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Market Updateđđ
For most of the past year the index has carried an almost built-in AI hedge. When hyperscalers raised capex, the companies receiving the money rallied, because the spending became their revenue. When hyperscalers hinted at spending less, their own stocks rallied on better free cash flow and more room for buybacks. One side could get hurt, but the other side caught enough of the money to stop the index from falling far. That arrangement made SPX remarkably hard to push down, and itâs why all the violence underneath kept disappearing at the index level.
Thursday was the first time that hedge failed.
Alphabet reported good operating numbers and raised 2026 capex guidance again, to $195-205B. Free cash flow came in at negative $5.9B for the quarter, and the stock fell 7%. The payer got punished, and the recipients didnât rally enough to replace it. The old reflex of buying anything that might receive a dollar of hyperscaler capex was nowhere near as reliable. The largest index weights fell, and the hedge on the other side was too narrow to hold the whole thing up. Nasdaq dropped 2% while Brent pushed through $100 and the 10-year traded above 4.7%.
Alphabet wasnât the first warning, just the first one big enough to matter at the index level. Over the prior two weeks, ASML, TSM, Texas Instruments, MaxLinear, Intel and BE Semiconductor all traded lower despite beats or raised guidance. Intel reported a blowout quarter Thursday night and the market yawned. Markets donât top on bad news. They top on good news, when people stop paying attention to it.
Friday bought time without fixing anything. Reports of possible US-Iran talks knocked Brent back down, yields eased, and SPX finished flat. Nasdaq still closed down 1%, so the market didnât rediscover its love for AI. Macro pressure simply eased. Even the support looked defensive rather than bullish: Apple outperformed by nearly 5%, and names like AT&T had their best week relative to the market in decades. My read: Thursday was a warning, not the flush itself.
Where the money is going
Money is never destroyed in a momentum unwind. It flows somewhere else.
Right now the tell is real yields, which are breaking out globally: the US, France, the UK, Bunds, JGBs. The price of money is rising, and investors are rotating out of long duration, the stocks priced to perfection and to grow forever, into financials, energy, REITs, insurance, and select healthcare.
It rhymes with the pre-GFC regime, when fundamental compensation for risk actually started to matter again.
The macro backdrop explains why.
Kevin Warshâs Fed is facing three inflation drivers at once: relentless AI-driven demand for equipment and electricity, a reignited tariff regime, and a re-emerging energy shock out of Iran, with shipping lanes blocked, the SPR largely depleted, and Brent above $100. I think the market is underappreciating the risk of a hike as soon as this week. I donât expect one, because Warsh still appears to view the energy shock as transitory. Which, again, is a dangerous word.
Semis are deeply oversold and violent bounces are coming. The momentum playbook says you sell into them.
Dimon is playing a different game than you areâŚ
The headline of the week was âJamie Dimon says donât buy stocks,â and most investors read that as sell everything. Listen to the actual interview and he said âI donât like prices today,â which is not the same statement. CEOs steward capital on time horizons that have nothing to do with yours. The last time Dimon made headlines like this was 2022, before the Fed hiked 500 basis points, and he wasnât calling a top then either. He was describing risks to a bank that will outlive him. Meanwhile JPMorgan just broke out of an eighteen-month base to all-time highs. Your portfolio doesnât care about headlines, and neither does he. Follow your own process.
Data centers are the new pipelines
At home, Canada has said almost nothing on AI policy while the two superpowers set the rules. Melâs reframe on the podcast stuck with me: Carney isnât silent by accident. He has no political incentive to touch it. He doesnât win that argument with investors, and he doesnât win it with the public. So the conversation doesnât happen, and the comment sections under every Edmonton data-center headline supply their own answers. Iâm having the same reset conversation at menâs league golf and in client meetings: intelligent, well-meaning people convinced these buildings are the devil. We did the same thing with pipelines for 35 years. Bad communication became bad policy, and the economy paid for it.
The tariff file makes the stakes plain. CUSMA didnât get renewed, so the agreement now faces annual reviews instead. Trumpâs threatened 50% tariff on certain Canadian goods hits BC (13.7% of its US exports), Quebec (10.8%) and Ontario (9%) hardest, per Trevor Tombeâs estimates. Alberta: about 1%. The likely next step is pressure on Alberta to tariff energy exports, the only lever that actually bothers Washington. Expect that to go over poorly in a province that has spent 25 years giving more to Confederation than it gets back.
The saving grace: natural gas
Hereâs the positive note Iâll close on. US electricity demand is rising far faster than supply, natural gas production canât keep up, and the political will to build nuclear at scale isnât there. Sometime before 2030, I think the Americans wonât ask for Canadian natural gas. Theyâll demand it, pipeline and all. Alberta has quietly built the blueprint: infrastructure ready for data centers, abundant gas, and a likely surplus this year with oil trading nowhere near the $56 the province modeled. The US spent 20 years as an energy exporter. That era is ending, and weâre the obvious solution next door.
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Podcast & YouTube Recommendationsđ
One of my favorite podcast episodes from ILTB:
Weâre not the biggest All-In fans but i really liked this perspective from Friedberg
A great listen if youâre interested in better understanding datacenter + Frontier Lab economics
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