The AI trade is not over; recent pullback was due to a temporary pause in liquidity from oil shock – Real Vision’s Raoul Pal

Real Vision's Raoul Pal argues that the recent pullback in AI-linked equities is not a sign that the AI trade has ended, but rather a temporary consequence of a liquidity pause triggered by an oil price shock. The transmission mechanism runs through inflation and rate expectations: a sharp rise in crude prices lifts headline inflation and can push back expectations for central bank easing, which tightens financial conditions and drains the marginal liquidity that tends to flow into long-duration growth assets. High-multiple technology and AI-exposed names are the most sensitive to this channel because their valuations depend heavily on discounted future cash flows, so a repricing of real yields hits them hardest. Energy producers and oil-sensitive sectors sit on the other side of the trade, benefiting from higher commodity prices while consumer discretionary and rate-sensitive segments face squeezed margins and tighter credit. The most concrete near-term catalyst for traders to watch is the next US CPI release and the associated move in breakeven inflation and two-year Treasury yields, since a cooling print would signal whether the oil-driven liquidity drain is fading.

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