Below are some of the most interesting things I came across this week. Click here to subscribe to our free weekly newsletter and get this post delivered to your inbox each Saturday morning.
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Brij Khurana writes that corporate profits, “have been inflated by massive government deficits, ambitious business investment, and debt-funded shareholder returns. If fiscal stimulus subsides and household savings rates rise—whether because of AI or any other reason—the Kalecki-Levy equation suggests the bubble that has sustained U.S. corporate profits since 2008 might burst.”
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In addition, stock based compensation has further flattered earnings figures. For example, as Michael Burry notes, “Since the beginning of 2018, Nvidia has spent $91 billion of its $205 billion in net income without changing the share count. Replacing GAAP SBC expense of $20.6 billion with the $91 billion buyback to nowhere expense results in total owners’ earnings at $135 billion.”
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But based on search activity investor enthusiasm for AI stocks appears to be waning. Moreover, “Surges in Googling do a much better job than valuations at forecasting an imminent fall. In each case the price of the stock, basket, fund or cryptocurrency dropped considerably over the 12 months following the peak in internet searches,” reports The Economist.
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This could be a problem if it leads to more funding strains for hyperscalers given that, absent the AI boom, the economy might not be doing so hot. Paul Kedrosky writes, “We now have confirmation, with the OECD saying in a new report that, without AI capex, U.S. economic growth declined in the first half of 2025.”
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At the same time, inflationary forces may be perking up again. “Commodities have broken out of their three-year range, signaling there are still global inflation pressures not fully priced in by Treasury yields,” writes Simon White. Faltering economic activity and rising inflation – isn’t there a name for that?
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