Jefferies strategist Chris Wood has warned that the AI trade could face a prolonged pause if investors conclude that hyperscalers will not earn enough returns on their heavy spending.
Wood stated that the end of the AI boom is more likely to stem from concerns over capital misallocation than from any chip glut.
He pointed to massive AI investments by hyperscalers as the key factor that could prompt investors to reassess the trade.
The strategist emphasized that inadequate returns on this capital expenditure would be the trigger for a pause rather than supply issues in semiconductors.