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Investors Are No Longer Willing To Pay Up Blindly For The Data Center Boom

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Cheap AI stock valuations raise doubts about data center demand

Tom Essaye argues they may be saying something less comfortable: investors are no longer willing to pay up blindly for the data center boom.

Essaye, founder of Sevens Report Research, said in a Wednesday note that cheaper AI stock valuations could reflect fear that the current wave of data center spending may slow. That matters because growth stocks typically receive richer multiples when investors believe future earnings will justify them. When some of the market’s most visible AI-linked names trade close to, or below, the S&P 500’s forward price-to-earnings ratio of 21.5, the message is not simply that shares are inexpensive. It may be that investors are questioning whether the earnings they once expected will arrive.

Essaye framed the risk through a hypothetical example. “Think of it this way: GOOGL (to use one as an example) cancels building 10 data centers because it’s going to cost too much money and the return isn’t there,” he wrote. “That will result in massive order cancellations at NVDA, MU, AVGO, SNDK, etc., because no one needs the chips, networking, memory, or processor power,” he added.

Also, click here to view the full article on Financial-world.org published on June 21st, 2026. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

SpaceX Thoughts: TSLA on Steroids

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What’s in Today’s Report:

  • SpaceX Thoughts: TSLA on Steroids

Futures are lower, led by tech (Nasdaq futures down ~3%) as a heavy selloff in Asian chipmakers including in a ~10% drop in the South Korean KOPSI index, is dragging broader equity markets lower amid valuation and capex worries.

Today, focus is likely to be on whether the pre-market selloff in tech stocks accelerates or stabilizes as trading gets underway on Wall Street, however there are also a few noteworthy economic reports to watch, including the Flash Composite PMI (E: 51.2), and the Richmond Fed Manufacturing Index (E: 8.0).

There are no Fed officials are scheduled to speak today which will leave fixed income markets primarily focused on the economic data and the 2-Yr Treasury Note auction at 1:00 p.m. ET this afternoon.

Finally, there are a few important earnings releases due to be released today including: CCL ($0.34), FDX ($5.91), and CBRS (-$0.14).

Regarding the economic data, investors will be looking for “Goldilocks” data with healthy growth and cooling inflation and strong earnings in order for the market to stabilize from the pre-market rout.

 

Tom Essaye Warns AI-Driven Stock Surge Shows Classic Bubble Traits

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Sevens Report founder sees parallels with past late-cycle manias

US Stocks Drop as Investors Wait on CPI Data to Set Fed’s Path

The current equity rally may be entering bubble territory, according to Sevens Report founder Tom Essaye, who advises some of Wall Street’s largest firms. Essaye points to weakening U.S. economic conditions alongside stretched valuations, with the S&P 500 up 28% since April and 57% since ChatGPT’s debut in November 2022.

In an August 1 client note, Essaye compared today’s AI-fueled rally to past bubbles, such as the internet and real estate booms, where a single narrative drove expectations of “unlimited earnings growth” across sectors. He warns that the AI theme now plays that role, creating risks for advisors managing long-term portfolios.

Also, click here to view the full article featured on The Wealth Advisor published on August 10th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here

Sector Winners from a Steepening Yield Curve

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What’s in Today’s Report:

  • Sector Winners from a Steepening Yield Curve

Futures are solidly higher following better than expected tariff news overnight.

President Trump announced semiconductor chip tariffs but included broad exemptions that will dramatically lessen the practical impact of those tariffs.  Investors are now hopefully we’ll get a similar set up for pharma tariffs.

Today focus will turn back to economic data and the most important report today is Jobless Claims (E: 220K).  Given last Friday’s awful jobs report, if we see a jump in claims, it’ll increase concerns the labor market is weakening.  An in-line to slightly better than expected number would be the best case for markets this morning.

Other data today includes Productivity & Costs (E: 1.9%, 2.1%) and Consumer Credit (E: $7.5B) while we also have one Fed speaker, Bostic (10:00 a.m. ET), although those events are unlikely to move markets.