Capex is booming. The leverage unwind is not priced in.

Transcript

Tom Five hundred and twenty BILLION dollars, buddy. That is not a typo — that is what South Korea is dropping to keep the AI dream alive, and the market is just sitting there acting like it is business as usual.

Marie It is Monday, June twenty-ninth, twenty-twenty-six, and you are listening to Investment Flash. I am Marie, joined by Tom and Gerald for the New York Edition.

Gerald Yeah look, it is a massive number, Tom, but let us be real — we have seen these capex announcements before. The Financial Times actually flagged the scale of this days ago, and the market is already looking at the margin pressure it puts on Samsung and SK Hynix.

Tom Gerald — Gerald, this is different! We are talking about a total semiconductor manufacturing expansion backed by the government. The Semiconductor ETF is down almost nine percent in the last week, which feels like a gift-wrapped entry point given this kind of structural support.

Marie Hold on — I am going to push back here. It is not just about the chips. If you look at the power sector, we are seeing a record two-hundred-billion-dollar merger and acquisition spree in the US alone just to power these data centers.

Gerald Exactly.

Tom One hundred percent.

Marie That is the whole story. You cannot run five hundred billion dollars worth of chips if the grid cannot handle the load.

Gerald Fair enough, but look at the valuations. The Utilities ETF is up seven percent year to date and trading just three percent below its fifty-two-week high. Honestly, calling for more upside in a sleepy sector like power when the multiples are this stretched feels risky.

Tom No way, the AI wake-up call for utilities is just starting! Look at the Clean Energy ETF — it is eighteen percent below its high after a rough week. If data centers need green power, that is a recovery play waiting to happen.

Marie Wait — wait a second, Tom. Before we get too bullish on the recovery, we have to talk about the leverage in Asia. Nikkei Asia is sounding the alarm on retail investors in Japan and Korea being levered to the hilt on this AI trade.

Gerald Honestly, that is the real danger zone. South Korea’s chip concentration makes their whole market a structural risk. The Korea ETF was down nearly ten percent last week. If that leverage starts to unwind, it is going to be messy.

Tom But Bloomberg is reporting a massive tech spending boost from the Korean government to cement their status! It is a binary trade, buddy. You either believe in the state-backed tech power or you do not.

Gerald Yeah look, I hear you, but the thing is, Japan is in the same boat. The Japan ETF is only five percent off its highs. If forced selling hits because of the AI leverage buildup, that is a long way down.

Marie See, Gerald, this is what I mean — everyone is looking for the top while the structural story is still being written. Speaking of contrarian views, did you see JPMorgan’s Mislav Matejka turning outright bullish on Europe?

Gerald I did. He is calling the recent selloff a buying opportunity. To be fair, the Europe ETF is only four percent below its high despite all the geopolitical noise. If that tension fades, he might actually be on to something.

Tom For real? Gerald, you are actually agreeing with a bull call on European equities? That must be a first.

Gerald Alright, alright — even a value guy can see when the risk-reward shifts. Honestly, analysts revising price targets after the stock has already moved is basically a free retirement plan, but Matejka is actually getting ahead of it for once.

Marie Ha — fair enough.

Tom Hah — yeah, yeah, he's not wrong about the retirement plan thing.

Marie Look, as much as we love the equity talk, we need to address the carnage in the crypto space. Four billion dollars in outflows from spot bitcoin ETFs in June? That is the worst month on record.

Tom No, but that is exactly my point from yesterday! Remember when I said the crypto bleed was actually a signal for US exceptionalism? The Bitcoin Trust is down fifty-three percent from its high. It is deep in bearish territory.

Marie Not so fast, Tom. There is a really original take coming out of CoinDesk. Michael Anderson from Framework is arguing that crypto’s next frontier isn't even about currency — it is about financing AI and robotics.

Gerald Wait, hang on. Blockchain as the financial layer for capital-intensive hardware? That sounds like a long-shot reach for a new narrative if I have ever heard one.

Marie No, but think about it — if you can use smart contracts and tokenization to finance real-world assets like robot fleets or server farms, you move beyond speculation. It creates a hard-tech infrastructure for digital assets.

Tom That is actually wild. It connects the two biggest hype cycles into one. I love it.

Gerald Only you would love a double-hype sandwich, Tom. Just a reminder for everyone listening, none of this is investment advice. We are just three people talking about the numbers.

Marie Right, and speaking of numbers, the energy infrastructure damage in the Middle East is looking serious. Restoration costs for Qatar's LNG hub are estimated at forty-six billion dollars over three years.

Gerald The thing is, the US Oil Fund is already up fifty-three percent year to date. A lot of that war premium is baked in, even if supply tightens. Natural gas might be the more interesting value bet since it is near its lows.

Marie See, THIS is what I mean when I say we need to watch the bond market too. If you combine energy supply shocks with this new volatility in Fed communication, you have a recipe for a rates spike.

Gerald Exactly.

Marie Totally.

Tom That's it.

Gerald The Financial Times is saying Warsh’s communication style is adding volatility to rates. If the Fed stays tight-lipped, mortgage rates could jump just on a volatility premium alone. It makes long-duration Treasuries look very vulnerable.

Tom Oh come on, Gerald. The bond vigilantes are on holiday. The long Treasury ETF has barely moved, and it is only five percent off its high. One dovish whisper and that trade reverses instantly.

Marie I’m going to push back here, Tom. You can't ignore the leverage unwind risk in Asia while simultaneously cheering for a chip rally that is fueled by that very same leverage. The South Korea ETF being down nearly ten percent in a week is a warning shot.

Tom Okay sure, but did you actually look at the scale of the investment? Five hundred billion! That is not a 'warning shot' — that is a declaration of war on the shortage.

Gerald Yeah look, it is a declaration of something, but maybe just a declaration of overcapacity. Calling the bottom on memory chips again — that’s what, the sixth bottom this cycle, Marie?

Marie Oh, that's brutal. But he's not wrong, Tom. We have been here before.

Tom Alright, alright — I know I said that about semiconductors last quarter too. But the numbers are bigger this time!

Marie Our view today is that while the capex boom is real, the leverage unwind is the part the market hasn't fully priced in. Everyone is focused on the five-hundred-billion-dollar future, but nobody is looking at the next consumer price index print or earnings season.

Gerald Honestly, that gap between the long-cycle stories and the market's short attention span is where the real trade is. If you're following along, make sure to check out investmentflash.com for the full digest and all the charts.

Tom And if you are just finding us, hit follow on Spotify so you don't miss the open tomorrow. We have got a lot more to cover on these power mergers.

Marie We will be back for tomorrow's London Edition at seven-thirty a.m. London time. See you then.

Gerald See you tomorrow.

Tom Catch you later, buddy.