AI compute spending still dominates the market, but oil risk and technical pressure are rising
AI summary card
AI compute spending still dominates the market, but oil risk and technical pressure are rising
Goldman Sachs market commentary notes that the equity rally has been driven almost entirely by AI capex and supply-chain tightness, but oil risks related to the Strait of Hormuz, crowded positioning, and month-end rebalancing may weaken short-term risk-reward.
- Negotiations between Iran and the United States over the Strait of Hormuz and nuclear capabilities still lack substantive progress, and prediction markets see a low probability of normalization before the end of May.
- AI spending is the market's most important driver, with compute, GPUs, CPUs, power, copper, and engineers all in constrained supply.
- Large technology companies are about to report earnings, and the market is focused on whether their 2026 capex will be revised further upward from the roughly $600 billion expectation.
- Technicals are weakening: CTA buying is close to being exhausted, market sentiment is turning greedy, the SOX index has risen for about 18 consecutive trading days, and month-end pension rebalancing may generate more than $20 billion of U.S. equity supply.
Report interpretation
Overview
This material develops the dual theme of "more tokens, more oil": on the one hand, negotiations involving Iran and the United States and passage through the Strait of Hormuz keep oil transportation and refined product prices as macro risks; on the other hand, market expectations for investment in AI compute, data centers, and related supply chains continue to drive U.S. equities and the semiconductor sector. The author emphasizes that AI fundamentals are currently hard to refute, but the market rally is overly concentrated, and short-term technical and positioning signals are beginning to deteriorate.
Core views
The core view is that AI capex remains the main driver of the equity market, and "token maximization" is becoming mainstream, keeping resources such as compute, power, GPUs, CPUs, copper, and engineers in persistent shortage; however, this trend is advancing too quickly, leading to crowded expectations and positioning. On oil prices, talks related to the Strait of Hormuz lack an executable breakthrough, and the probability of oil transportation returning to normal remains low. Overall, if an asset is not in the AI supply chain, its short-term relative performance may be weak; even within the AI chain, risk-reward has declined because of technical headwinds.
Analysis framework
The report uses a combination of macro events, market positioning, technical indicators, and corporate capex expectations to assess geopolitical oil-price risks, central bank meetings, CTA and pension rebalancing, options and sentiment indicators, and the impact of big-tech earnings on AI capex expectations.
Methodology notes
Central bank meetings, geopolitics, and big-tech earnings jointly influence short-term market direction.
The report treats FOMC, Bank of Japan, European Central Bank, and Bank of England meetings, along with the U.S.-Iran standoff over the Strait of Hormuz, as the main macro variables this week.
Short-term supply and demand are assessed through CTA demand, sentiment indicators, options buying, and pension rebalancing.
The report believes CTA equity buying is basically exhausted, shorts have been squeezed out, the NAAIM Exposure Index is above 90, and month-end pension rebalancing may increase U.S. equity supply.
AI demand is transmitted through data-center capex to semiconductors, power, copper, and engineering resources.
The author believes the market is betting that more tokens will produce stronger models and ultimately lead to AGI, but the key question is whether hyperscale data center operators continue to revise capex upward.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- AI supply chainCore beneficiary asset
- Strengths
- Demand is strong, supply is constrained across compute, power, chips, copper, and other links, and EPS growth is accelerating.
- Weaknesses
- Upside expectations are highly concentrated, and valuations require continuous upward capex revisions to be sustained.
- Comparison
- It has clear advantages in market attention and capital flows relative to non-AI-related assets.
- Risks
- Rising investment costs, capex missing expectations, technical crowding, and shareholder return pressure.
- Oil and refined productsMacro risk and inflation variable
- Strengths
- Uncertainty in the Strait of Hormuz and transportation risks may support price volatility.
- Weaknesses
- The path to resolution depends on political negotiations, with limited fundamental progress.
- Comparison
- Compared with AI assets, oil prices are driven more by geopolitics and transportation bottlenecks.
- Risks
- Failure of U.S.-Iran negotiations, shipping-lane control risks, and European markets being dragged by price volatility.
- U.S. mega-cap technology stocksPricing vehicle for AI capex
- Strengths
- The market believes demand is strong and is watching capex from companies such as Amazon, Microsoft, Meta Platforms, and Alphabet.
- Weaknesses
- Shareholders have not yet been adequately rewarded for capex growth.
- Comparison
- They capture the AI theme better than traditional industries, but also bear higher expectation risk.
- Risks
- Capex does not continue to grow, rising costs slow actual growth, and earnings guidance disappoints.
- U.S. equity marketAffected jointly by AI momentum and technical supply-demand
- Strengths
- The AI theme supports index and semiconductor sector performance.
- Weaknesses
- CTA demand is basically exhausted, sentiment is greedy, and shorts have already been squeezed.
- Comparison
- If an asset is not in the AI supply chain, the opportunity to participate in the market rally is clearly reduced.
- Risks
- Month-end pension rebalancing may bring more than $20 billion of potential supply, and market technicals are shifting from tailwinds to headwinds.
- Bonds and interest-rate marketsShort-term observation target driven by central bank meetings and CTA positioning
- Strengths
- If central banks keep rates unchanged, details and guidance may become the main trading clues.
- Weaknesses
- CTAs are already at maximum short bond positioning, making positioning crowded.
- Comparison
- Relative to equities, rates markets—especially long duration—may become more tradable again after month-end.
- Risks
- FOMC and other central bank communication changes rate-cut expectations, and positioning reversals create volatility.
Key data
- U.S. IPO financing size$14 billionThe chart title shows that U.S. IPOs have raised $14 billion year to date, based on U.S. deals larger than $25 million.
- Estimated CTA equity buying last month$150 billionThe report says CTA buying reached $150 billion last month at current volume levels, and demand is basically exhausted.
- Potential U.S. equity supply from month-end pension rebalancingMore than $20 billionThe report warns that month-end rebalancing may bring significant U.S. equity supply.
- CTA bond buying last month$50 billionThe report says CTAs are maximally short bonds and bought $50 billion last month.
- 2026 capex expectation for large technology companiesAbout $600 billionThe market expects combined 2026 capex from large technology companies such as Amazon, Microsoft, Meta Platforms, and Alphabet to be very large.
- Duration of the SOX index's consecutive riseAbout 18 trading daysUsed to show that semiconductor sector momentum is strong in the short term but technically crowded.
Impact & implications
For investors, short-term market pricing may continue to revolve around the AI supply chain and energy risks. If AI capex continues to be revised upward, it will support related assets such as semiconductors, data centers, power, and copper; if it is merely flat, the market may interpret that as slowing growth amid rising investment costs. On energy, if Strait of Hormuz risks persist, they will continue to support oil-price volatility and pressure regions and industries sensitive to energy inputs.
Risks
- The AI theme is advancing too quickly, and the market rally is overly dependent on AI spending.
- If large technology companies do not continue to revise capex upward, the market may see that as slowing growth.
- Talks related to the Strait of Hormuz and Iran lack substantive progress, and oil transportation risks persist.
- CTA buying is exhausted, sentiment indicators are greedy, shorts have been squeezed out, and technicals have turned into a headwind.
- Month-end pension rebalancing may generate more than $20 billion of U.S. equity supply.
What to watch
- Earnings reports and 2026 capex guidance from large technology companies such as Amazon, Microsoft, Meta Platforms, and Alphabet.
- Policy details and communication language from the FOMC, Bank of Japan, European Central Bank, and Bank of England meetings.
- Changes in traffic through the Strait of Hormuz, U.S.-Iran negotiations, and the probability of normalization before the end of May.
- CTA equity and bond positioning, NAAIM exposure, call-option buying, and GS sentiment indicators.
- Pullback risk after the SOX index's continued rise, as well as the scale of U.S. equity month-end pension rebalancing.