♪You can dance in a hurricane, but only if you are standing in the eye ♪

As a child, I’d often slip away to my room upstairs during parties—even those thrown just for me—because I found them too noisy and overwhelming. That’s when I first turned to music to help calm myself. Gentle tunes would ease my overstimulated mind. Over time, calming music became essential for managing my stress levels, which led me to discover SiriusXM’s Coffee House.

It calmed me down, even more recently when, commuting to work in the morning, packed in like sardines on the Boston Orange Line, in a somehow scorching hot train car, in the dead of winter, someone squished face-to-face in front of me, coughed…directly into my mouth. And that is where this letter’s title inspiration came from; the Brandi Carlile song The Eye, on the Coffee House; ♪You can dance in a hurricane, but only if you are standing in the eye. ♪

2025: Another Great Year...For Investors

2025 generated another wonderful year of profits. Simply investing in the DJIA, S&P, and Nasdaq, you would have generated between 15% and 21%. 2024 and 2023 also generated above-average market returns. And with inflation according to the BLS of ~3%, investors were generating double-digit real returns. Of course, this is misleading, as the gains were from a handful of technology stocks. Almost half of 2025’s gains on the S&P500 came from seven stocks tied to the AI story: Nvidia, Alphabet, Microsoft, Broadcom, JPMorgan Chase (tangentially tied), Palantir, and Meta. And at the end of the year, markets were spurred higher on the new memory shortage narrative, causing memory storage companies to soar.

Chuck Prince was right; dance, dance, dance, dance, until you collapse. Anyone that invested in the markets has been dancing blissfully in the eye of the hurricane. And this has continued into the new year. The Director of IR on the Interactive Brokers earnings call mirrored investor excitement levels, “Cyclically, rising markets and expectations for lower interest rates drive increased client engagement. Clients traded actively, grew more comfortable taking on risk, increased their market exposure, and made greater use of leverage through margin loans. They also expanded beyond equities into other asset classes, including options and futures.” And “Trading volume during our overnight hours continues to grow rapidly—up 76% from last quarter and more than 130% from the fourth quarter of last year.” Although they noted it’s adding liquidity to a lightly traded market, this is indicative of investor confidence.

 As John Kenneth Galbraith noted in A Short History of Financial Euphoria, “As already observed, common features recur. This is of no slight practical importance; recognizing them, the sensible person or institution is or should be warned. And perhaps some will be. But as the previous chapters indicates, the chances are not great, for built into the speculative episode is the euphoria, the mass escape from reality, that excludes any serious contemplation of the true nature of what is taking place.” And some are starting to become wary of the AI story. In a recent FT article, Chief Investment Officer of Amundi, Vincent Mortier commented, “Whether there are excesses…in the equity market on AI is no longer questionable, but to figure out which exact companies will be the loser and when this reckoning will happen is difficult.”

2026 might just be the moment that people awaken to the real situation. According to the St Louis Federal Reserve, the average American has over 45% of their assets tied up in the stock market. 87% of Americans with incomes of $100,000+ own stocks, which drops precipitously to only 28% of households making less than $50,000, supporting the K-shaped economy argument of a bifurcated economic backdrop (see chart). The average American has ~ $104,000 in debt, with Gen X holding the most ~$158,000, and Gen Z the least ~$34,000, of which the majority is on credit cards and auto loans, according to Statista. The average salary in 2025, according to the Social Security Administration was $63,795, up 2.9% from $61,974 in 2024. Inflation, according to the December CPI report, was only 2.7%, but as noted by numerous economists, it is misleading due to the missing October inflation data.

More likely than not, wages did not keep up with inflation in 2025, forcing Americans to either leverage debt or increase their investing strategy aggressiveness to offset losses in income purchasing power. Lack of real income growth has reflected itself within the University of Michigan Surveys of Consumers, with Consumer Sentiment dipping 21.3%, Current Economic Conditions dipping 26.2%, and Consumer expectations dipping 18% year over year for the January survey, although the recently released February data signaled improvements month over month.

A recent BofA survey in December indicated high, if not bordering on euphoric optimism in the stock market. According to BofA strategist Michael Hartnett, this level of optimism has only occurred 8 times this century, usually preceding the market reaching its apex. More worrisome is the low cash levels, which fell from 3.7% in November to 3.3% in December. There is no cash on the sidelines and therefore little support if markets were to lose confidence.

Which then explains the recent commentary from President Trump. At Davos, he was expected to announce that 401K holders can use an unspecified amount of their accounts to purchase homes. As the WSJ noted, “First-time home buyers under age 59½ can currently take up to $10,000 out of their individual retirement accounts penalty-free for a home purchase. But such early withdrawals aren’t allowed in 401(k)s and similar employer-based accounts unless people pay a 10% penalty.” But, 401ks are already allowed to make self-loans to themselves, the lesser of 50% of the vested amount, or $50,000, but it must be repaid within 5 years. When asked on their earnings calls about the benefits of the potential new policy, the CEO of D.R. Horton noted, “I think anything that opens up the ability of people to either get to a monthly payment and/or get to a down payment, which are the two things, especially for a first-time homebuyer that we need to solve for, right? It's getting to a monthly payment that they're comfortable with, can and should afford as well as the down payment that they need to purchase a home. So we absolutely think it will be helpful. To what level, we'll see what gets put forward in terms of policy and how that plays out. But anything that we see to help get people moving, not just in the new home market but in the resale market as well, we believe, is accretive to our performance.” The issue, as noted by many, is not availability but rather affordability. Later in the month, Trump reversed course, stating, “I like keeping their 401(k)s — I’m not a huge fan of putting down a deposit. I’m not. I’m so happy with the way 401(k)s are doing.” Homebuilders proposed a new idea, developing “Trump Homes” increasing supply of housing availability. But the President noted that he wants housing prices to rise, not fall, “I don't want to drive housing prices down. I want to drive housing prices up for people that own their homes.”

With home equity already hovering around 30-35% of average American net worth, if prices were to fall, it would seriously maim confidence and impact any leverage embedded on the consumer balance sheet. Furthermore, any changes to the tax code are required to go through Congress, which would slow progress on any new tax initiatives. Even if policy were to change to support the housing market, it would take considerable time from proposal to approval and implementation.

The additional leveraging of retirement assets follows the recent news that the Federal government will be buying $200 billion mortgage bonds from Fannie Mae and Freddie Mac in an attempt to lower rates for home buyers. And then the other recent news that Trump will cap credit card rates at 10%. Disregarding his ability to implement these policies, they are obviously meant to stimulate spending via leverage. Lower rates allow consumers to rely more heavily on cheaper debt, spending more and stimulating the economy, for a time. This is no surprise, as Trump has made his career in real estate by relying on favorable low-rate environments to finance his projects with lower levels of committed capital. And with these types of assets, leverage can be taken on further by collateralizing the home equity. According to Moody’s Analytics, home equity loans are the fastest-growing category of consumer credit on a percentage basis, albeit from a low starting point.

This is what happens when net worth becomes concentrated in inflated asset classes, such as stocks and the housing markets. To keep the plates spinning, you must create new rules, in this case, leverage, praying that neither plate slows or falls. The US markets are certainly getting riskier. And the schemes to keep the plates up are getting more desperate. But nobody can predict when markets acknowledge these risks. If you want, you can dance in the hurricane, for now. But the prudent investor, who is overstimulated by the party going on around him or her, may just want to quietly escape upstairs, abstain from the party, listen to calming music, and wait for better conditions to come back downstairs.

Midterms are Upon Us, and Trump is Irritating Everyone

The US has midterm elections this year, which historically coincide with volatile markets. One could argue that the barrage of news supporting whatever is the hot political topic of the moment is nothing but pandering to the voter base.

 We have the uncertainty of the next Fed Chairman, with Jerome Powell stepping down in May.  Although markets have had more than adequate time to acclimate to this adjustment, there is substantial uncertainty about who succeed Powell, and the precedent being set by the Department of Justice launching an investigation into Powell and the Federal Reserve. In an unprecedented event, on Sunday, January 11th, Jerome Powell came out swinging against Trump, deviating from his previous strategy of demurring to comment in public. “It is not about Congress's oversight role; the Fed, through testimony and other public disclosures, made every effort to keep Congress informed about the renovation project. Those are pretexts. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.” If Trump is trying to force the Federal Reserve into submission, the question arises not about the independence of the Federal Reserve, which arguably has never existed, but rather the extent that the Federal Reserve panders to oscillating politics rather than serving its mandates. We recently learned that Kevin Warsh, a historically fiscal hawk, would replace Jerome Powell, throwing a curveball for many in the markets. If easy money from low rates and RMP/QE are the propellants to these markets, this could be a bad omen. For those of us who want to normalize interest rates and lower the Fed balance sheet, no pick would have been better. We will see, as Trump recently threatened to sue Warsh if he did not lower rates, although in jest. But we all know that jests can be passive threats too. And around and around we go!

If I were an international investor, I would be concerned about my US exposure. The historical stability and rule of law in the United States is obviously cracking under the recent unpredictable, sporadic, and sometimes complete reversal of policy decisions and commentary from the government. As with US politicking, this is always temporary and may subside somewhat after midterms, but until then, expect volatility. It is a risk that nobody but those closest to or inside the government can predict or react to quickly enough.

 Liquidity injections are occurring via the Reserve Management Purchases. As Jamie Dimon noted on the JPM earnings call, “Can I just add one more factor, which is the Fed, they don't call it QE but they're talking about doing $40 billion a month of buying T-bills. That adds $40 billion a month into bank -- all things being equal, to bank reserves. And most of that initially shows up in wholesale deposits and then maybe gets redeployed. So we'll see how that plays out too. But it does create more liquidity in the system, which I should have mentioned is another tailwind for the economy.” And with Trump’s coercion of lower rates, we have the ingredients for an inflationary backdrop and currency debasement. With lower interest rates, the incentives for foreign buyers to purchase US and corporate debt decline. Further exacerbating the geopolitical landscape is last month’s decision by President Trump to impose additional punitive tariffs on Europe for opposing his initiative to move Greenland under American control. Of course, he backed off after brief discussions with NATO, but this reinforces the unpredictability of the US at the moment. Trump has threatened additional tariffs on a number of other countries as well. The issue in this case is that Europe and other impacted countries may not be as amenable as during the previous April ‘Liberation Day’ tariffs and initiate their own retaliatory tariffs. As the Kiel Institute indicated in a recent study, only 4% of last year’s tariff increases were absorbed by the exporting foreign companies, while 96% were absorbed domestically by importers and consumers. 

 These policies are generating currency risk and interest rate risk, based on the fiscal and monetary policies of the US government, and additional geopolitical risks. Some would argue this is all part of Trump’s ‘Art of the Deal’ playbook. Possibly. But regardless, this is nothing short of a bull in a china shop. Due to the implications of some of these proposals and decisions, excluding political variables would be dangerous for any investor.

Outside of the stock market, the economy seems to be struggling, as noted in prior quarters for all but the upper-income demography, although earnings appear to be holding up for now. Layoffs under the premise of gained efficiencies from AI have helped buoy stock prices, but as concerns about job security increase, consumers have become cautious. As reported by the FT, the Challenger, Gray and Christmas employment report indicated announced layoffs are up from post-pandemic lows and that companies have cut more jobs in January since 2009, jumping 109,435 last month. For those who follow the news, there have been frequent reduction-in-force (RIF) announcements from well-known companies.

As noted on the Robert Half call by CEO Keith Waddel “While prospectives on medium- to long-term structural impact of AI on the labor market vary greatly, most of the evidence suggests a negligible impact so far on our areas of employment particularly among small businesses. For example, a very recent study by Oxford Economics concludes that, “firms don't appear to be replacing workers with AI on a significant scale and we doubt that unemployment rates will be pushed up heavily by AI over the next few years.” Also, feedback from our SMB clients indicates that potential future labor savings from AI are not a material factor in their current headcount decisions. That said, as AI reshapes how work gets done and the skills required for many roles evolve, clients are increasingly relying on us to help them navigate change, deploy talent quickly, and support the implementation of new technologies, including the requisite data requirements.” If AI displacement isn’t driving these layoffs, which has been the underlying argument, the normal rationale for these decisions are a weaker economic backdrop or to support margins or bottom-line earnings.

January Quotes and Themes:

AI is the primary revenue driver:

• Avnet Inc: “Demand signals continue to reset globally, resulting in lead times trending higher across most product categories. This trend is still largely driven by the data center, artificial intelligence, but is also broadening as projected growth rates in all segments we track continue to improve.” – Philip Gallagher

  
  

• SanDisk Corporation: “For the first time, data center is expected to become the largest market for NAND in 2026, driven by some of the world's largest and well-capitalized technology companies.” – David Goeckeler

  
  

• Seagate Technology Holdings: “. The data center market accounted for 87% of our shipment volume, supported by ongoing demand momentum from global cloud customers and sequential growth across the enterprise OEM markets.” – Gianluca Romano

  
  

• Taiwan Semiconductor Manufacturing Co. Ltd.: “While we expect AI accelerators to be the largest contributor in terms of our incremental revenue growth, our overall revenue growth will be fueled by all 4 of our growth platform, which are smartphone, HPC, IoT and automotive in the next several years.” – CC Wei

  
  

• TD Synnex Corp: “Within TD SYNNEX, excluding Hyve, our momentum continued with gross billings increasing 10% year-over-year and gross profit and operating income each also increasing by double digits. Hyve experienced another strong quarter with gross billings increasing by more than 50% year-over-year and ODM/CM gross billings increasing 39% year-over-year, driven by sustained broad-based demand in cloud data center infrastructure from our hyperscaler customers.” – Patrick Zammit

  
  

• Texas Instruments Incorporated: “In summary, industrial, automotive and data center combined made up about 75% of TI's revenue in 2025, up from about 43% in 2013. We see good opportunities in all of our markets, but we place additional strategic emphasis on industrial, automotive and data center.” – Haviv Ilan

  
  

• United Microelectronics Corp: “Sure. Well for 2026, we expect AI-related segment remains as the primary growth driver in semi-industry. And furthermore, with the continuous commercial deployment of Edge AI applications, demand for chip using a general purpose server is also expected to rise. In contracts, the adverse effect of the memory supply imbalance could put some pressure on specific consumer electronics. But overall, the semiconductor industry is projected to grow by mid-teens in 2026.” – Jason Wang

On Memory Price Impact:

• Apple Inc.: “From a memory point of view, to answer your question, memory had a minimal impact on the Q1, so the December quarter gross margin. We do expect it to be a bit more of an impact to the Q2 gross margin and that was comprehended in the outlook of 48% to 49% that Kevan gave earlier.” – Tim Cook

  
  

• Avnet Inc.: “Yes, I think we said there's upward pricing pressures in that. So I think it's going to continue. I think before we get increased pricing, I mean the good news is in this cycle, one of the positives, and it's been a long cycle is pricing has kind of held up. ASPs overall have held up. But as lead times start to trend higher across other product categories, I think you can anticipate some of it is already happening for sure, in memory storage controllers, certain capacitors in the IP&E space, we're starting to see some pricing inflation. A lot of that's driven obviously by the activity around data center increase in the hyperscalers, but it's really a lot of our industrial customers are increasing demand based on their exposure to the data center, if you know what I mean.” – Philip Gallagher

  
  

• Taiwan Semiconductor Manufacturing Co. Ltd.: “Charlie, those -- although we say it's call non-AI, but actually that's related to AI, you know that, right? Because the networking processor, you still need to have AI data to scale up or scale out. Those are the networking switches or those kind of things still grow very strong. As for PC or the smartphone, to tell the truth, we expect higher memory price. So we expect the unit growth will be very minimal.” – CC Wei

  
  

• TD Synnex Corp: “So again, the guidance for Q1 reflects what we see from the regions, from the BUs. So I can confirm that the memory price have increased dramatically. And what we are seeing already is an increase in ASP on a series of product families, especially PCs, servers, storage. So the ASP increase is, on one hand, a tailwind in the short term. What will be interesting to see is what will be the impact on the volume going forward. But again, specifically for Q1, the guidance reflects the result of the bottom-up exercise with the regions and the forecast is done by technology, by country.” – Patrick Zammit

  
  

AI End Users: Banks

Moving down the channel to AI end users, the big banks, JPMorgan, Bank of America, Wells Fargo, Citi, and Goldman Sachs all reported earnings. I am not a bank analyst, but I did note a trend from the calls regarding AI applications and their use benefits so far. Mike Mayo was peppering management teams with AI spending and profitability questions.

On the Bank of America call, Mayo inquired, “And specifically on AI investments, like how much do you spend on that? Or the number of people, or if you could dimension that, and kind of what kind of outcomes you're looking for, especially as we sit here at the start of the year?”

CEO Brian Moynihan responded, “Yes. Well, we're looking for -- we have the -- to give you an example, we have 18,000 people on the company's payroll who code. And we've using AI techniques, we've taken 30% out of the coding technique -- the coding part of the stream of introducing a new product or service or change. That saves us about 2,000 people. So that's how we're applying it. That was this year's statistic, meaning '25. Next year, we should get more out of it as we figure out and apply it across. So there's 20 different projects going on in the company. I don't know off the top of my head the total expenditure, but it's several hundred million dollars.”

Bank of America fixated on AI benefits from cost-cutting and efficiencies, not generating revenue. Mayo pressed JPM too, asking during their earnings call, “Are you spending more on AI?” CEO Jamie Dimon addressed increased AI capex. “We will be spending more -- we -- I think that AI -- we will be spending more but it is not a big driver. I do think it will be driving more efficiency down the road. But I'd also point out about that, efficiency -- because other banks have to do it too, it will eventually be passed on to the customer. This isn't like you're going to build 3 points of margin and you get to keep it. You don't. So you need to build some of these things just to keep up.

And here we have -- we look at -- and we look at all of our competitors, those competitors include all the fintech. You have Stride, you have SoFi, you have Revolut, you have Schwab. You have everyone out there. And these are good players, and we analyze what they do and how they do it and how we would stay upfront. And we are going to stay upfront, so help us God. We're not going to try to meet some expense target and then 10 years from now, you'd be asking us the question, how did JPMorgan get left behind?”

Morgan Stanley CEO Ted Pick noted, “We believe we're not overreaching in saying that, even with the ongoing investments we're making back to Mike's question on AI, in core technology or in ongoing AI efficiency and effectiveness tools, we would expect that if the markets are conducive, and we execute, so those are two ifs, market is constructive, and we execute across wealth and the investment bank and IM as well that we should continue to realize operating leverage.”

Citi CEO Jane Fraser commented in her prepared remarks, “But we're also building AI into the processes that move money, manage risk and serve clients. Colleagues in 84 countries have now interacted with our proprietary tools over 21 million times, and we continue to see adoption increase. It's now above 70%. With much of our transformation behind us, we are shifting our focus to how we can use AI tools and automation to further innovate, reengineer and simplify our processes beyond risk and controls to improve client experience whilst reducing expenses.”

It seemed that banks were trying to justify their AI capital expenditures on the calls with efficiencies...down the road. But with no real material cost reductions to point to and with ballooning expenditures, analysts are getting restless. The improved search capabilities, workflow automation, and other structured capabilities are not the artificial general Intelligence (AGI) that was promised. Although AI does have the ability to streamline efficiencies on the back end, these types of process improvement projects occur constantly within organizations, and is not some revolutionary development. As Jamie Dimon noted, companies, not just banks, cannot risk missing the AGI wave. Whether it is FOMO, like Dimon, or ego, like Ellison, Musk, Altman, etc., the markets are forced to chase this AGI story, until it is no longer fashionable to do so or the story exhausts itself.  As noted in a January Bloomberg Podcast, GMO founder Jeremy Grantham noted, “I think it’s obviously a bubble. And I think it’s quite a simple story. Bubbles don’t occur when there’s some crummy idea that gets touted. People often say that and think that. And it’s simply not true. All the bubbles are associated with serious things. And the more serious, the bigger the bubble. And if it’s important, really important, perhaps more important than anything else, and if it’s obvious, then you are dealing with a handful like the railroads. Everyone knew the railroads would change the world for the better. Everyone knew it was the most powerful idea that they’d come across in their lives. And it was. And everyone put their money in. And everyone wanted to buy, to build, yet another railroad, between Manchester and Leeds. And so you had multiple tracks, and everybody lost their money. And the bubble broke. And it brought the economy to its knees for a year or two and then it regrouped. And the railroads carried us to glory. And then Internet, the same.”

As noted on the staffing company Kforce's earnings call, “Let's face reality. AI is real. It's here to stay. However, reality that we're hearing that's setting in is the pace and complexity of executing corporate AI initiatives as compared to what I'll call more simplistic consumer AI, that's really what's been surfacing.” The CEO noted in the prepared remarks of the call a dose of reality too, “We also believe that our trends are evidence that clients may increasingly pursuing a flexible talent model as a means to complete critical projects in this uncertain macro landscape and the growing belief that returns that we'll be generating from continuing AI investments may take longer to realize and may be more specific in nature to unique business problems rather than an overarching solution to all technology challenges.” He elaborated later on in the call what other consulting firms had as well in the current and prior quarters, “So I think many organizations got the wake-up call as they started to go down these paths with experimenting with AI, just how much foundational work they need to do to really be prepared to maximize the opportunity and leverage. And modernization in these phases, this isn't something that's going to happen overnight. I mean these are multiyear endeavors.”  

And the price tag is getting more expensive. Bloomberg anchor Lisa Abramowitz noted recently that, “Microsoft, Meta, Alphabet and Amazon are expected to spend more than $600 billion this year on capital expenditures. That’s almost double the roughly $350 billion these companies spent last year and compares with the $251 billion deployed in 2024.” At what point do markets finally push back and the ‘show me’ moment occur? And not just show improved search, workflows, and other cost efficiencies. That is what the analysts were beginning to probe during the January earnings calls, and came to aheads in February with the stock price reactions to the Microsoft, Amazon, and Google capex budgetary expansions during earnings calls. In response to capex skepticism on the call, Amazon CEO Andy Jassy responded, “And I think the other thing is that if you really want to use AI in an expansive way, you need your data in the cloud and you need your applications in the cloud. Those are all big tailwinds pushing people towards the cloud. So we're going to invest aggressively here, and we're going to invest to be the leader in this space as we have been for the last number of years. We have, I think, a fair bit of experience over the years in AWS of forecasting demand signals and doing it in such a way that we don't have a lot of wasted capacity and that we also have enough capacity to serve the demand that's there.”

In attempts to appease markets and keep the party going, the cornerstone of this AGI story, the still private company OpenAI has been trying to emphasize its potential revenue accretive products in the media, especially as they raise capital in a new round of financing. Below is a list of articles from Bloomberg. Of course, Altman is quietly trying to hide comments made in 2024: “I kind of think of ads as like a last resort for us as a business model.” He probably regrets that public statement, with the announcement that ChatGPT tiers will include ads going forward.  This also puts OpenAI at a disadvantage as its competitors do not force ads on users yet, and there are no barriers to switching. Consumers are not stupid; they will use the best product, with the least advertisements. And neither are their competitors. Anthropic’s new Super Bowl ads are as hilarious as they are damning to OpenAI (Link).

Going back to the quote mentioned earlier about the madness during economic euphoria, earlier this month the Economic Times and other media outlets published articles stating, “If the architects of the artificial intelligence boom are right, it is only a matter of time before data centres -- the giant computing facilities that power AI -- will float in orbit and be visible in the night sky like planets.” Google has created Project Suncatcher, which of course, was followed on in various forms by Jeff Bezos, Sam Altman, Elon Musk, and Jensen Huang.  I think this fairytale narrative can be broken quite easily with the question…how do we transfer the energy from space to the ground for pre-existing data centers? Or how do we get these giant data centers into space and maintain them in a cost-efficient manner? From the articles I have read, that remains to be answered.

 More recently, the FT published an article noting that the highly touted Saudi Arabia futuristic Neom project will be amended to now have an AI angle. “The person said there would be a greater focus on “industrial” sectors in Neom, including it becoming a hub for data centres. “Data centres need water cooling and this is right on the coast so it will have seawater cooling. So it will be a major centre for data centres,” the person said. Neom said that as the kingdom “works to establish itself as a global hub for data and AI, Neom is focused on attracting investors, partners and tenants in these fast-growing sectors”. It added that the project had “several natural advantages” including digital infrastructure, its location “at the crossroads of three continents”, access to “abundant and cost-effective renewable energy” and the availability of land.”

 The issue is that the narrative for AI is tiring. And when a narrative is exhausting, markets must pivot or tweak the narrative to inject new energy into the story. As we saw during the WEF conference, Nvidia CEO Jensen Huang tried to reinvigorate excitement around the AI story. According to his speech with BlackRock’s Larry Fink, “There are trillions of dollars of infrastructure that needs to be built out,” and “This application layer could be in financial services, it could be in healthcare, it could be in manufacturing. This layer on top ultimately is where economic benefit will happen.” If the AI trade erodes, the sheer market cap size and reliance on the market could create a contagion, as noted by a recent Bloomberg article, “AI ‘Contagion Channels’ Show Huge Economic Risk If Bubble Bursts.”  And the negative impact could snowball down the application layer in financial services, it could be healthcare, it could be in manufacturing. Industries are exposed. See the chart below.

In its newest story form, sourcing energy to power the insatiable demand for AI is what is stymying AGI evolution. Ironically, when asked about the energy bottleneck for AI on TSMC’s earnings call, CEO CC Wei noted that, “Today, from my point of view, still the bottleneck is TSMC's wafer supply. Not the power consumption, not yet. So we also look at carefully. To answer your question, say that TSMC's wafer can support how much of the gigawatt, still not enough. They still have abundant of power supply in the U.S.” And this is true, for now, as we see memory price commentary coming from the producers noting, not energy constraints, but production capability constraints.

As investors squabble over the bottleneck holding back the AGI utopia, and as markets galivant higher, the party continues on, I, as usual, will have already done my Irish farewell, snuck upstairs, and will be listening to the calming tunes of SiriusXM Coffee House.

*Postscript: I have not actively published material on this blog in the past. Going forward, I hope to be more active, but not with any planned regularity. So stay tuned. I do tweet or post on X more frequently @nhryanhickey. I am happy to connect with people, so feel free to contact me on the website, LinkedIn, or X. Or don’t. Just please don’t cough in my face. One time was enough for a lifetime.

Information presented in this post was obtained from sources believed to be reliable, but accuracy, completeness, and opinions based on this information are not guaranteed. Any information contained on these pages is for general informational purposes only and should not be construed as legal, accounting, tax, or other professional advice. You should consult directly with a professional if legal, accounting, tax, or other expert assistance is required. Under no circumstances is this an offer to sell or a solicitation to buy securities suggested herein. The writer may have an interest in the companies mentioned. All data, information, and opinions expressed are subject to change without notice.