Nasdaq's 5.5% dip: buy strong AI names, skip weak ones

The recent volatility fits a familiar pattern: rapidly rising prices encourage misallocation, which correction then disciplines. It places the current AI infrastructure boom alongside past episodes such as the dot-com boom of the late 1990s, commodities in the 2000s, and subprime mortgages in the great financial crisis.

The author points to Warren Buffett's comment that hyperscalers are, in some cases, playing a game they don't want to play, and notes that Buffett initiated Berkshire Hathaway's position in Alphabet. He also cites Elon Musk's argument that debt markets have almost entirely shut off access to money for companies without substantial revenue independent of AI data centers, and says equity markets are now punishing overextended AI participants.

Alphabet can cover capital investments with cash from operations, while Oracle and CoreWeave cannot. It argues the correction is bad near term but good long term, because it should curtail me-too AI investment and allow the market to consolidate on a more secure basis.