No AI Bubble? Why Tech Keeps Surging | Macro Mondays w/ Andreas Steno & Mikkel Rosenvold

Key Concepts

• AI Bubble: The debate regarding whether current high capital expenditure (capex) in AI is sustainable or a speculative bubble.
• Strait of Hormuz Crisis: The ongoing geopolitical deadlock involving Iran’s blockade of the strait and the resulting impact on global energy and trade.
• Credit Cycle: The expansion and contraction of access to credit, heavily influenced by central bank interest rate policies.
• Imported Inflation: The mechanism by which global supply chain shocks and commodity price increases eventually filter into Western economies.
• Strategic Independence: The geopolitical shift toward securing domestic supply chains (energy, rare earths, solar) to reduce reliance on foreign adversaries.

1. The AI Capex and "Bubble" Debate

The hosts analyze the quarterly reports of major hyperscalers (Microsoft, Amazon, Alphabet).

• Key Finding: The AI trend is currently accelerating rather than stalling.
• Evidence: Microsoft reported a contractual backlog of approximately $300 billion related to its partnership with OpenAI.
• The "Backlog" Metric: A critical distinction is made between companies like Microsoft/Amazon, which have massive backlogs to justify their high capex, and Meta. The hosts argue that Meta’s capex is less defensible because they lack a comparable backlog and their consumer-facing AI (Meta AI) has low user engagement.
• Conclusion: The "bubble" discussion is premature. A reversal will only occur if central banks tighten the credit cycle significantly, which has not yet happened.

2. Central Bank Policy and Interest Rates

• Federal Reserve: The hosts note that the Fed is currently in a "no-cut" stance. With inflation remaining sticky and the geopolitical situation in the Strait of Hormuz, the Fed is prioritizing patience.
• The "Kevin W" Factor: The transition to a new Fed chair (referred to as "Kevin W") is expected to be difficult, as the committee is increasingly divided along political lines, ending the era of consensus-driven policy seen under Jerome Powell.
• Real Interest Rates: Because inflation is rising while front-end interest rates remain anchored, real interest rates are effectively declining, which continues to support the current capex boom.

3. The Strait of Hormuz and Geopolitical Strategy

• The "Humanitarian" Maneuver: The U.S. is attempting to break the deadlock by encouraging third-party commercial vessels to transit the strait, likely underwritten by U.S. insurance and military oversight.
• Strategic Goal: The objective is to "smoke out" Iran. If Iran attacks neutral vessels from countries like Indonesia or Brazil, it shifts the global narrative, framing Iran as the clear aggressor disrupting international trade.
• Energy Security: The hosts argue that the West will not face food or energy shortages. Instead, the global market will see a "cynical" redirection of resources: Western nations will outbid developing nations (e.g., Bangladesh, Pakistan) for available supplies.

4. Global Trade and Future Risks

• The Trump-Xi Summit: An upcoming, though unconfirmed, summit between Donald Trump and Xi Jinping is identified as a major macro theme.
• Weaponized Supply Chains: China has already demonstrated the ability to weaponize rare earths and solar panel supply chains. The hosts argue that the U.S. push for energy independence (including efforts in Venezuela and the Middle East) is a strategic move to gain leverage for these negotiations.
• Manufacturing Lag: The hosts emphasize that the West has outsourced most of its manufacturing over the last 40 years. Consequently, supply shocks hit manufacturing hubs (China, Vietnam) first, with the price impact "imported" to the West with a 12–15 month delay.

Notable Quotes

• On Fed Policy: "We ain't cutting [expletive] bro." (Attributed to the sentiment regarding the current Fed interest rate trajectory).
• On Market Predictions: "Sometimes maybe good, sometimes maybe [expletive]." (A recurring disclaimer regarding the accuracy of macro forecasting).
• On Global Resource Allocation: "The western consumer is obviously in a better position to deal with a higher price of food or energy than the consumer in Bangladesh or in Pakistan... we will outbid countries poorer than ourselves."

Synthesis

The current macro environment is defined by a tension between an accelerating AI-driven capex cycle and geopolitical instability in the Strait of Hormuz. While the AI sector remains robust due to strong contractual backlogs, the broader economy faces a delayed inflationary threat caused by supply chain disruptions. The hosts conclude that the West is currently insulated from immediate shortages due to its purchasing power, but the long-term stability of the business cycle depends on how central banks manage the credit cycle in response to these imported price pressures and the outcome of upcoming high-stakes diplomatic summits with China.