Call on What Wall Street Doesn’t Want You To Know

  3. Financial HEAT Podcast https://www.youtube.com/@TuttleCap Freedom from the Wall Street Hypocrisy

  4. Tuttle Wealth Management: Your Wealth Unshackled

  5. Advanced HEAT Insights: Matt’s Inner Circle, Your Financial Edge

    The views and opinions expressed herein are those of the Chief Executive Officer and Portfolio Manager for Tuttle Capital Management (TCM) and are subject to change without notice. The data and information provided is derived from sources deemed to be reliable but we cannot guarantee its accuracy. Investing in securities is subject to risk including the possible loss of principal. Trade notifications are for informational purposes only. TCM offers fully transparent ETFs and provides trade information for all actively managed ETFs. TCM's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. Trade notification files are not provided until full trade execution at the end of a trading day. The time stamp of the email is the time of file upload and not necessarily the exact time of the trades. TCM is not a commodity trading advisor and content provided regarding commodity interests is for informational purposes only and should not be construed as a recommendation. Investment recommendations for any securities or product may be made only after a comprehensive suitability review of the investor’s financial situation.© 2025 Tuttle Capital Management, LLC (TCM). TCM is a SEC-Registered Investment Adviser. All rights reserved.

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