Dan Niles' bearish market outlook: OpenAI's revenue revision and Treasury yields tell the same story
- What to look for
- You can examine the three reasons for the shift to a bearish stance—the Fed's rate-hiking cycle, mixed AI signals, and the emergence of bonds as an alternative—alongside the speaker's figures.
- Why it matters
- This helps readers understand a perspective that assesses bubbles by earnings levels rather than valuation multiples and uses the bond market as a benchmark for judging stocks.
AI summary
Dan Niles of Niles Investment Management says he is bearish, following his principle of not fighting the Fed or the bond market. His reasons include expectations of another rate hike in October (month 10), with inflation above target for 6 consecutive months; the withdrawal of an IPO for an Nvidia-backed Australian data center; and a downward revision of OpenAI's revenue figure from 700 hundred-million dollars to 500 hundred-million dollars. With the top 10 stocks accounting for roughly 40% of the S&P500 and semiconductors leading the charge, he acknowledges the spread of agentic AI as a bullish argument. Conversely, he cites pressure on token prices from open-weight models, an 11% decline in Ramp spending over two months, disappointing results from Micron and Samsung Electronics, and excessive profits represented by 80% memory margins as bearish arguments. He says strong auctions for Treasury securities with maturities of 10 years and 30 years have provided a risk-free alternative yielding 5~6%, and that bonds are more interesting than stocks with market capitalization/GDP at an all-time high. If AI is the greatest transformation since the internet, overinvestment is inevitable, and a bubble collapse could arrive quickly, as in 2001, so he emphasizes responding nimbly and watching the bond market. All directional outlooks are the speaker's conditional judgments, not definitive predictions of short-term prices.