Now what?
It’s window-dressing time and there’s only a week left in the first half of 2026 and the Nasdaq is looking tired of all the “winning“. So far, we’ve “only” dropped from 30,650 to 29,347 and that’s 1,303, which is 4.25% but our 5% Rule™ says 30,000 is the top of the range and 31,000 is just an overshoot (and the RSI over 70 bore that theory out) and 29,000 is the goal for this particular pullback and that is also going to be a test of the Nasdaq 100’s 50-day moving average – so interesting times ahead!
Good news for the bulls is a 4.25% drop took RSI back to 49 (neutral) and MACD also took a quick plunge so it does NOT look like we’re going to get a 10% correction (28,000) without something very bad happening.
Unfortunately, something very bad is happening – they Hyperscalers are going broke!
That’s what happens when you spend $700,000,000,000 which is (and this may surprise you) A LOT OF MONEY!!! And, of course, it’s not just the $700Bn they are spending this year but the $1.3Tn they PLAN to spend next year and the year after that and THAT INSANE spending plan is what the AI Circle-Jerk Bubble Economy™ is based on!
I don’t have time at the moment (8:30) to tell you how right I was but, seriously, here’s the background summary of what we’ve been talking about on the topic inside the PSW Live Member Chat Room:
You developed and discussed this specific thesis over several months, building up to a detailed breakdown of the exact mechanics on May 19 and May 20, 2026.
♦️ Here is the timeline of the days you discussed the hyperscalers burning through their cash reserves and ultimately clashing with the government in the credit markets:
The Culmination: May 19 – May 20, 2026 The most detailed examination of hyperscalers competing directly with the government to borrow money occurred during this two-day stretch.
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- May 19, 2026: You prompted Basho to look into the hyperscalers’ balance sheets by asking a critical question: “What is that ‘cash’?”. This led to Basho’s deep-dive report, “Show Us the Pipes, Mario!”, which revealed that Big Tech’s “cash” is actually a portfolio of marketable securities, mostly government and corporate bonds. Basho noted that to fund their massive $600 billion AI capex, hyperscalers have to tap into the bond market through two pipes: issuing new debt (an estimated $1.5 trillion needed over the coming years) and liquidating their existing bond portfolios. Crucially, the report highlighted that this forces them to compete for the same pool of buyers as the U.S. Treasury, which was simultaneously trying to auction off $574 billion in Q1 2026 alone to fund the federal deficit.
- May 20, 2026: You followed up on this the next morning, explicitly stating how this competition was breaking the market plumbing: “Hyperscaler Bond Liquidations to fund CapEx are becoming so massive they are now significant competition for regular US Treasury auctions”. You explained that to attract buyers, hyperscalers were having to sell their low-interest paper at a discount, sucking money away from the broader bond market and driving interest rates higher for everyone else.
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The Lead-Up: Earlier Mentions of the Cash Exhaustion Thesis Before the May plumbing breakdown, you laid the mathematical groundwork for this debt crisis on several other dates:
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- November 14, 2025: You initially laid out the timeline for the “Mag 7 cash burn,” calculating that their $544 billion in projected AI capex for 2025-2027 would exhaust their massive cash reserves by mid-2027. You warned your members: “the 2026 and 2027 spending plans exhaust the Mag 7s current supply of money and starts putting them into debt… THAT is where things get murky”.
- January 15, 2026: You reiterated that Big Tech couldn’t sustain $500 billion a year in spending indefinitely without tapping the credit markets, noting that eventually, “the biggest, most profitable companies in the World will have to go hat in hand to the biggest financial institutions to BORROW $500Bn”.
- April 28, 2026: In your “Titanic Tuesday” post, you highlighted that the top hyperscalers generated about $2 trillion in free cash flow over the entire past decade, but were preparing to vaporize a third of that in just 12 months. You posed a stark question to the readers: “what happens to a $50 trillion U.S. equity market when its eight largest companies… all need to roll a combined $1.5-2 trillion of fresh financing into a market that’s already pricing perfection?”.
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“Murky” – that is where we are now and now I am not so sure what will happen next but I am sure I am not a dip buyer on a 4.25% percent “correction!”
IN PROGRESS
