AI capex boom vs. rest of economy languishing; rates higher for longer (with Jonathan Ferro, Lisa Abramowicz)

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Academy Securities 6.2
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Peter Tchir 7.5

AI capex boom vs. rest of economy languishing; rates higher for longer (with Jonathan Ferro, Lisa Abramowicz)

yields

I don't think we can cut now without controlling the long end of the bond market. I think if we cut rates right now, we would lose control over the long end of the bond market. So I think we're higher for longer.

4/6/2026 10:00:49 PM	short term up	6 days later	-1.06%	-1.06%
3/23/2026 7:47:20 PM	short term down	6 days later	-1.14%	+1.14%
2/23/2026 8:50:13 PM	short term cautious down	6 days later	+0.37%	-0.19%
11/25/2025 5:52:13 PM	medium term cautious up	20 days later	+3.78%	+1.89%

The tech investment story has changed from buybacks to lots of capex, moving from shrinkage to tons of supply. What does that mean for the investor?

Jonathan Ferro
Peter Tchir

It's all hands on deck. There is so much money to be made in AI that interest rates (4%, 6%, 8%) are trivial. AI data centers could care less about electricity prices. The rest of the economy is languishing.

Everyone is growing and spending money to do it. The degree of uncertainty is hitting people.
What are the prospects of capital constraints given the massive demand for funds in fixed income?

Jonathan Ferro
Peter Tchir

People are much more comfortable owning corporate credit than Treasuries. Treasuries have become a generic asset. The bigger risk is inflation, not a downturn.

Asset managers are all in on credit. You're getting higher yields from Treasuries but a compelling story from credit. Super sovereigns are trading at closest spreads ever to US Treasuries.
Do you agree that credit and equity are better hedges for inflation risk?

Lisa Abramowicz
Peter Tchir

I like credit on that perspective. We are in a 3% to 5% inflation period. The next year to two years is about the cost of build out, not the benefits of AI.

Three months ago I thought we could cut rates and control the long end. I don't think we can cut now without losing control of the long end of the bond market. Defense spending is up everywhere.
At what point does the equation of increased AI costs justified by productivity and layoffs become unsustainable?

Lisa Abramowicz
Peter Tchir

Over the next six months to a year, people will be able to see what they spent on tokens vs. employees and make that decision. There is so much angst around this from a personal level, unlike the dot-com era.

Until recently it was all 'who knows what we are spending'. This will let people take a closer look. AI and electricity generation seem to be massive political risks heading into an election season.
What will the policy response be toward AI and electricity generation?

Jonathan Ferro
Peter Tchir

Politicians will fight electricity and data centers because it's populist, while some will embrace it. This will reshape where people live, benefiting the heartland and Great Lakes region.

The heartland beat the rest of the country in population growth for the first time in 30-40 years. They have fresh water, weather conducive to this, and engineering schools.
What are you bearish on?

Jonathan Ferro
Peter Tchir

I'm cautious on anything that requires a deep spend, like construction and homes. Affordability is real. I would avoid the really expensive places that grew up quickly during COVID.

I get uncomfortable with where the spending is going to come from.
What does your gut tell you about the strong jobs data?

Jonathan Ferro
Peter Tchir

I think the jobs data is overstated. The BLS birth-death model is flawed. EIN applications go up when people are worried about their jobs, not necessarily because they are creating new businesses.

People are so nervous they are joining the gig economy to supplement their income.

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