Here Is Proof AI Will Continue Driving The Economy & Stock Market Much Higher

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Hedgeye writes “The S&P 500 fully recovered from a -10% drawdown in just 11 trading sessions, the fastest V-shaped recovery on record.” I personally believe this happened because investors finally realized the temporary conflict in Iran is unlikely to be more important than the massive economic boom that is underway thanks to artificial intelligence, robotics, and the related power generation and data center buildout. You can see this boom clearly in the latest manufacturing data. For the FOURTH month in a row , America’s manufacturing sector continues to expand based on the latest survey data. The US economy has seen strong manufacturing expansion over the last four months, suggesting that the US can reindustrialize and grow. If we dig deeper into the data center metrics, it is truly shocking what is happening. Matthew Klein has a great report that shows the business investment in data center construction more than tripling over the last 3 years. What about net imports of selected AI-related goods? Those have taken off to significantly higher levels too. The contributions to real GDP growth coming from computers and peripheral products is not higher than it was at any point in the 60 years. That is just mind-boggling considering this data set includes the internet invention and initial build out, along with the Dot Com boom. What if we look at the quarterly CAPEX spending by the big 5 publicly-traded data center builders? That has quadrupled since mid-2023 according to Klein. A 4x increase in about 3 years is honestly hard to comprehend. Everyone wants in on the data center action too. This past week the Wall Street Journal’s Kate Clark reported that “Coatue is launching a new venture, Next Frontier, to buy land for AI data centers. Tens of billions could go into the effort, with early work underway on an Indiana campus.” Coatue is one of the best investment firms in the world. They don’t do things by accident and they tend to be early and right about new trends, so it is noteworthy that they are looking to deploy tens of billions of dollars into this theme right when many others think it is too hot or too overvalued. But here is where everything gets interesting. This data center build out and CAPEX spending is starting to flow through the economy in interesting ways. YCombinator’s Garry Tan recently highlighted for every one-gigawatt data center complex, we create 5,322 permanent jobs, there is over $150 million paid per year in state taxes, and there is about $250 million paid per year in local taxes. In the short-term, during construction various companies make an estimated $2.7 billion in combined investment too. It is impossible to ignore just how much capital is being invested and the positive ramifications coming from this data center build out. But we don’t just see the positive impact in job creation and government taxes paid either. For example, the big fear a year ago was that AI would destroy lots of software engineering jobs. Citadel’s Frank Flight put that worry to rest when he recently wrote : “We illustrated back in February that demand for software engineers, the most AI exposed occupation was accelerating higher, which we argued violates the displacement narrative. Indeed the acceleration in software job postings has continued, now up 18% from the inflection point in May last year.” Personally I find the growth of engineer hires interesting because at the same time you can see that overall job postings across the economy has been declining at the same time. So not only are engineers more in-demand on an aggregate basis than they were a year ago, but the gap has significantly widened on a comparative basis. Narrative violation to say the least. Nvidia CEO Jensen Huang was recently asked about the impact of AI on various jobs in the economy and it would be safe to say he vehemently disagrees with recent comments from some of the large model company CEOs. Take a listen: Now these comments from Jensen are very important because job creation is universally good across the globe. We know that the United States will prosper with more jobs and more economic productivity, but the positive impact on other societies in less developed nations is even bigger. World Bank CEO Ajay Banga recently talked about this phenomenon of using job creation to create economic prosperity. Here is how he described it (22 minute mark): So if AI is going to continue driving immense economic value and job creation globally, where are new areas that economic value is going to accrue? Everyone knows the common themes of data center builders, power generators, chemical companies, commodity providers, chip manufacturers, and others. But maybe the best investment theme is to believe that the current winners, such as Anthropic and OpenAI, will end up being significantly larger than everyone believes. Sometimes the contrarian bet is not on a new company, but believing something about the existing companies that no one else believes. Just look at Anthropic’s recent revenue growth. Anthropic is now reportedly doing $44 billion in annual recurring revenue. This is up $14 billion (almost up 50% month-over-month) since last month. If they added $14 billion in the last 30 days, that means they are doing almost half a billion dollars in revenue PER DAY. That is nearly impossible to comprehend for a company that was only started a few years ago. So if you are wondering what is going on in the US equities market, it all comes back to the AI trade. There is a generational build out of new infrastructure and the global race to see who can capture and own the most compute. Investors realize that value is going to be created from scratch, so they are plowing money into the market looking to benefit from this persistent tailwind. Wars, undisciplined monetary policy, mainstream narratives, or any other potential boogey man is not going to be able to stop this trend. Stocks are going higher, because AI is just warming up. Hope you have a great start to your week. I will talk to everyone next time. - Anthony J. Pompliano Founder & CEO, ProCap Financial (Nasdaq: BRR) . 🚨New Profile Just Dropped My wife Polina just published a new profile , and this one is worth your time. She spent months with Jake and Logan Paul, not the internet characters, but the actual people behind the persona. What she found is a genuinely interesting business story. They’ve backed OpenAI, Anduril, Ramp, and Whatnot. Jake says he will be a liquid billionaire by 35. Whether you believe him or not, the way they’ve turned attention into ownership is a playbook worth understanding. Read It Here Why All-Time High Stocks Are Bullish for Bitcoin Jordi Visser is a veteran macro investor with 30+ years of experience and the author of the VisserLabs Substack . In this conversation, we discuss why the stock market keeps hitting all-time highs, the AI-driven semiconductor supercycle, why software is losing to chips and power names, where bitcoin fits into the macro picture, the rise of tokenization, and how to think about inflation and the Fed. Podcast Sponsors Figure – True DeFi Democratized Prime to earn ~9% APY! They also have the lowest industry interest rates at 8.91% with 12 month terms! Take out a Bitcoin Backed Loan today and buy more Bitcoin. Check out Figure ! Figure Lending LLC dba Figure. Equal Opportunity Lender. NMLS 1717824. Terms and conditions apply. Arch Public - Arch Public’s cutting-edge algorithmic tools ignite profits, harnessing razor-sharp data analytics to nail perfect entries, exits, and risk management. 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