The circular AI economy continues, centering around OpenAI and its investments.
OpenAI, which recently raised capital at a valuation of $500 billion – not too shabby for a company that isn’t structured as a for-profit entity yet – has inked another deal.
They’re going to invest in Advanced Micro Devices (AMD), in a deal that will also allow OpenAI to buy up to 10% of the company.
Bear in mind, AMD is the closest competitor to Nvidia. And Nvidia invested $100 billion in OpenAI – or at least committed to $100 billion – so that OpenAI could buy Nvidia chips.
Shares of Nvidia were slightly off Monday, but AMD stock soared 25% – a high level when an announcement of this magnitude is made in a small-cap stock, not a company valued in the hundreds of billions.
It’s all part of a circular move. And some of the memes floating around about OpenAI’s recent investments – and the circular logic of AI investments right now – are spot on. Here’s our favorite so far:
Investors are bullish on AI plays now, even as AI companies embrace circular financing
The AI Bubble Goes Global
We’ve been skeptical of market valuations for some time, especially with the high concentration in a handful of companies – mostly tied to the AI story.
With the sudden rise of circular financing schemes, at least we don’t feel like we’re alone in making the case for a bubble in AI stocks.
The masses are starting to agree. Searches for the phrase “AI bubble” are soaring on Google:
Google search trends, a powerful source of alternative data, show that investors are increasingly concerned about an AI bubble.
While it’s a relief that we’re not the only ones seeing the bubble, there’s a harsh reality ahead.
Bubbles don’t end when people see a bubble forming and rationally move their capital elsewhere. They end when people stop caring about the bubble and go all-in to catch the next 25% move in the likes of AMD.
That’s why we’ve forecast a terrifying bull market – one driven not by facts or fundamentals, but by momentum, and a need to get out of a rapidly depreciating dollar.
This Isn’t Supposed to Happen
In the meantime, as stocks trend higher, so is market volatility. Typically, periods of low volatility switch to higher volatility as stocks take a dive.
Rising markets usually calm investors, not make them more nervous. But this time, both are moving higher together, and the move is now in its 6th day, a record.
Typically, the stock market doesn’t usually rise at the same time as market volatility. The five-day trend is a new record.
One way to look at this is a reflection of how fragile confidence really is. And how any pinprick of bad news could lead to a market selloff.
In other words, liquidity is flowing again, but conviction isn’t. U.S. M2 money supply has been expanding for months, even before the recent interest rate cut.
Currently, it’s up 4.8% year over year. That’s the fastest pace since 2022. That’s just enough to drive stocks higher in the short-term. Even algorithms and systematic funds will respond mechanically and buy stocks when they see liquidity rise. It’s the most fundamental indicator.
The volatility index (VIX)’s rise to 16.6, up over 2% this week, shows that big money is hedging, even as the market indices rise. After all, with signs of a slowing economy – and a government shut down – it’s hardly business as usual.
Another Resource Stock Wins the Trump Lotto
In case the AI news isn’t bullish enough – it only covers a few mega tech stocks after all – there’s always the resource space.
Announcements of strategic investments by the United States government – ostensibly for defense purposes – have been enough to create some big winners such as MP Materials (MP).
The latest? Trilogy Metals (TMQ). Shares jumped 210% in pre-market trading this morning following the announcement of the latest investment.
As with similar deals, Uncle Sam will take a 10% stake. When other countries do this, their position is often called a Golden Share. But be careful, people tend to get upset when you call it socialism.
Trilogy is particularly interesting, as their holdings are in the Arctic. The frozen tundra of the North is home to potentially trillions in resource deposits – and is often a focal point for Russian mineral exploration.
If a new Cold War breaks out with Russia, Arctic resources could become a flashpoint.
~ Addison
P.S. It’s a busy week…
Today, I’m recording our latest research in our Florida studio – then meeting up with Andrew Packer for an evening repast and conversation.
Tomorrow, I’m off to Washington D.C., to hear Palmer Luckey, founder and CEO of defense startup Anduril, talk about the evolution of warfare in the 21st century.
And on Thursday, I’m back home to record our latest Grey Swan Live!
Thanks to everyone who sent in their guesses yesterday. A few of you, using clues such as a supply-side economist, thought our guest was Arthur Laffer. Not this time.
One mentioned David Stockman, President Reagan’s Budget Director. Another good choice.
But our Thursday guest this week? None other than George Gilder – as many of you astutely guessed (perhaps we made it too easy?).
George once handed President Reagan the first microchip, and now he says today’s tech wave dwarfs the original $6.5 trillion tech revolution of the 1980s.
Eight exponential technologies — AI, quantum computing, robotics, self-driving cars, blockchain, chips, advanced biotech, and even space — are no longer advancing in isolation.
They’re colliding, compounding, and accelerating into what could be the single greatest wealth-building event of our lifetimes.
The pace is staggering.
That’s why in Grey Swan Live!, we’ll show you how to navigate this convergence — and how early positioning could define not just your portfolio, but your legacy.
It’s not too late. Join us, won’t you?
If you have any questions for us about the market, send them our way now to: Feedback@GreySwanFraternity.
