Every Australian understands a Saturday auction.
You watch the bidding, and then you watch what the vendor has to accept to get the thing sold.
Last Thursday, the US government held one of its own.
It sold US$25 billion of 30-year bonds, and the buyers only turned up at 5.216%, the highest rate at that auction since 2001:
Source: Bloomberg
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Big Tech trade tea leaves…
Big Tech valuations are built on profits that turn up years from now.
Higher rates shrink what those future profits are worth today, which is exactly why expensive growth stocks tend to wobble when yields climb.
And the AI build is no longer coming out of petty cash.
Amazon, Meta, Microsoft and Alphabet are projected to spend US$740 billion on AI computing infrastructure this year, and another trillion in 2027.
Alphabet posted negative free cash flow in the second quarter, the first time in its life as a listed company.
Its debt pile went from US$25.7 billion at the end of 2024 to US$118.7 billion by the end of June.
That money is borrowed from the same bond market that just made the US Treasury pay up.
Source: Bloomberg
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July was the dress rehearsal
The market is getting twitchy.
The main US semiconductor index fell 21% in July, its worst month since October 2008, while the Nasdaq 100 dropped more than 11% from its June record.
Then August rolled around, and the whole thing snapped back, with Microsoft up 27% off the late July low.
You might think — are we in the clear now?
Well, consider looking further afield than Big Tech.
Where bored money tends to wander
Now look at gold over the past year:
Source: Trading Economics
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It ran from around US$3,300 an ounce last September to above US$5,300 in March.
Then it spent five months doing very little, drifting back to roughly US$4,000 by July before turning up again through August.
That’s a long nap, taken during the loudest stretch of the AI rally.
Remember…
Australian gold producers and developers tend to lag the metal by weeks, sometimes months. That lag is potentially very lucrative to savvy investors.
And don’t forget about the tech that got thrown out with the bathwater
Not everything sold off in July deserved it.
Some of those businesses have real pricing power, genuinely defensible market positions and no need to borrow US$100 billion to justify their share price.
I am not calling the top of the AI trade.
That’s one big yawn for me at this stage.
My point is simpler.
Look out for the trigger of rotation, and that does not necessarily have to be a crash.
Sideways would be enough.
So there’s a few ideas based around an alternate set of auction results worth watching…
Warm regards,
Lachlann Tierney,
Australian Small-Cap Investigator and Fat Tail Microcaps
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