Is A Housing Boom For Real?
1.) GPU - Some think that the entirety of the AI Bubble rests on GPU rental rates. In other words, what's the cost of compute. If rental rates are rising, then compute is in demand and the AI bubble would appear intact. If they are rolling over and declining - the bubble has popped and you need to consider the exit. Where are we now? Continuing higher. The on-demand B200 index rose 1.9% to a new high of $6.97 on Nov 10 and H100 1.7% to a new high of $3.06. The B300s at $7.68, H200s at $3.48 and A100s at $1.59 were unchanged, but hovered near ATHs and poised to follow. Recent price surges point to a clear demand inflection. The H100s are the most important ones to keep an eye on. As you can see...they're doing just fine.
2.) AI SPEND - Why are rental rates rising? Probably because more and more people are using AI! AI spending rose to a new peak in October, rising 1.65% from September. Spend also increased among the top 1% of spenders. The top 1% of firms now spend a median $10.2K per employee per month on AI, up 9%. Firms in the top 10% spent $801, roughly flat. The median firm spends $16.32, up $0.93. Sure, that may point to "bubble status". But increased spending points to increased demand within the supply constrained environment.
3.) HOUSING - Back on Oct 21 I asked "What if the next big move in housing was a boom and not a collapse?" In that post, I looked at Home Depot, which at that time was trading around $280...an important level where buyers had been showing up for years. If that level held, I needed to keep an open mind about a potential housing boom. Despite high mortgage rates, a consumer getting crushed, expensive houses, an overall lack of affordability and a bond market that was supposed to implode. Home Depot didn't crash. Instead it rallied, now at about $352. Now we're starting to see home builders perk up. Both Pulte and Toll Brothers - the largest homebuilders in America - are pushing up against old highs after trading sideways for the last 3 years. The old adage usually holds true - The bigger the base, the higher the space. Of course, they can still fail near these highs. But if they break out, it would help confirm the thesis of a housing boom. Are there reasons to be bearish on Housing? Of course. Mortgage rates are still high. Housing permits are weak. Builders aren’t feeling particularly confident. And home sales haven’t exactly been setting records. I get it. There are plenty of reasons to be bearish on housing. But if things are so bad, why are homebuilder stocks going up? Remember, these stocks were rallying on the same day we were getting more terrible housing data back in October. The economic reports tell us what’s already happened. The stock market is trying to figure out what’s going to happen next. Right now, Home Depot held support, and two of the biggest homebuilders in America are knocking on the door of new all-time highs. If they break out, that’s bullish. If they fail, we’ll have to reconsider.
