Societe Generale strategists Manish
Kabra's team believes that the recent sharp fluctuations in semiconductors and momentum trading reflect more of a concentrated clearing of extreme positions and leverage than a simultaneous weakening of AI fundamentals. They judge that the most intense deleveraging phase in the South Korean stock market is nearing its end, and US momentum trading has also experienced an unprecedented large-scale reduction in hedge fund holdings.
Meanwhile, the AI investment cycle continues to expand. Societe Generale points out that in the latest earnings season, the US Hyperscaler cloud business continued its strong upward cycle, with order backlogs increasing by about 15%, driving a further increase in AI capital expenditure of about 10%. The team expects
AI CapEx to continue accelerating in the second half of 2026, with the peak likely not appearing until the first half of 2027.
Therefore, it is currently necessary to distinguish between deleveraging at the trading level and the capital expenditure cycle at the industry level: the former has clearly cooled down, but the latter has not yet peaked.
Societe Generale further suggests that before Hyperscaler's free cash flow truly improves, the hardware, infrastructure, and supply chain segments that directly benefit from AI capital expenditure may be more worthy of attention than the high-investment spenders.
