What if the Fed is using the wrong playbook?
Classic theory: Fed hikes rates → borrowing gets expensive → spending drops → inflation cools.
But there's one sector that doesn't care: AI.
Big Tech is set to drop ~$800B in 2026 alone. Global AI investment could hit $1T this year. When winning the AI race has no ceiling, an extra point on rates won't stop the capex train.
So what actually happens?
Demand for chips and energy stays red hot, but financing costs spike. Those costs get passed through the entire chain. Higher rates → higher prices → more inflation → Fed hikes again. Feedback loop.
Sound familiar? 1999:
• Fed hiked 3 times that year
• Nasdaq ripped 50%+ after the first hike
• 10Y yields went from 4.7% to 6.5% (similar to today)
Back then, the unstoppable narrative was the internet. Today it's AI.
If we're in a 1999-style paradigm shift, rate hikes might not slow Big Tech down. Capital keeps flowing into anything AI-adjacent.
Question is: does the AI boom end differently than dotcom did?
Classic theory: Fed hikes rates → borrowing gets expensive → spending drops → inflation cools.
But there's one sector that doesn't care: AI.
Big Tech is set to drop ~$800B in 2026 alone. Global AI investment could hit $1T this year. When winning the AI race has no ceiling, an extra point on rates won't stop the capex train.
So what actually happens?
Demand for chips and energy stays red hot, but financing costs spike. Those costs get passed through the entire chain. Higher rates → higher prices → more inflation → Fed hikes again. Feedback loop.
Sound familiar? 1999:
• Fed hiked 3 times that year
• Nasdaq ripped 50%+ after the first hike
• 10Y yields went from 4.7% to 6.5% (similar to today)
Back then, the unstoppable narrative was the internet. Today it's AI.
If we're in a 1999-style paradigm shift, rate hikes might not slow Big Tech down. Capital keeps flowing into anything AI-adjacent.
Question is: does the AI boom end differently than dotcom did?
