Silver Linings Euro TMT Weekly

Research evidence excerpt

Silver Linings Euro TMT Weekly

ning – i.e.

into Healthcare, Financials and Alternatives) - https://www.jpmm.com/research/content/GPS-5365028-0.pdf & https://

www.jpmm.com/research/content/GPS-5354716-0.pdf - and options volatility flagged by our team. I’ve also been noting a clear

divide between generalists/internet/software folks on the one hand and HW/Semis specialists on the other; the latter, of course,

continue fundamentally to believe that the AI trade must continue, and that bottlenecks assure continued opportunities for

substantial additional upside over time. Most specialists I talk to were prepared for some weakness, but yesterday was the first

day where incoming investor questions (at least from my tech-heavy client base) sounded genuinely more worried.

So what’s driving the recent, painful pullback? It’s impossible to pinpoint one thing driving this record TMT momentum sell-off

(-15.9% in only 2 weeks). The biggest issues aside from geopolitics, macro (in particular tech momentum becoming an ATM for

macro broadening trades) and the rotation we’re seeing back into laggard Mag 7 includes: 1) token costs/frontier model viability/

open source debate; token costs per task are coming down as model choice/efficiency becomes a focus, something that comes up

in every conversation (and risks overpowering the market today and next week as generalists dissect the launch of Kimi-K3, see

my thoughts below). Will frontier model revenues continue surprising on the upside (we think so), and if not, who will pay for all

these chips? “Jevon’s Paradox” is losing its power as an incantation; 2) asymmetery; folks we talk to pretty universally expect this

to be a super quarter for hardware & semis prints, so it may be tough to surprise positively. How much optimism will companies