From quality without value to neither?
Valuation concerns about big US supercap tech stocks are nothing new. Not only do these stocks dominate the major cap weight averages like the S&P and Nasdaq because of their multi-trillion-dollar market caps, but they’ve been trading at high levels of price to earnings, dividends, book value, revenue and cash flow. The market has given them a pass on these valuations for two main reasons; past high growth of earnings and the anticipation it will continue, and quality, specifically their fortress-like balance sheets, with plenty of cash and low debt.
Now all that’s left is the anticipated growth.
The so-called hyperscalers are projecting spending to reach around $700 billion this year. This aggressive investment strategy is straining their balance sheets, as it consumes nearly all of their cash flow from operations, raising concerns about their ability to manage debt and maintain financial stability in the long term.
Hyperscalers like Meta, Amazon, Microsoft, and Alphabet are significantly increasing their capital expenditures (capex) to compete in the AI market. This shift has led to a greater reliance on debt financing. In 2026, hyperscalers are expected to raise substantial amounts of capital through bond issuances, with companies like Oracle planning to raise up to $50 billion. This trend indicates a move from cash-funded models to more leveraged structures, which can impact their balance sheets.
The scale of capex spending is also consuming nearly all cash flow from operations for these companies, compared to a historical average of 40%. This heavy investment raises concerns about the sustainability of their financial health.
Despite the risks associated with high levels of debt, some analysts remain optimistic about the long-term returns from these investments. The expectation is that as AI usage grows, the returns on these capital expenditures will materialize, justifying the initial spending. However, the timeline for recouping these investments remains uncertain, creating a potential risk for investors if demand does not meet expectations.
This is a fundamental shift in the underpinnings of these stock prices, moving a substantial part from fact to hope. And it’s a high stakes shift … whereas until recently the potential consequences were a decrease in earnings, which alone would be devastating to their stock prices, it now includes the risk of insolvency if their bets don’t pay off.
🇮🇱 Former chief of staff and senior advisor to israeli Prime Minister Netanyahu, Asher Hayon was just found dead in his home in Tel Aviv.
🇦🇪 Turkish media reports that the President of the United Arab Emirates, Mohammed bin Zayed Al Nahyan suffered a STROKE or brain bleed and may be in critical condition.
Turkish President Recep Tayyip Erdogan and Greek Prime Minister both cancelled a scheduled trip to the UAE, citing a “health problem” with UAE President Mohamed bin Zayed Al Nahyan.
🇮🇱🇬🇷🇮🇷 Is now confirmed that Dana Eden, the Israeli executive producer and co-creator of the anti-Iranian propaganda television show ‘Tehran,’ was found dead in her hotel room in Greece, where she was filming the fourth season of the show
Police are investigating the death as a suicide, with pills found at the scene.
According to Hebrew media, a coroner found bruises on her neck.
Strange happenings…………
On first pass this reads like psyop to play to Iran’s domestic audience that it’s somehow Iranian IRGC extrajudicial killings.
Kinda like selling it as an Iranian equivalent of the Maduro capture raid.
Speaking of which, USS Ford(8 month deployment so far) battle group is moving to reinforce(not replace) the USS Lincoln(3 month deployment so far) battle group already in the AO.
A lot of other assets(including F35s and tankers) have moved into the region.
If I had to guess, mid March is what I would speculate as operationally relevent date group.
It’s beyond Trump’s deadline and it’s lowlight moon-phase wise, same as when US forces raided Iran last year
What’s the possibility that this massive $700B “hyperscaling” is the next iteration of ‘Get Big Fast” during the Dot Com bubble era starting nearly 30 years ago?
Except now with an extra one or two zeros on the end of the “drunk sailor on shore leave” spending frenzy.
When I was at Amazon in the 90’s the spending went from frugal, to frugal except anything that directly contributed to exponential scaling, to spend like a drunken sailor on acquisitions if it even smells like growth, to stop spending immediately or we’re going to go bankrupt in 37 minutes.
Maybe it’s not the same song, but it’s humming a similar tune.
It kinda has a WorldCom-GlobalCrossing air to it…
$100K for a pick up truck!
Here is the answer……….
https://carnewschina.com/2026/02/17/byd-racco-ev-kei-car-officially-revealed-interior-in-japan/
$100k for a fancy pickup truck. That’s absolute madness.
It’s my understanding the last big profit center for Detroit is pick-up trucks.
I recall during the GFC when supply chains kept pumping out vehicles and the market was flooded with unsold cars with images of countless thousands of new vehicles parked up on old air force bases.
I personally visited the giant auto malls between LA and San Diego(a concrete ocean of car dealers) during the peak of the GFC to get some ground truth and saw base model Ford F150 pick up trucks being sold for $9,995.
That was after attending a convention in Las Vegas and having recently visited Dubai.
Between Vegas and Dubai I think they had the vast majority of global heavy cranes in use, then rapidly in disuse from the collapse of the build out.
Maybe there’s a similar AI infrastructure buildout echo effect on the horizon,
Things have certainly changed.
https://www.autocar.co.uk/car-news/new-cars/exclusive-electric-alpine-a110-use-wild-r5-turbo-3e-platform
France takes on Germany
https://www.zerohedge.com/news/2026-02-16/china-silver-fund-revalued-amidst-selloff
Nauty
I feel ill…………………..Gold feels ill………………..Silver feels ill
Oh Hum
Speaking for gold and silver, it’s an old fashioned hangover. After a party like that…
Investing Experts Sound Alarm on Big Tech’s Massive AI Spending
“Nearly one in three surveyed investors called “AI hyperscaler capex” the most likely source of a “systemic credit event,” the second-most common answer behind private equity/credit.”
I think they will walk back some of those capex projections. Stock price feedback is hard for corporate managers to ignore. When the kids start spending like drunken sailors, the grownups can take away their credit cards.
JP Morgan says there’s a case against the gold rally continuing – and it’s wrong
““Gold has had a ferocious rally over the last five years … There’s a laundry list of reasons why, but the biggest driver may be a new era of geopolitical volatility and fragmentation incentivizing investors to buy the precious metal.”
“Now add on worries about currency debasement, growth, inflation and irresponsible fiscal finances that haven’t been fully reflected in sovereign assets,” they continued. “It’s no wonder the precious metal has been a popular asset for investors during times of stress.””
Correct, except for the order. The biggest driver is currency debasement, inflation, and irresponsible fisc, while the add-ons are geopolitical.
Why do I say this? Look at the big picture. Gold bottomed around the turn of the century, when the US had a nearly balanced budget. It’s risen nearly twenty times in price since as the deficit has grown. The bull market started over a quarter century ago.
It makes a difference. To the answer to the question “What stops gold’s rally?”
It will be when governments get their fiscal house in order and central banks stop inflating. And this is a much more grokable issue than unpredictable geopolitics. Of course gold prices will respond to the oscillations of geopolitics, but those are fluctuations superimposed on the larger trend.
On a fundamental level, it must be. For what do we measures gold prices in? Government and central bank currencies. Their value is as inseparable from the price of gold as the gold itself.
Gold is gradually getting boring again, which is a good thing for its near term outlook. One of its main attractions is its use as portfolio ballast, something at which it isn’t so effective if it’s jumping around all over the place.
We can’t rule out the potential for further substantial downside, especially at these still elevated levels, but that’s true of any asset at any level. My base case remains unchanged … it will return to its established trend and rise at a more sustainable pace … until either the world’s governments and central banks discover fiscal and monetary prudence or fast money piles in again and makes it jump around.
Weekly Market Pulse: What’s Your Risk Tolerance?
Weekly Market Pulse: Is The Stock Market Peaking?
These pieces are by one of my favorite financial writers, Joseph Y. Calhoun III. I’m linking them here because he explains better than I do the basis for the Financology Model Portfolios and portfolio management principles.
The tsunami of tariff propaganda continues:
Bad news about President Trump’s tariffs: U.S. companies and consumers are paying the bill
“Here’s the big picture: Every dollar in tariff revenue the government siphons away from U.S. companies and consumers is a dollar they could have spent elsewhere to support the economy. In other words, tariffs leave businesses and consumers with less purchasing power, which slows economic growth.”
But this is true of every form of tax; income tax, sales tax, property tax, etcetera. Just replace the word “tariff” with “tax” in the preceding paragraph and see for yourself. Yet the sheer mass of corporate media carping about import taxes dwarfs that about any other form. The media’s relentless carpet-bombing of the public this way isn’t economics, it’s politics. No wonder trust in the media is disappearing.
If there were any truth in media garbage like this would be labeled a political advertisement.
Mega’s dispatch from England:- Oil Shock 2026?
I been worried for sometime about the lower than vermin scum that “Rule” us are completing some rather risky actions. Given the “Up the creek without a paddle” situation they managed to place us in i think “They” want to give us a nice healthy (for them) dolso of hyper inflation.
What’s the fastest way of doing that without taking the blame?
A MEGA rise in Oil prices……….& nothing better for that than war in the middle east.
Given that Oil tankers are getting Hi Jacked on the high seas (Shadow fleet) i think a boiling point is about to be hit. Make no mistake this is what these bastards want.
Another little helpful effect will be to drive people to EVs. I mean its a bugger to have to wait hours to charge, but it beats gas lines.
Meantime here in Blighty or the Peoples republic of free commisit Britain the “Dear Leader” has now allowed the local elections to go ahead. He also said how it was not his fault that they almost didnt……………it was the local councils whom wanted a delay.
I know we told “the bigger the lie the more people will believe it”……but not this one.
The local Labour party are pissed. They can see that a carbal of Fabian assholes have taken control of the party. We find that save seats were handed out to friends & family of these despots.
Hence we are seeing very little local support for said scum. Normally the Leader would resign, but the “Dear Leader” has other ideas. He threatened a general election if any attempt is made on him. …………….it sort of reminds you of the scene in “Blazing saddles” when the new Sheriff rides into town.
Anyway its time for breakfast & i am still under the weather………….
Cheers
Mike
I think your MEGA rise in oil prices is under way. Did anyone notice it began the very day I predicted it?
Outlook 2026
“Other commodities not so much. Oil especially is historically cheap and broad commodity indices like the SPGSCI, heavy in energy, could be the sleepers that awake in the coming year.”
MDFE UPDATE:- Happy Birthday!
Andrew Mountbatten-Windsor arrested
We’re resuming our live updates as police have arrested Andrew Mountbatten-Windsor.
Police had been assessing claims against the former Duke of York – who turns 66 today – that emerged in the Jeffrey Epstein files.
Andrew has always vigorously denied all the allegations against him and any claims of wrongdoing in connection with Epstein.
This is a breaking news story and is being u
Supreme Court Strikes Down Most Of Trump’s Tariffs
U.S. Supreme Court strikes down Trump’s emergency tariffs
This is a big mess. The Supremes apparently didn’t speak to the question of refunds for tariffs previously paid, inviting massive further litigation on that matter.
This decision was directed to the matter of whether tariffs can be imposed under the 1977 law called the International Emergency Economic Powers Act, or IEEPA. Other bases for tariffs exist, and Trump has indicated his intent to use them. So it doesn’t end Trump’s tariffs campaign, but rather complicates it.
While we have argued since Financology’s inception that tariffs are one of the least objectionable forms of taxation, and that the Constitution shows our founders envisioned them as the primary means of raising federal revenue, we’ve also objected to Trump’s spastic, disruptive implementation. One can wonder how things might have been different had he not so abused his discretion.
There is also the matter of the excessive exercise of executive power in matters that are appropriately up to the legislature, which has been expanding over multiple administrations. This is the core ground upon which the decision is based. So this is a positive decision from the standpoint of constitutional delegation of powers.
How should emergency tariff powers work? The President can use them. but they have to be ratified by Congress within a limited time or they sunset.
There is a desperate need however for a similar limitation on military adventurism. It’s tragically ironic that the President can’t impose certain tariffs at our borders without legislation but can nevertheless send our military anywhere in the world to wage war and take lives.
But to genuinely solve the problem, Congress needs to fix itself. The legislative having so tied itself up in a gordian knot of procedure and committee bureaucracy that it can’t act is largely responsible for the executive and judicial branches having grown overly assertive.
Bloomberg reports that in response to the Supreme Court decision, Trump has announced a new, across-the-board 10% global tariff and new tariffs on automobiles.
These are imposed under a different statutory authority than the one the Court ruled on. A broad and modest global tariff was one of the better features of the original tariffs. So aside from having left a mess over the question of refunds for tariffs already paid, the net outcome of this may be positive.
https://financology.net/2025/12/17/outlook-2026/#comment-8849
“How should emergency tariff powers work? The President can use them. but they have to be ratified by Congress within a limited time or they sunset.”
This, by the way, is how the new 10% tariffs work, under Section 122 they remain in effect for 150 days and need congressional ratification to continue.
May be the Aliens can help?
I think Trump sent them home.