The Mag7 MAGS stocks, plus Oracle $(ORCL)$, will spend $820 billion on capital expenditure in 2026. Almost half of that investment piles into commodities, as the buildout of AI architecture is so heavily energy-intensive that Amazon (AMZN) alone consumes more primary energy on a daily basis than most countries in OPEC.
What one strategist argues, therefore, is that investors should plow capital into the energy stocks providing the raw materials that technology stocks desperately require to grow.
Jeff Currie, economist and senior advisor at Carlyle Group, has a distinguished CV as former chief commodities strategist at Goldman Sachs. He's credited with calling not just the spike in oil prices that helped precipitate the global financial crisis of 2007-2009, but also the oil glut that followed over the next decade.
Jeff Currie established his reputation as a maverick analyst as chief commodity strategist at Goldman Sachs
Since the fall of 2020, Currie has turned extremely bullish on the whole commodity complex during what he calls its "supercycle." Since then, he points out, the Goldman Sachs Commodity Index has rallied 205%, gold (GC00) 140%, Nasdaq COMP130% and the S&P 500 SPX by 85%.
In a long thread posted on X Friday, designed to replicate the ten-point commodity bulletins he published at Goldman, Currie welcomed investors to "the most asymmetric trade in modern financial history."
Technology stocks are the most highly-valued equities in the market, but they place huge demands on infrastructure to build compute and roll out datacenters. As a result, they effectively have short positions in the commodities needed to develop their expansion, Currie said. He pointed out that the "marginal dollar of investable savings still flows into the AI buildout, not the physical infrastructure that feeds it."
He neatly encapsulated his theory as such: "The Mag7 is the largest unhedged molecule short ever underwritten by the equity market."
Munificent Seven versus Magnificent Seven
Currie elaborated: "The Magnificent 7 is the bid for molecules, electrons, copper (HG00), water, gallium and concrete. The Munificent 7 - ExxonMobil $(XOM)$, Chevron $(CVX)$, ConocoPhillips $(COP)$, Shell (UK:SHEL), TotalEnergies (FR:TTE), BP $(BP)$ and Equinor $(EQNR)$ - are the offer." The combined Mag7 capex of $820 billion this year is larger than the capital formation in the U.K. and France, for perspective.
The argument Currie makes is that the Mag7 generates a free cash flow yield of roughly 1.5%, whereas the 'Munificent 7' generates something closer to 15.5%. Capital, he adds, is supposed to flow to stocks with an improving return on invested capital.
What makes this trade even more compelling from Currie's perspective is that this valuation/ investment discrepancy is occurring "at the exact moment supply has never been more constrained." Since the Strait of Hormuz was closed, China "weaponized the periodic table" (by which he means restricted exports of rare earths) and the conflict in Ukraine shows no sign of devitalizing.
The multipolar world and resource nationalism is complicating supply chains. More friction in logistics and tighter commoity markets explain why what Currie called the "molecule complex" is printing fresh records every week. Physical capacity across the world is constricted by a variety of chokepoints, some natural like Hormuz, some man-made like tariffs.
Dividing the S&P energy sector XX:SP500.10 by the S&P 500, the equity market is discounting a long-term oil price (BRN00) of around $70, Currie calculated. Given geopolitics right now, he believes this is an absurdly optimistic assumption.
Asset allocation, Currie emphasized, is a zero-sum game: "You cannot be overweight everything." At present, the information technology IYW and communication services XLC sectors tickers comprise 43% of the S&P 500, but energy XLE and materials XLB just 6%. If the tech sector were to revert to neutral - 18% of an index capitalized at $66 trillion - $10 trillion worth of capital would be "looking for a new home." That should be the commodity compex, according to Currie.
Currie summed up the present dynamic across commodity markets in three words: "Deglobalization. Electrification.Redistribution." His advice to investors is "own the molecules, own the metals, own the soft commodities," because none of these can be printed by governments and central banks.
There's one last qualification from Currie on gold (GC00). He described himself as a longstanding 'perma-bull' and eventually sees a $10,000 target in the long run. Right now, though, he sees a correction to $4000 as possible because some central banks, such as Turkey's, are selling gold to defend their currencies and pay for energy imports. "Once central banks turn dovish after the energy crisis hits growth, the trade resets and I'm back long."
Comments