Fed Narrative Shifted More Than Nvidia's: 3-Minutes MLIV

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00:00Mark, good morning. Let's think about then what we've learned over the last 24 hours.

00:03Have you taken away anything material with regard to either specifically NVIDIA or the big tech

00:08names that's reshaping your thinking at all or are we still waiting, waiting for more confirmation

00:14there? I don't think that has been a big game changer. That's in the context that we always

00:20kind of knew from the earnings previously this season that NVIDIA earnings were going to be

00:25very strong. They are the big beneficiaries of the massive AI CapEx bubble that we're in.

00:30And we've talked a lot over the last few weeks that the temporary pullback in stocks is not the

00:35bursting of the AI bubble. We expect the AI bubble to inflate significantly further into 2026. We

00:40don't know the exact timeline of when it's going to burst, but it does not appear we're close to

00:44bursting yet. Now, the other dynamic we've talked about in the short term is the short-term pressure

00:49on retail favorites, momentum stocks, some of the frothier names, some of the AI adjacent stuff

00:55driven by particularly what's happening in the crypto sector. We felt that wasn't fully exhausted

00:59yet. I'm not convinced that NVIDIA earnings really changed that picture either. So I feel like we're

01:05still in the same narrative that AI bubble has much more to inflate into next year. Does it mean we

01:10started immediately reinflating from here? Have we already? Is this the time to buy the dip? I'm not

01:14completely convinced on that. I think that the other thing news we got yesterday, which was more

01:19narrative changing, were the Fed minutes. And I think now people are increasingly suspicious that

01:25we will get that December Fed cut. And maybe that's the more important marginal news we got.

01:30And therefore, there's still a bit more in this pullback to come in the next couple of weeks,

01:34particularly in the frothier names, maybe not the good quality AI names.

01:37Yeah. If we don't get a Fed cut in December, is that a problem? Because you could argue the next Fed chair

01:43is going to cut rates aggressively and I can wait. Or is it a problem because the funding pressure is

01:49increasing and we could have an issue into into year end? I don't think it's a problem, first of

01:56all, because they won't they won't cut unless, you know, it's clearly the need to. I'm not convinced that

02:02it's obvious they need to. At some point, obviously, when the U.S. economy slows down hard, they're going to cut

02:08super aggressively. I don't think they need to be going for a preemptive cut now. And I don't think the U.S.

02:13economy is careening off a cliff edge just yet. So therefore, I don't think they should be cut

02:18and cutting. I don't think it's a problem. The funding is a concern. It is a worry. But the

02:22cuts, not the marginal issue that decides that. So, no, I don't think a lack of a cut is a big

02:26problem, even if it will weigh on asset prices in the short term. Is that what is propelling some of

02:34these tech stocks higher? You have the Nvidia story on one hand. You have this kind of circularity.

02:38You have all these investments, all this fiscal spend. How much of that rally is dependent, though,

02:43on the Fed kind of greasing the wheels?

02:47I think it's clearly a marginal positive driver. It would be foolish to dismiss it. I don't think

02:54it's the most important dynamic here. Yes. One of the things that fueling valuations is that we are

03:00always under Trump administration going to get Fed policy, which is too easy for the economic

03:06fundamentals based on orthodox economic policy. And that helps asset prices. But the AI bubble is

03:12its own theme, and it's more dominant. And we are at the inflation stage of incredible

03:16capex spending, which benefits some of the big names out there.