OpenAI and Anthropic have a good probability of never being profitable in the age of much cheaper AI models coming available from China as well as META and GOOG. The hyperscalers have seen their free cash flow plunge as their capex budgets soar as they build compute capacity. Over half of which is for OpenAI and Anthropic. Their debt and equity issuance has spiked as a result and ORCL’s debt just got downgraded earlier this month to one notch above junk status. Meanwhile, most of the software industry is getting IBM’d.
‘Pegasystems (PEGA) plunged more than 15% during pre-market trading on Wednesday following second quarter 2026 results that missed the mark due to “unprecedented changes in the AI market (that) caused clients to delay their purchasing decisions.”
The only ones that seem to be making the AI Revolution profitable are the semiconductors, which are now at record 20% of overall market cap and trading volume. At the same time inflation, energy, and interest rates are all moving higher. What possibly could go wrong?
Doug Kass is a world-renowned hedge fund manager with decades of experience and success navigating through some of the most turbulent periods in market history. He is known for his time-tested analytical skills and ability to look past the current noise and herd mentality.
On TheStreet Pro, Kass provides frequent market commentary and investing ideas for active investors throughout each trading day in Doug’s Daily Diary. He also serves as president of Seabreeze Partners Management Inc. Previously, he served as a senior manager at Omega Advisors, a $6 billion investment partnership. He co-authored a book with Ralph Nader and the Center for the Study of Responsive Law called “Citibank: The Ralph Nader Report” and can be found as a guest host on CNBC's "Squawk Box."
A Note from Doug: Current strategies and actionable trade ideas -- all on one dynamic platform built exclusively for active trades. From sudden sell-offs to sudden spikes, TheStreet Pro arms you with crucial analysis -- at a rapid fire, professional pace -- to help you make sound trading decisions -- every day, every hour, and every minute. Join me and my team of professional traders for unique perspectives and breakthrough investment opportunities.
