AI Capex vs. Geopolitical Risk (with Matt Miller)

3/7/2026 1:24:02 AM	short term up	5 days later	+8.59%	+8.59%
1/7/2026 1:57:31 AM	medium term cautious down	20 days later	+9.44%	-4.72%

Asks about the massive $650B AI capex from Mag7 and whether it's worth it, comparing to the 2000 fiber rollout.

Matt Miller

Rebecca Patterson

The technology is changing so quickly that we can't rule out a breakthrough changing energy needs, potentially leaving data centers as stranded assets. However, $650B in capex is a huge private sector stimulus supporting the stock market.

Investors are betting on a structural AI story creating new industries and productivity growth, preferring that over a cyclical story given war uncertainties.

Notes the massive volatility in Mag7 stocks, with $3T swings, questioning why investors sell and buy so rapidly.

Matt Miller

Rebecca Patterson

Suggests a larger portion of market volume is driven by short-term retail and algorithmic flows, conditioned by post-COVID and post-Liberation Day dip-buying that has paid off.

The market has short-term memory telling it everything will be fine, supported by AI, tax refunds, and a stalled but not deteriorating job market.

Asks about the disconnect between all-time highs and the Iran war turning into a quagmire.

Matt Miller

Rebecca Patterson

There is a huge disconnect between foreign policy/military types (dark outlook) and investors (focused on 2% US growth, low unemployment, consumer spending). Buffers like tax refunds and strategic oil reserves are finite; the longer the Strait is closed, the greater the risk.

Germany cut GDP forecast by half, Asia is rolling out emergency fiscal measures, flights are being canceled due to jet fuel. It's coming, just not here yet.

Questions how much AI capex will drive the economy and whether it sets up a manufacturing resurgence.

Matt Miller

Rebecca Patterson

Manufacturing surveys are improving, driven by data center and AI-adjacent businesses. But the next leg of adoption requires seeing revenue and productivity data, which is still low. Advanced economies are more negative about AI's personal impact, which could slow adoption.

If adoption takes longer than expected, that alone could be a hit to these companies.

Notes strong double-digit earnings growth expectations for S&P 500 ($328 over 12 months) despite oil being a huge cost input, and asks how drawn-down buffers will hit earnings.

Matt Miller

Rebecca Patterson

The clock is ticking; we probably have a few weeks. If the Strait doesn't reopen, earnings expectations for sectors relying on energy, food, fertilizer will go down quickly. Compares to Brexit where the market was fine until the day before the vote, then collapsed.

Investors know there's a probability but don't know how to price it until the event is confirmed, leading to sharp corrections.

Asks why strategists are still bullish given the Strait could remain closed and Iran has a vote.

Matt Miller

Rebecca Patterson

Iran has realized the Strait is powerful leverage, possibly more than uranium. Reopening isn't a handshake or tweet; it requires removing mines and normalizing processes, which takes time.

Asks about the SOX index's 18-day winning streak and whether chip makers can keep growing margins.

Matt Miller

Rebecca Patterson

If expectations keep rising, at some point you can't keep up. Beyond earnings this week, constraints from the US-China summit in mid-May regarding rare earths could be important.

Asks how to push back on the optimism around AI.

Matt Miller

Rebecca Patterson

Sovereign wealth fund capital from Gulf States into US tech could slow if Saudi Arabia and UAE need cash due to deficits. This could force companies to tap debt markets more, potentially dampening sentiment tactically.

References Meta tapping the debt market last October and its stock selling off as a precedent.

Rebecca Patterson

Enterprise AI adoption is a question; companies want businesses to rethink entire processes, not just back-office tasks. It's unclear how quickly that will happen to meet stock expectations.

Rebecca Patterson

Raises risks: China announcing its own version of Mythos or a cyber risk going from 0 to 10 overnight could cause companies to pause AI adoption.

That has become a more probable risk than existed a couple of weeks ago.

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