US MARKET CALL: AI Fatigue Weighs On The 'Lag-7'

As we predicted, the S&P 500 had a June Swoon. We expected that it would be more of a broadening rotation than a widespread correction. That's the way it played out. The S&P 500 market-weighted stock price index peaked at a record high of 7,609.78 on June 2 (chart). It fell 3.4% through Friday's close. Over that same period, the S&P 500 equal-weighted stock price index was unchanged (chart).

Investors seem to be experiencing AI Fatigue. They are questioning whether the hyperscalers' massive spending on AI infrastructure will ever pay off. They see token prices falling, suggesting there might already be excess compute capacity. They see that yet another Chinese company is offering cheaper, powerful, and open-source LLMs. They worry that new technologies will rapidly make current ones obsolete in a process known as "creative destruction."