Artificial Inflation Whacks The S&P for A Trillion

We’re workshopping a new term: “Artificial Inflation.”

On Wednesday, investors cheered as chipmaker Micron Technology (MU) reported one of the greatest blowout earnings reports of all time. One reason: the demand for DRAM has skyrocketed. And with it, prices are expected to be 50% to 55% higher by the end of 2026 than the year before.

Someone’s on the other end of the transaction, right?

At the market open yesterday, Apple (AAPL) reported that it was raising prices for the first time since 2022, specifically citing higher memory prices.

The result? The AAPL dropped nearly $20. 

The S&P 500 Index fell along with it… and $1 trillion in “value” evaporated in 27 minutes:

Apple’s 6% decline yesterday resulted in other sell-offs, with over $1 trillion in wealth disappearing in less than half an hour. (Source: Kobeissi Letter)

We’ve seen the phenomenon before, but not to this degree and not this fast. 

Typically, new technologies ramp up, costs drop and consumers get a better product. New television prices have dropped 90% in real terms in your lifetime, even as the screens have gotten more vivid, flatter and wider.

Historically, memory chip prices have fallen over long periods, following Moore’s Law. However, the current trend shows massive price increases driven by the AI data center boom.

“Artificial inflation” is throwing a wrench into the interest rate picture this year. Polymarket odds now suggest 57% chance the Federal Reserve hikes rates before the year is out. 

With Kevin Warsh bringing a new emphasis on anecdotal evidence and market prices to the rate decisions at the FOMC, we suspect 57% of those betting on a rate hike in 2026 will be 100% wrong. 

Warsh is still warming up his seat at the head of the board of governors’ table. 

During our conversation on Grey Swan Live! our guest, Dan Amoss, suggests that there will be another pause following the next Fed meeting on July 29. 

Then the key thing will be to watch Warsh’s speech at the annual meeting of central bankers held in Jackson Hole, Wyoming, August 27 to August 29, to get a clear picture of what direction he will be leading the Fed.

We suspect, “Artificial Inflation” or not, the market may be anticipating a move in the wrong direction.

Today’s Grey Swan Pro takes a reasonable contrarian stance, with an emphasis on how to lock in relatively high yields and profit from  shock move lower in interest rates— details here.

~ Addison

P.S. Dan Amoss just joined us yesterday for Grey Swan Live! Our replay is up on site for members who weren’t able to join live. 

Give yourself some time to listen carefully to this one. Dan explained how the Federal Reserve, under Kevin Warsh, will be forced into “financial dominance,” a fancy way of saying monetary policy will be under Trump’s thumb at least until November. 

We also discussed why the market may be wrong in expecting an interest rate hike – and why the Fed may surprise by lowering interest rates before the year is out. All that, and Dan mentioned his top three investment ideas now. Members will want to tune in for the replay.