Dan Niles: Market strength is getting back to where AI capex is being spent, not the spenders

• Bullish through year-end, expecting S&P earnings to increase 25% due to Agentic AI.
• SpaceX's IPO and subsequent index inclusions (Russell, MSCI, Nasdaq 100) focus attention on new players in the AI capex race.
• Hyperscalers (AMZN, MSFT, GOOGL, META) were down last week, while the semiconductor index (SOXX) was up 9%, indicating a shift in investment.
• He advises investing in companies receiving AI capex (semiconductors) rather than the hyperscalers spending it, due to cash flow concerns for the latter.
• Agentic AI requires 10-100 times more tokens, driving substantial demand for memory and chips, suggesting the rally has more room to run until early next year.
• Nvidia (NVDA) is seen as reasonably valued with 80% revenue growth, contrasting with SpaceX's high valuation at 45x revenues.

Dan Niles is bullish on the market through year-end, driven by Agentic AI spending. He highlights a shift in market strength towards AI infrastructure and semiconductor companies, which are benefiting from significant capital expenditure, while the hyperscalers doing the spending saw declines last week.