Why Bank of America says the end of AI capex's 'easy money' is coming

The 8:30 Hosts Julie Hyman, Pras Subramanian, and Jake Conley discuss the Nasdaq's (^IXIC) fresh record high in conjunction with the note Bank of America published on Monday.

And when you looked at the gains yesterday, um they were actually relatively broad-based. You know, we keep talking about the duck under the water to use the um I think it's the Amy Woverman analogy

um that things look calm on the surface, but there's a lot of turmoil underneath. For the past few days, the advanced decline line in the market has been improving. In other words, for a while, even though stocks were higher, the ratio of stocks climbing to falling was going down.

It's reversed over the past couple of days and um almost all of the groups in the S&P 500 were higher yesterday.

Another fresh 2002 high for the 10 year.

Um the 30 year also at 2002 highs. And to your point, yes, there is some dispersion underneath. Yes, there are some sectors that are struggling, but by and large, the indexes the indexes are trending up into the right. But let's throw a wrinkle in here.

There's a there's a great note out from Bank of America's Savita Subramanian. I believe it came out earlier this morning. It might have been last night.

Last night. And she makes this argument that the relative trade where you buy the AI CAPEX beneficiaries and you sell some of the white collar uh threatened industries.

And consumption. That that trade might be starting to get a little bit under pressure. It might be time to reverse. I want to read from her note, she says, we think it's time to selectively pivot as it is dangerous to underestimate the appetite of US consumers and CAPEX strength may be more priced in than not.

That doesn't mean the rally's going to end.

That doesn't mean it's going to end, but it means maybe be a little more selective about where you're putting your exposure and think through what you're hedging versus what you're buying really aggressively.

So, one thing that caught my eye on that in her report uh was the sort of the uh the high paying jobs among increasingly at risk, right? The the the white collar people are are at risk here. Uh she's the continued trade down amid those white collar professionals from wants to needs. Uh we're seeing evident in the positioning of staple stocks versus discretionary staple stocks actually having a little catching a little bit uh of buying here. Uh that's not always a good thing.

In terms of what uh drove the rally yesterday, even though it was broad-based, materials were the best performing group, followed by communication services. Looking at some of the stocks that stood out, there was Nvidia, which I mentioned. Um Mercado Libre was actually the best performer in the Nasdaq 100, and SpaceX.