Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Wednesday. Today is Wednesday, June 24th.
We are making it through the summer. I can't believe July is just a few days away.
Today I want to answer a question I've been getting from a lot of readers and members.
The First Reason: The Return on Investment Question
Everyone understands that hyperscalers and data centers are going to be critical infrastructure for decades.
That is absolutely true and nobody serious is debating it.
But here is the question the market is now asking.
What is the return on all that investment?
Something important has been quietly building in the last week or so, somewhat buried in all the SpaceX noise.
S&P 500 companies are pushing back hard on what they're spending on AI tokens — the actual usage of AI services.
And Microsoft came out and said something that caught Wall Street's attention.
Their Copilot product now allows customers to choose between different AI models — Claude, OpenAI, others.
Why? Because Microsoft said their corporate customers are upset with the bills.
They're spending too much and not getting enough back.
So Microsoft is now offering cheaper alternative models to keep those customers happy.
Think about what that signals to investors.
You can make a $100 billion infrastructure bet.
But if the price you can charge for using that infrastructure starts coming down because customers are pushing back, the math changes.
The return on investment gets harder to justify.
And that is the conversation the market is having with itself right now.
The Second Reason: Too Much Stock Hitting the Market
SpaceX went public — the greatest marketing campaign I've ever seen for a company going IPO.
But here's the thing most people aren't thinking about.
Usually when a company goes public, that's the end of the fundraising journey.
With SpaceX, I think the IPO is the beginning.
Their bond offerings, their ongoing capital needs — you're going to see them issuing debt and stock at regular intervals.
And every new share issued dilutes the price.
Simple math: if a company has 100 shares at $200, and it issues 10 more, you end up at $180.
More supply, lower price.
And it's not just SpaceX.
Alphabet is issuing stock.
Meta is reportedly shopping a deal around Wall Street right now.
Everybody is putting stock on the market at the same time.
That supply pressure is real and it is weighing on prices.
What Happens Next
Here is what I've learned watching bull markets over 35 years.
When a market gets to a new leg up, it pauses to catch its breath.
These pauses happen when new information comes in that makes people ask — wait, is this still right?
We're in one of those moments.
Is the return on investment still worth the spending?
Is the AI pricing power still there?
The market is having a conversation with itself, and it can't break decisively higher or lower until that conversation resolves in a meaningful way.
Here is the interesting thing.
Every time I've seen one of these pause formations in this tech run, the market has absorbed the negative news and pushed higher.
Usually because someone comes out and says — no, we're still in, we're still spending, the demand is still there.
That's the conversation playing out right now.
It's a tug of war between the people making enormous investments and the companies being asked to pay for the service.
That tug of war is what's keeping things in this sideways, choppy, uncertain zone.
More will be revealed.
These stocks have had one of the great run-ups in market history.
Now is the time to sit back, stay patient, and let this play out.
Anyway, that's all I have.
Have a wonderful Wednesday.
I will see you tomorrow.
“The Buck Stops Here,”
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Written by Dylan Jovine