Dan Niles: Market strength is getting back to where AI capex is being spent, not the spenders

3/5/2026 11:01:49 PM	medium term up	20 days later	-1.27%	-1.27%

Asks if AI infrastructure names (chips, memory) are rising due to SpaceX reminding markets of another deep-pocketed AI capex player.

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Last week hyperscalers (Amazon, Google, Microsoft, Meta) fell 4% on average while market rose; Oracle fell 14% on huge capex guide. SpaceX IPO and Musk's comments on hundreds of billions in spending boosted semiconductor stocks 9% last week. Strategy: buy where money is spent (semis), not the spenders (hyperscalers) who face cash flow/raising issues.

The rotation reflects market selling hyperscalers but buying semiconductor beneficiaries of that spending.

Asks about SpaceX day two performance and whether chip stocks have more room to run or when to rotate out.

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SpaceX will be added to Russell indices June 26, MSCI ~10 trading days post-IPO, Nasdaq 100 ~15 days post-IPO. Hard to be negative until Nasdaq 100 inclusion completes. Valuations can overshoot (meme stock lesson) but eventually normalize. AI buildout: OpenAI's agentic AI (Jan 30) requires 10-100x more tokens for complex tasks vs simple queries. This capacity buildout takes at least a year, so chip stocks have more room to run until early next year.

Nvidia trades at just above market multiple with 80% revenue growth, while SpaceX at ~145x revenue is very expensive. Tesla's potential $26B revenue from Google/Anthropic deals is speculative.

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