The AI capex dilemma has reached extreme levels of anxiety in the market, with fresh bond issuance raising questions about the cost and availability of capital. According to Privorotsky, the valuation reset is striking, with SOX trading at just 12.16x blended 24-month forward earnings, which is below the Liberation Day and Iran escalation lows and approaching 2022 levels. Similarly, Nvidia trades at just 10x, its lowest multiple since 2013.

The market is increasingly questioning whether 2027 marks the peak earnings year, as financing constraints threaten the pace of the AI buildout. There are echoes of the late 1990s, when capacity expanded ahead of demand. However, the bull case remains that AI adoption remains in its infancy, particularly across robotics and enterprise automation.

Despite these challenges, the question remains whether this is a generational valuation opportunity or the beginning of a much bigger earnings reset. The balance sheet capacity and debt market constraints are real, and the market is grappling with these challenges. It is important to note that the AI capex dilemma is not a new phenomenon, and the market has faced similar challenges in the past.