The Joys and Costs of Tokenmaxxing

The report analyzes the 'tokenmaxxing' phenomenon and soaring AI compute costs, highlighting that US AI investment as a share of GDP has surpassed the 1990s Dot-com peak. It warns of capital destruction in the US and macro vulnerability in India and Pakistan due to energy prices and capital outflows.

Key Takeaways

• 1.The AI 'arms race' has led to US IT investment reaching 4.91% of nominal GDP in 1Q26, surpassing the Dot-com peak of 4.46%.
• 2.Corporates are facing a backlash against 'tokenmaxxing' and soaring AI costs, with companies like Microsoft and Uber reportedly pulling back on AI tool licenses and budgets.
• 3.The 'picks and shovels' trade remains dominant, with memory makers like Hynix and Micron seeing market capitalizations surpass US$1tn.

Table of Contents

• Abstract
• Analyst Certification
• Investment Recommendation Record
• Explanation of Jefferies Ratings
• Valuation Methodology
• Jefferies Franchise Picks
• Risks which may impede the achievement of our Price Target
• Other Important Disclosure

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