Agentic AI burns through tokens, CoreWeave notes yield around 15%: Niles keeps cash close before earnings

Dan Niles does not think the artificial intelligence (AI) market has peaked, crediting agentic AI for his view even as he has spent weeks advising investors to hold more cash and stay cautious. His caution comes days before Microsoft, Alphabet and Amazon report earnings, with the PHLX Semiconductor Index (SOX) losing 3.2% last week while the S&P 500 fell 0.5%.

Niles says agentic AI uses 10 to 100 times more tokens than inference and compares the current repricing with the 1997 and 1998 internet drawdowns, which preceded a rally. “In summary, because of the advent of Agentic, I do not believe this is THE TOP,” he said.

He nevertheless sees the market repricing on 2 fronts: funding is getting more expensive in both debt and equity markets, and growth at AI-native firms is slowing. CoreWeave sold $1.25 billion of unsecured 2032 notes in June with a 9.625% coupon. Those notes have yielded around 15% this month, while CoreWeave stock had fallen 36% since the start of October as of last week. Because CoreWeave rents computing power to Microsoft and Meta, its funding strain sits inside Big Tech’s AI supply chain. Niles says Anthropic’s quarterly revenue growth slowed from 145% in Q2 to 45% in Q3.

Niles also flags political risk, saying both US parties seem to agree on data center moratoriums and that the risk could worsen after the midterms. Australia’s NextDC illustrates the potential effect on share prices: its stock fell 39.5% on October 21 after power delays tied to community opposition forced a guidance cut. In the US, Amazon dropped plans for 4 data center buildings on a $427 million campus in Loudoun County, Virginia. Opposition blocked or delayed US projects worth $68 billion between April and June, according to Data Center Watch. “I worry whether a datacenter moratorium causes an issue with cloud growth guidance for the December quarter despite very strong growth in the September quarter,” he added.

Microsoft and Alphabet report after the close on October 28, hours after the Federal Reserve’s rate decision, while Amazon follows on October 29. Niles expects their stock moves to hinge on comments about capex, expenses, cash flow, and financing needs. Former BitMEX CEO Arthur Hayes expects the AI buildout to end in a crash, while Fundstrat’s Tom Lee says the AI selloff is nearly over.