Is the AI bull market over? The market is full of doubts.

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Tech companies are enjoying robust profits and aggressive capital expenditure plans, yet share prices have failed to rise—this divergence is confounding investors. The narrative of an AI boom ending has evolved from a single storyline into a web of multiple scenarios, significantly increasing market uncertainty.

According to Chase Wind Trading Desk, Nomura Securities strategist Naka Matsuzawa pointed out in a report released on July 17th that the cost-benefit balance of AI investments has become blurred, and market participants are facing various potential "AI boom-ending scenarios," caught between doubt and wait-and-see attitudes. Meanwhile, there is clear internal differentiation within the tech sector: semiconductor stocks have sharply declined, MAG7 is flat overall, while software stocks are outperforming, indicating that the internal repricing of funds within the sector has quietly begun.

In the next two weeks, US hyperscale cloud providers (hyperscalers) will sequentially announce earnings reports and disclose capital expenditure plans.Matsuzawa pointed out that even if the related data is strong, given the complexity of these scenarios, it remains unpredictable whether the market will respond positively. The bond market has not yet shown bets on rate cuts prompted by expectations of slowing AI investment, meaning that the market has not yet fully priced in the end of the AI boom.

Multiple scenarios overlap: AI boom-ending paths become more complex

Previously, the market mainly evaluated potential inflection points in the AI investment cycle by focusing on three scenarios: First, overheated AI investments squeeze hyperscalers' cash flow, leading to investment slowdowns; second, high memory prices push up investment costs, causing contraction in AI spending; third, rising raw material costs exacerbate inflationary pressure and drive central banks toward a hawkish stance.

However, according to Nomura's report, the market is currently wary of a fourth scenario—high memory prices triggering overheated semiconductor investment, which then causes a fall in memory prices. In short, the cost-benefit balance that AI brings to a wider economy has become blurred, and semiconductor stocks, previously rising thanks to soaring memory prices, now appear to be at a turning point.

The coexistence of four scenarios makes it increasingly difficult to clarify the overall economic cost-benefit balance brought by AI. Matsuzawa believes that it is precisely this multi-path uncertainty that traps market participants in doubt and indecision.

Intensified internal differentiation among tech stocks: strong performance fails to gain market recognition

A core contradiction currently haunting the market is: tech companies’ profits are healthy and their investment plans are proactive, but this hasn’t translated into share price momentum. The divergence has been particularly obvious recently.

Within the sector, semiconductors and MAG7 are underperforming, while software stocks remain resilient. In the broader US market, defensive and consumer-related stocks are doing well, while tech, capital goods, and bank stocks are generally under pressure. The VIX has risen to 16.7, while volatility indicators for bonds and forex continue to fall, suggesting uncertainty is currently concentrated in the equity market.

Matsuzawa pointed out that even if hyperscale cloud providers report stellar earnings and capital spending plans in the next two weeks, amidst the interference of these multiple scenarios, market reactions across sub-sectors remain hard to predict—strong numbers may not result in broad-based sector gains.

Bond market has not yet priced in the end of AI, rate cut expectations remain distant

An important signal to watch: if the market truly begins to price in the end of the AI boom, there should be bond buying—investors would start positioning for future rate cuts. However, this has not happened yet.

Nomura’s report notes that the US Treasury yield curve has shown bear flattening; 10-year real yields have rebounded to 2.31%, while the 10-year breakeven inflation rate has slipped to 2.23%. Expectations for Fed hikes have risen: 3 basis points for July, up to 14 for September, and 27 cumulative for December. The 2-year forward OIS rate (terminal rate proxy) has climbed to 3.84%.

This means that the logic dominating the bond market is still driven by rate hike expectations, rather than bets on future rate cuts. Matsuzawa thus judges that pricing for the end of the AI boom remains incomplete, investor doubt is still brewing, and no clear consensus has yet formed.

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The above highlights are from Chase Wind Trading Desk.

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