So Kevin Warsh might be the next Fed chair. And before you roll your eyes at another “Fed nominee changes everything” hot take, hear me out – this one actually might.
Here’s the thing: Warsh isn’t your typical “let’s tweak interest rates” guy. He’s more like that friend who shows up to your house party and turns off the music because “we need to have a real conversation.” Except instead of killing your vibe, he might be killing quantitative easing (QE) – and that changes everything for AI stocks.
QE: The Market’s Favorite Cheat Code
For the past 15 years, QE has been like having infinite lives in a video game. Companies could pitch wild AI dreams, promise profits “someday,” and investors would throw money at them because, hey, the Fed’s got our backs, right?
QE didn’t just lower interest rates – it basically said “time doesn’t matter.” Cash flows in 2030? Just as good as cash flows today! Revenue-free growth stories? Sign us up! That’s why every company with a chatbot suddenly became an “AI play.”
But Warsh? He’s not buying it. His philosophy is basically: “Let markets be markets again.” Less balance sheet expansion, more actual price discovery. It’s like switching from participation trophies back to keeping score.
The Great AI Split is Coming
Here’s where it gets interesting. In a post-QE world, AI stocks are about to split into two very different camps:
“AI Now” – The Kids Making Money Today
These are the companies actually turning AI hype into cold, hard cash. Think data centers, chips, power infrastructure, cooling systems – basically all the boring stuff that makes AI actually work. These companies have real customers paying real money for real products. Revolutionary, I know.
“AI Later” – The “Trust Me Bro” Crowd
These are the companies whose pitch is essentially “AI will be huge, we’ll figure out how to make money from it eventually.” They’re banking on future monetization, margin expansion “over time,” and cash flows that exist mainly in PowerPoint presentations.
In the QE era, both groups partied together. But when the music stops and chairs become scarce, guess who’s left standing?
Why This Actually Makes Sense
Look, I get it. Nobody likes a party pooper. But here’s the plot twist: ending the QE party might actually be good for the AI revolution.
When money becomes more expensive and investors get pickier, something magical happens: only the good stuff survives. Companies have to actually deliver results instead of just promising them. Capital flows to projects that work, not just projects that sound cool in a TED talk.
The AI infrastructure companies – the ones building the actual backbone of this revolution – don’t need artificially cheap money to succeed. They need it to build real things that solve real problems. Higher rates might actually help them by killing off the pretenders and forcing customers to focus on what actually works.
The Bottom Line
If Warsh really does mark the end of QE as the market’s safety net, we’re looking at a fundamental shift. AI won’t disappear – it’ll just grow up. Instead of throwing money at anything with “artificial intelligence” in the name, investors will have to ask harder questions: Who’s making money? Who’s solving real problems? Who’s building stuff people actually need?
The companies with good answers to those questions will do just fine. The ones whose business model is “step 1: AI, step 2: ???, step 3: profit” might want to update their resumes.
And honestly? That’s probably exactly what this industry needs. Less hype, more substance. Less “AI will change everything” and more “AI is changing this specific thing, and here’s how we’re making money from it.”
The AI revolution isn’t ending – it’s just getting real. And sometimes, getting real is exactly what a party needs.