{"text":[[{"start":5.4,"text":"At this halfway point of the year, it looks like business as usual in markets. "}],[{"start":10.4,"text":"The war in Iran proved to be a blip for investors, the threatened invasion of Greenland (remember that?) didn’t leave any obvious mark, and all the big, broad measures of stock market performance have trundled higher, powered as ever by the miracle that is Big Tech. Everything is hunky-dory and markets are always more resilient than you think."}],[{"start":30.450000000000003,"text":"For most of us, this is great news. I’m aware I’m afflicted with a sarcastic tone of voice but I’m being serious — most ordinary humans’ interaction with financial markets is limited to index-tracking passive investment in our pensions, so a near 10 per cent ascent in US and global stocks will do nicely, thanks very much. Don’t worry, sleep easy. "}],[{"start":51.25,"text":"Behind the blunt measures of market performance, though, two things are worth noting. One is that the tectonic plates are shifting — indices are disguising a serious rethink in where investment returns will come from in the coming months and years. The other is that the chorus of warnings about cracks in the foundations of the AI business model, its wildly bubbly characteristics and its centrality in propping up financial markets, is becoming deafening."}],[{"start":76.6,"text":"On that second point, the past couple of weeks have been packed with distress signals from numerous directions. They are coming from the corporate debt markets, where new bonds issued by Elon Musk’s SpaceX are feeling the heat of bond investors’ trademark scepticism. The bonds enjoyed very robust demand at the point of issuance, but some see that as a problem in itself. Allianz’s chief investment officer has described the market’s willingness to hand money over to Musk as a clear sign that we have moved from “a healthy boom, a stretched boom . . . into bubble territory”. Ominously, the bonds have weakened since they launched."}],[{"start":113.1,"text":"Central bankers are also fretting. Sure, that’s their job. They are tasked with spotting risks to financial stability, some of which materialise, and some of which don’t. Still, the latest annual economic report from the Bank for International Settlements makes for sobering reading, studded with warnings that the AI investment “exuberance” could flip into a bust."}],[{"start":135.85,"text":"Even in stock markets, it is obvious something is amiss. It has been a comfort to stock investors for some time that runaway share prices have been supported by runaway corporate earnings expectations. But what if the expectations themselves are in a bubble?"}],[{"start":151.95,"text":"Brokerage Panmure Liberum noted this week that if you adjust valuation metrics for the apparent excesses in earnings expectations, you are left with “a bubble that surpasses anything ever seen in US history by an extreme margin. If valuations followed a normal distribution (which they don’t, so don’t take this literally), this would happen in 0.00019 per cent of months or once every 43,432 years”."}],[{"start":179.5,"text":"None of this is to say markets will imminently come crashing down, especially as the shaky but meaningful fizzling out of the war in Iran has pulled down oil prices and lessened the pressure on central banks to jack up interest rates. If anything kills a bubble, it’s a big jump in the price of money."}],[{"start":196.45,"text":"But powerful forces beneath the surface of markets suggest investors know something doesn’t add up. A few months ago, the hyperscalers racing to spend unimaginably huge amounts of money on AI technology did a lot of the heavy lifting in pushing up stock indices. Now, the adage that in a war, the only winners are the arms dealers is taking hold. Microsoft is down nearly 20 per cent this year. Facebook owner Meta is down 11 per cent. Investors are just no longer convinced the AI spending jamboree will generate real-life revenues in future, especially as the big companies consuming this technology are already balking at the price tag and making do with cheaper models."}],[{"start":null,"text":"
"}],[{"start":237.29999999999998,"text":"The once-vaunted Magnificent Seven stocks — an imperfect but nonetheless go-to gauge of hyperscaler performance — performed slightly worse than UK government bonds at the halfway point of this year, quite the badge of dishonour. Meanwhile, the Philadelphia Semiconductor Index is up a cool 80 per cent. South Korea’s volatile chips-heavy market is up even more."}],[{"start":260.95,"text":"The signs that a whole new investment narrative is taking hold do not end there. Emerging markets stocks have churned out double the returns of global stocks, in no small part because of the chips mania. Small-cap stocks in the US are trouncing their supersized siblings in the benchmark S&P 500 index, suggesting investors think the small-scale late movers on new tech could stand to reap the biggest benefits. "}],[{"start":285,"text":"The bizarre period where markets have rewarded companies racing to spend the most on untested technology is coming to an end, and now the chips mania is running on its fumes. The old AI trade is dead. Long live the new AI trade."}],[{"start":300.35,"text":"The gentle, steady, seemingly bulletproof ascent in US and global stock markets is welcome and deeply comforting. But nothing is quite as stable as it suggests."}],[{"start":317.90000000000003,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1783140915_9428.mp3"}