Markets are green pre-market on a reversal Monday, with oil dropping after a weekend of war headlines where the US and Iran held off on attacking each other. It is a busy week with the Fed meeting, where I think they should hold, plus heavy earnings. Thursday is the big day with Apple and Amazon, Microsoft and Lam Research report Wednesday afternoon, and I am also watching Waste Management, L3Harris, Strategy and SpaceX.
The weekend story bears are calling circular funding is Nvidia in talks to backstop $250 billion in OpenAI data center financing in Ohio, part of a project costing more than $500 billion with power controlled by the US government and funded separately by Japan. It looks like the fulfillment of the old Stargate alliance that had stalled on financing and power, now with Nvidia stepping in.
On the open source fight, a member of technical staff at Anthropic mocked Jensen Huang's Open Weights and American AI Leadership letter, and Gavin Baker pushed back that Nvidia is already a leading open source company and the letter never asked closed labs to open their models.
On the Fed, I agree with John Roth's Substack piece on why they should not raise next week. There is some non-core inflationary pressure but not enough to panic, and higher rates hurt small business and younger buyers, while the real estate market has stayed flat rather than fallen.
Morgan Stanley estimates big tech CapEx rises 11% to $2.9 trillion by 2028, and any sign of that growth tapering would help the hyperscaler story.
The main idea I have been reviewing is whether China is commoditizing AI models on purpose to hurt closed labs like OpenAI and Anthropic. US labs monetize the model through subscriptions while China makes money on everything around it, manufacturing, robotics, hardware, cloud, energy and physical deployment, which fits Xi framing AI as moving from the digital world into the physical world where China already has scale. Making the model free dissolves the layer your competitor sells for margin, and export controls that block the latest chips get routed around when anyone can host an open model.
There has not been much to buy in a while for a long term buy and hold investor. The last real opportunity was the June flush out around $687 on the QQQ, where leverage was getting taken out. Friday's weakness was more a pullback in semis and momentum than that kind of flush, so at age 42 I am willing to wait rather than add again here.
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