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Dan Niles warns about token minimization. (0:16) Drivers sues gas stations over alleged AI price fixing. (1:38) Domino's CEO retires. (2:26)
The following is an abridged transcript:
Famed tech analyst Dan Niles is warning investors of a "speed bump" in the AI trade, arguing that the smart money should flow toward where AI dollars are being spent — namely semiconductors — rather than the hyperscalers doing the spending.
The five major public companies investing heavily in AI — Amazon (AMZN), Alphabet (GOOG) (GOOGL), Microsoft (MSFT), Oracle (ORCL) and Meta (META) — are all down year to date, while chip stocks (SMH), (SOXX), (SOXL), (FTXL) and (XSD) remain firmly in the green.
Speaking on CNBC, Niles said corporate AI strategy has shifted dramatically. Just months ago, companies were focused on token maximization — encouraging employees to generate as many AI tokens as possible.
Now, the conversation has shifted to token minimization.
"You can't blow through your entire AI budget in four months like Uber (UBER) did and not have a problem when you report results and then guide," Niles said.
The massive capital requirements tied to AI are forcing tech giants to raise significant amounts of debt and equity. SpaceX (SPCX) is down premarket after tumbling more than 16% Monday following the announcement of a $20B bond offering.
Niles said he is backing away from hyperscaler names and trimming semiconductor exposure despite the sector's strong performance.
"My question is, well, if you're routing things to cheaper models, what does your September guidance look like?" he said. "That's where I see a speed bump coming when these guys report and guide."
Tech weakness is continuing this morning. South Korea's KOSPI index — heavily influenced by Samsung and SK Hynix — fell about 10%, while Nasdaq 100 futures (US100) are down more than 2%.
Gas station operators including Marathon Petroleum (MPC), BP (BP), Circle K, 7-Eleven and Walmart (WMT) have been hit with a class-action lawsuit brought by California drivers who accuse them of using artificial intelligence to inflate fuel prices.
According to Reuters, the lawsuit claims the defendants violated California's Cartwright Act by using AI software that relies on competing gas-station data to coordinate higher prices.
The lawsuit, filed in federal court in Sacramento, also alleges violations of Assembly Bill 325, a California law that took effect Jan. 1 and was intended to crack down on algorithmic price fixing.
The plaintiffs claim gas prices have risen by as much as $0.30 a gallon in areas where the software is widely used, with each additional penny costing California drivers an estimated $134M annually.
And Domino's Pizza (DPZ) is down premarket after CEO Russell Weiner said he plans to retire effective Sept. 30.
The company has named Joe Jordan, currently chief operating officer and president of Domino's U.S., as its next CEO and a member of the board.
Weiner will become executive chairman designate on Oct. 1 and assume the role following the company's 2027 annual shareholder meeting.
During his tenure, Domino's added more than 3,200 net new stores, increased global retail sales by nearly $3B and delivered close to a 30% increase in operating income.
Now here’s what’s trending on Seeking Alpha:
Google DeepMind Nobel laureate John Jumper jumps to Anthropic.
Oracle cut 21,000 jobs over the past year as AI adoption reshaped operations.
And on this morning's economic calendar:
9:45 a.m. June PMI Composite Flash
10:00 a.m. June Richmond Fed Manufacturing Index
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