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A critical constraint for AI infrastructure spending: it's not about the chips.
Summary: Today, a look at the market's attempt to recover from the recent sell-off, noting at least one key name that is not participating in the comeback and noting sectors that are sending off diverging signals. Also on today's pod: key companies reporting and results incoming, macro and FX, some must reads and listens on what could hold AI back even if the hope to spend even more on data centres and more. Today's pod is hosted by Saxo Global Head of Macro Strategy John J. Hardy.
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Today’s Links
All of the major antitrust efforts against the true Big Tech giants have so far failed. Remember when Lina Khan was supposed to take them on under the Biden administration. Under Trump it looks like we have a patronage system at work - flatter Trump and support him rhetorically and financially with this or that vanity project - ahem, White House Ball Room - and you’re good to do whatever you want. Two things here: first, interesting to note that newly election NYC mayor Zohran Mamdani has appointed the very same Lina Khan to lead his transition team. Some are arguing that the NYC mayor position is prominent enough to have national implications for the Democrats for better or worse - especially as the battle lines are already drawn between Mamdani and Trump and even “the establishment” of Democrats that are so averse to more left-leaning approaches Mamdani supports. Anyway - Khan and Mamdani aside, secondly is what route to take in disrupting Big Tech? Cory Doctorow has a number of creative solutions on this. Listening to Stratechery’s take on Amazon.com’s earnings call (paywall) and a recent Pivot podcast episode on the same, it is clear that this company is set to so totally set with its logistics to dominate online retail spending that too many suppliers will end up being limited to one marketplace to sell their goods. Besides that, it was also worth noting that Amazon.com CEO Jassy made it clear that power is an important constraint in further data center expansion, just as Jensen Huang said that China might win the AI war over the US in part because of its access to cheaper electricity. As noted on today’s podcast, this Endgame Macro X poster continues to spray out the compelling thoughts on an incredible variety of topics, some of them slipping below the radar of the press, like its comments on the Fed’s move to loosen up its definitions on what it deems a “well managed” bank, one possibly inspired to prevent any future designation downgrade to trigger a flood of asset liquidation. Another one presents an alternative take on one of the purposes of US tariffs: stressing global US dollar liquidity and forcing more to seek USD liquidity by owning US treasury assets. FT writes a disturbing piece on AI slop even finding its way into scientific journals and further overwhelming the peer review system, possibly resulting in a collapse of progress in areas of scientific research. The chart below shows the S&P 500 Index versus two discretionary consumer ETFs (hotels and restaurants) and the old Dow Jones Transport index, all indexed to 100 on the last day of 2024. The two ETF selections inspired by (copied from) a Mike Green post on X to point out out this major divergence versus the concentrated-at-the-top Big Tech dominated overall index.Chart of the Day - S&P 500 concentration
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