The atmosphere reminds me of this.
Due to voice hoarseness etc., the second Vartti will be skipped this week (I still aim for two episodes per week if suitable topics and time to ensure sufficient quality are found), but I’ll toss out a couple of news items from the week that have been on my mind.
Now investors are obviously talking about the situation in the Middle East, but interestingly, these news do not concern the ongoing conflict.
The AI boom continues and roars. The annual investment level of Mega Tech is already 700 billion dollars. On top of that come investments from all sorts of clever players from Irene to OpenAI into models and/or especially physical data centers.
Related to this, Amazon issued 50 billion dollars worth of debt. This well illustrates the change I’ve talked about in the Varttis: former cash cows are starting to turn into cash eaters!
See e.g.
In the old days, the largest debt issuers were laggards (mörnijät) of the old economy, such as telecom operators. Now Mega Tech is starting to appear at the top of the lists.
Think about it, before that gang spat hundreds of billions of dollars into the economy as debt paper investments, helping to push down interest rates. Now the tables have turned (to the joy of fixed income investors).
At the same time, NVIDIA, the shovel seller of the AI boom, continues “circular economy investments,” meaning it invests billions in companies that in turn buy chips or practically AI factories from it.
Under the terms of the deal, Nvidia is also making a “significant investment” in Thinking Machines to “support the company’s long-term growth.” The firms didn’t reveal the amount of the investment.
Nvidia has been on a dealmaking spree as of late. On March 2, it announced agreements with Coherent (COHR) and Lumentum (LITE) to build optics technologies. In February, the company said it was entering a massive multiyear, multi-generational partnership with Meta (META). OpenAI also revealed that Nvidia would invest $30 billion in the company as part of its $110 billion fundraising round.
On a macro level, I’m following with interest how global financial conditions develop. Mega Tech absorbs its share as investments. The rise in oil prices also eats away extra fuel from the engine. I haven’t talked about liquidity in the Varttis for a while, but for example, Michael Howell (whose stories over the years I’ve found slightly mystical but spot on) has been warning for a while about a turn in the liquidity cycle, downwards. This doesn’t automatically mean a crash for the stock markets, but rather a kind of lack of momentum regarding the rise. Economic acceleration could ironically suck even more fuel from the engine, which is away from the stock market. The worst would be if inflation gets another boost from it. This may sound counterintuitive, but often the best environment for the stock market is one where the economy grows slowly, inflation crawls, and central banks try to support growth. Like after the financial crisis or to some extent in recent years since the fall of 2022.
Time will tell.