So the Fed just cut rates again – quarter point, nothing fancy – and instead of markets doing their usual happy dance, they basically shrugged and went back to scrolling TikTok. Why? Because Jerome Powell had the audacity to suggest that maybe, just maybe, they won’t cut again in December.
Cue the dramatic gasps from Wall Street.
But here’s the thing that’s going to sound absolutely wild: The Fed doesn’t really run this show anymore. I know, I know – that’s like saying water isn’t wet or that pineapple belongs on pizza. But stick with me here.
Welcome to the AI Economy (Population: Everyone’s Money)
Remember when Fed meetings were like the Super Bowl for finance nerds? When Powell would clear his throat and entire sectors would either moon or crater? Those days are feeling pretty vintage right about now.
Today’s market isn’t about your mortgage rate or whether small businesses can get loans. It’s about one thing: AI spending. And AI spending is basically the honey badger of economic forces – it just doesn’t care about interest rates.
Think about it: Microsoft, Amazon, Google – these companies are sitting on cash piles that would make Scrooge McDuck jealous. When they decide to drop $50 billion on data centers, they’re not checking whether rates are 4% or 4.25%. They’re thinking about the next decade, not the next Fed meeting.
Powell himself basically admitted this during his press conference, saying AI data center spending “is not especially interest sensitive.” Translation: “Yeah, we’re not really driving this bus anymore.”
The Old Playbook Is Broken
The traditional economic story went like this: Fed controls money → money controls growth → growth controls earnings → earnings control stocks. Nice and tidy, like a finance textbook.
The new story? AI demand → massive corporate spending → ridiculous profit margins → stock prices go brrr. Notice who’s missing from that equation? Our friends at the Eccles Building.
While everyone else is struggling with $750 monthly car payments and housing that costs more than a small country’s GDP, the AI economy is basically printing money. Data centers, chips, power infrastructure – it’s a capex party and everyone’s invited (if you’re a mega-corp with unlimited cash, that is).
But Wait, The Fed Still Has Some Tricks
Before you completely write off Powell and crew, they still matter in two big ways:
Valuations: Higher yields still make your spreadsheet spit out lower stock prices. So when the Fed gets hawkish, your favorite AI stock might take a 3% haircut just because math. But here’s the kicker – those same companies keep posting insane revenue growth, so the dip usually gets bought faster than concert tickets.
System Risk: If the Fed goes full Volcker and breaks something important in the broader economy, even AI companies feel it. But we’re nowhere near that scenario. The economy is cooling, not imploding. Think gentle landing, not crater formation.
The Bottom Line: Follow the Money (It’s All Going to AI)
Here’s your investment thesis in plain English: The companies building the AI infrastructure – the picks and shovels of the robot revolution – are where the action is. Whether the Fed cuts in December or not, these companies will keep getting massive checks from cash-rich tech giants.
So next time Powell speaks and markets wobble, remember: The real money is flowing toward data centers, AI chips, and power infrastructure. That’s your signal, not whatever cryptic message the Fed is trying to send.
The AI capex supercycle is the main character in this market story. The Fed? They’re more like that friend who thinks they’re still relevant but everyone’s already moved on to the next thing.
Bet on the future that’s actually being built, not the one that central bankers think they’re controlling.