Sean Cochran on AI capex, K-shaped recovery, dollar bullishness, and yen outlook (with Paul Allen, Sheryon)

Market is trying to resolve how much memory supply will come and how it will be consumed, driving volatility. K-shaped recovery persists: strong AI capex in North Asia but general population not participating. Fed is more data-driven, pushing yields up but unlikely to sustain high levels. Bullish on dollar due to credit cycle deterioration; yen can find a floor and rally if tightening credit conditions trigger repatriation. AI job destruction fears are overblown; technology historically creates more jobs.

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Sean Cochran 8.0

Sean Cochran on AI capex, K-shaped recovery, dollar bullishness, and yen outlook (with Paul Allen, Sheryon)

dxy

Tactically, I would say we're bullish on the dollar. Certainly, I'm personally bullish on the dollar.

ndx

The market is trying to decide what's the true profitability of this memory that's being purchased for the purposes of AI, which would then tell us what's the sustainable nature of that spending.

rut

Cochran describes a K-shaped recovery where only AI capex-geared economies participate; general population and small caps are not benefiting.

yields

Cochran says yields have pushed up into the change in the Fed, but long-term yields are already quite elevated and unlikely to sustain very high levels.

South Korea's $1.3 trillion industrial policy focuses on semiconductors, AI data centers, and physical AI. Samsung and SK Group to announce major investments.

Paul Allen / Sheryon
Sean Cochran

The market is trying to resolve how much memory supply will come and how it will be consumed, driving volatility.
US exceptionalism and a more hawkish Fed narrative are strengthening the dollar. What are implications for Asian economies with currency pressure?

Paul Allen / Sheryon
Sean Cochran

North Asian economies geared to AI capex are participating in a K-shaped recovery: strong capex holds up growth, but the general population is not participating via jobs or consumption.

The new Fed is data-driven and will not provide strong guidance; yields have pushed up but are unlikely to sustain very high levels at the long end.
Yen is looking attractive near 40-year lows. Is intervention or BOJ tightening the catalyst?

Paul Allen / Sheryon
Sean Cochran

Bullish on the dollar: as credit conditions deteriorate and debt loads rise, demand for high-quality collateral increases, creating demand for the dollar.

Yen is a net creditor; in tightening credit conditions, yen capital should be repatriated, putting upward pressure on yen. Base case: yen can find a floor and rally.
How does yen weakness affect Japanese equities?

Paul Allen / Sheryon
Sean Cochran

A weakening yen creates an environment where equities provide a natural inflation hedge, increasing investor interest in Japanese equities.

Japanese equities are not expensive in a global context, and the value-up theme has increased conviction.
BIS warns of potential AI bust in short term and hollowing out of middle class in long term. How do you play this?

Paul Allen / Sheryon
Sean Cochran

Historically, technologies create more jobs than they destroy. Current peak concern around job destruction is a naive application of how models should be applied.

We need to apply the right technology in the right context; the market will figure this out over time.
Will the K-shaped recovery continue, and what does inequality mean for investors?

Paul Allen / Sheryon
Sean Cochran

As long as the market remains focused on capex-driven IT growth, the K-shaped phenomena will continue, creating political tension.

As some of these private companies list, aggressive equity capital raisings will slow, reducing AI orientation and broadening market focus.

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