r/stocks
If the Iran War is Over, Will there Be No More Reasons to Rally?
Author questions market catalysts as geopolitical premiums fade and macro worsens (no rate cuts, high inflation) despite AI earnings.
- Solid earnings supported by AI infrastructure build-out.
- Steady job market indicating underlying economic resilience.
- Worsening macro conditions: no rate cuts, potential hikes, and higher inflation.
- Market rally relies on geopolitical peace deals rather than fundamentals.
- Strong earnings failed to rally the market earlier in the year.
The market was stagnate and flat for months before the Iran war due to low chances of rate cuts. Even analysts believed that the market would stagnate or underperform this year originally. There was originally a sharp sell off when war broke out due to uncertainty of the strait never being closed but quickly reversed on ceasefire news.
So if the economic situation is even worse now, no rate cuts this year and a potential rate hike, higher inflation with a steady job market. If it’s not for constant peace deal news, what reasons will the market have to pump?
I understand that earnings have been solid due to the AI infrastructure build out but they were solid in the beginning of this year as well and the market was still stagnating.
Any ideas on what could be catalysts for the rest of the year?
There's simply been too much shouting of the thesis of the secular bull market (not to mention Trump's luck in his life) ending for me to get on board with the idea of a deep crash happening anytime sooner than probably conveniently in 2029.
Maybe in 2028 considering what we saw with COVID, but I think it's more likely when Trump is out of office.
So, it's probably more likely it's 2005-2006 or 1998 if we're going to make silly comparisons.
The money in AI has never been in delivering efficient/cheaper models, LLM models are essentially commodities at the end of the day and China will win that race to the bottom.
The money in AI comes from delivering the most complex/powerful models to companies and governments that actually need them. (Or raising the subsidized prices we have now).
At the end of the day the US government will continue spending because they need to maintain superiority over adversaries. And that is the money hose that will never end.
You say that’s where the money in ai comes from yet they are still unprofitable and subsidizing their prices as well, what happens if they need to drastically raise prices? If companies are already cutting back on ai spending, then they probably won’t continue paying for the expensive frontier models and transition to the Chinese ones.
So if ai companies need to start coming out with cheaper ai models, they’d probably have to make much more efficient models that uses less gpu’s, if they buy less gpu’s than those companies lose money, and because those ai companies have circular financing, when one starts to crack so do the other companies as well
Ahh I see where the miscommunication is here.
The average office worker probably needs GPT4 (drafting emails, fixing documents/excel worksheets, etc). We've pretty much discovered ways to lower costs from there as well. The cost for these models is essentially under a dollar a day even if you use it actively. The transition has pretty much already happened.
Again, the US government is probably going to be the one paying for the frontier models and keeping these companies afloat because they can do a ton of different things with it that are important to national security. The average American really won't be affecting the bottom line for these AI companies that much.
I never said the average American cutting back on ai spending will affect the bottom line of ai companies.
I’m talking about the ai companies who’s ai budget that was supposed to last for the entire year, was used up in a month and will cut back going forward. Yes the US government will continue using AI but that doesn’t change the fact that AI companies are still unprofitable. Maybe they raise prices eventually to be profitable, regular people AND companies will cut back and find cheaper models which will most likely be Chinese models. The U.S. government is a big customer but corporations make up most of the demand.
"AI spending" is such a broad term. I'm going to take it to mean the frontier LLM companies since they are the big "money losers" today. Most infrastructure related is booming in top and bottom line with no end in sight.
OpenAI ARR went from single digit billions to over $25b. Anthropic leaped from $9b to $20b to over $40b in ARR. That's spend increase (and by a lot), not decrease. What's your data point for companies cutting back on AI spend?
When I said ai spending, I meant to the llm companies. You are right the infrastructure boom continues. Also you know what I’m talking about, there was news of a companies ai budget being used up in a month with what was supposed to last a year, various articles.
Where’s your source for those numbers? For what years?
One thing that isn’t being talking about is this data center companies need to be able to build their data centers on time, because they are taking on massive debt so if there is a delay or cancellation like what is happening all across America, they might not be able to meet their obligations. If the data center companies can’t meet their obligations, they stop buying gpus, then companies like Nvidia will no longer invest in data centers or ai company and the ai circular financing collapses.
round 2? um did you start tarding on april 1st?
Round 2 with the tariff threats, did you forget how to understand English?
The point is that you can profit even if you don't believe that the AI spending will last forever, jesus christ people lack nuance on reddit lol
straits is opening, inflation is transitory, rate reduce is still possible
- MU is an example of a cyclical industry - swimming in money while there're supply shortages, then going down just as fast once the supply catches up to demand. This will happen, that's the purpose of market economy to fix imbalances, the question is only when - 2026, 2027, 2028?
- NVDA, AVGO - big revenue growth in the past 2 years as a result of huge capex from hyperscalers, plus openai, anthropic and other customers. Will this sharp demand for their AI enabling products continue forever? Likely, no - hyperscalers won't be able to maintain 500b capex costs for decades, even a couple of years of such expenditures bear the risk of drowning them. Look at what's happening to oracle already.
Thats why AI companies are posting record profits every quarter and shattering earnings, because its not profitable. You regarded?
Your portfolio doesn’t tell me anything. The market was stagnate for months before the war due to no rate cuts. Your portfolio doesn’t dictate the performance of the entire market lol
Yeah, after the initial correction by tech in October, the next few months that followed were pretty hair pullingly caliber annoying.
The last few years have told us that markets trying to broaden the horizons away from tech was usually just going to end in tears at some point in the short term. July 2024 was a pretty good example. This example was well hidden...but I just don't think a run back into tech was going to occur if Iran hypothetically doesn't occur because QQQ kept getting stuffed at $625-630ish for about 6 weeks.
So, unless a pullback transpired, you would've just continued seeing the S&P get stuffed at 7k at the most.
Some kind of pullback probably happens regardless based on what we were seeing, it just maybe isn't as severe in a "not" Iran world.