Summary: We are much of the way through earnings season, although some of the bubbliest of the big bubbly names are reporting earnings this week, including speculative Today - a rundown of yesterday's significant, if rather mega-cap and AI-concentrated market correction and its possible drivers, including the idea that the drivers weren't so obvious, and possibly therefore a bit more ominous. Still, it is worth noting the lack of contagion into other assets so far as we ponder next steps across markets, including in rates and FX. This and more on today's pod, which is hosted by Saxo Global Head of Macro Strategy John J. Hardy.
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These new AI data centers are nuts. Meta was in such a scramble that it was building massive “GPU tents” and some are building their own power infrastructure with in one case a 2 GW natural gas turbine setup - basically the equivalent of two full-size nuclear power plants. Insane. A WSJ op-ed suggests that we could soon transition to the post-chip era in semiconductors - shifting to wafer-based solutions (like unlisted Cerebras does, which allows a massive wafer-sized solution that has 14 x the transistors of Nvidia’s state of art Blackwell and 7,000 times the memory bandwidth - also somehow “stacking” 16 of these in a single “box”). There is that and the idea that we can move beyond etching of chips with ASML’s “most complex ever machine” and get beyond the “reticle limit” to entirely new laser-based tech driven by Lam Research founder David Lam’s new startup Multibeam. And then the kicker if all of this could be based in the US rather than Taiwan or elsewhere. Clearly, human ingenuity will get us to performance levels currently unimagined and at far better efficiency. The Palantir CEO Alex Karp railing against the “expert class” and suggesting that retail speculators are the smart ones here. The full cycle will tell, but Alex Karp might do well to park the hubris. A recent Michael Every appearance in which he lays out his theories on Economic Statecraft and even what he calls “fartcraft” (bear with him, it is important stuff) to mobilize and leverage national assets for strategic aims. His framework is so critical for this new age of markets. Brent Johnson of the “USD milkshake theory” was on Macrovoices last week, with special focus on how the US plans to use crypto stablecoins to help back the US dollar. Our even-weighted basket of AI stocks was down nearly 5% yesterday. Interestingly, two of the three weakest names since our “this is a bubble” declaration on September 11 have been a couple of the very largest names in the index: Meta and Oracle, two of the biggest spenders on AI infrastructure - especially Oracle, which peaked above 345 on the very day of the earnings call in which it touted titanic levels of planned data center capacity on September 10 (the major trigger that prompted the creation of this basket) and closed yesterday at 248.17, almost entirely retreating to the stock price of the day before that announcement ( 241.51). Note that not a single of these AI stocks posted a gain yesterday, even as 229 of S&P 500 Index members did.Table of the Day - AI stocks bruised yesterday
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