The Software Breakdown: Massive Volume, Extreme RSI, Panic Term Structure
AI Abundance 2028: Citrini vs. Bloch
Yesterday’s selloff was widely linked to Citrini Research’s hypothetical June 2028 “Macro Memo,” a scenario analysis arguing that AI’s success, not failure, could destabilize the labor market and broader economy. The narrative has clearly shifted from “what if AI doesn’t work?” to “what if it works too well?”
Citrini sketches a disruptive, demand-shocking future. But it’s worth reading alongside Michael Bloch’s detailed rebuttal, which systematically challenges the doomsday framing and argues that AI-driven upside is being underestimated.
The reality is unlikely to be binary. Yet one conclusion stands out: under either scenario, the idea of “peak AI infrastructure spend” looks premature. If anything, both paths imply we are far from done building, and funding, the AI stack. (JPM's Paige Hanson)
AI Catastrophe Narrative Looks Overdone
AI disruption risk isn’t new, but the recent catastrophizing feels excessive writes JPM market intelligence team. Citrini’s white-collar employment “catastrophe” scenario has darkened the displacement narrative, yet there are meaningful caveats.
First, compute constraints alone make such an extreme outcome unlikely by the early 2030s. Second, hallucination rates remain elevated even in leading models (see chart). And history repeatedly reminds us that technological forecasts often overshoot reality.
Two obvious examples: the overly optimistic autonomous driving timelines since 2013, and Victorian-era medical warnings that train travel could cause severe physical and psychological harm. Innovation tends to disrupt, but rarely in the straight-line, apocalyptic fashion initially imagined.
Source: artificialanalysis.ai
IGV Breaks $80 — Panic Returns
IGV printed a nasty downside candle yesterday, slicing through the key $80 level. That said, this ETF has “broken down” multiple times over the past few years, only to reverse sharply out of nowhere. Bullish or bearish, IGV remains a volatility beast. Size positions accordingly.
Source: LSEG Workspace
Exodus
Yesterday's IGV volume bar was huge.
Source: LSEG Workspace
Deeply Oversold
IGV weekly RSI at the most oversold levels since the GFC.
Source: LSEG Workspace
Stress running high
IGV’s term structure is flashing extreme volatility across the curve, with the biggest shock concentrated in the front end, where investors are scrambling for protection in panic mode.
Source: Spotgamma
Gone
Hedge funds have slashed exposure to software.
Source: GS
The Software long/short
Nearly all Software names sitting in the Consensus Long/Overweight quadrant are Infrastructure or Security plays according to JPM. The positioning theme hasn’t changed: long Infrastructure/Security, short Apps. That rotation within Software has been in place for months, and it remains firmly intact.
