So the Fed just cut rates by a quarter point – their second cut this year – and you’d think Wall Street would be throwing a party, right? Wrong. Markets actually sold off because Jerome Powell basically said “don’t get too comfortable, folks” about future cuts.
Here’s the thing though: the Fed is becoming irrelevant. I know, I know – that sounds like financial heresy. But hear me out.
We’re living in the AI economy now, and AI doesn’t care if Powell cuts rates in December or not. While everyone’s obsessing over basis points, the real action is happening in data centers, chip factories, and power grids.
Why the Old Playbook Is Broken
Remember when Fed policy actually mattered? When a hawkish comment could tank stocks and dovish hints sent everything to the moon? Those days are over, my friend.
The traditional economy – you know, car loans, mortgages, small business credit – is kind of a mess right now. Credit card debt is growing slower, housing is still unaffordable (thanks, $750 monthly car payments), and regional banks are sitting on commercial real estate time bombs.
But none of that matters because AI is the new economy. And here’s the kicker: AI spending isn’t rate-sensitive. Powell literally admitted this himself, saying data center buildouts aren’t “especially interest sensitive.”
Translation: The Fed Chair just told us on camera that the hottest investment boom in the country doesn’t really care about his rate decisions. Awkward.
Cash-Rich Giants Don’t Need Loans
Think about it – Microsoft, Amazon, and Google are sitting on mountains of cash. When they’re dropping billions on AI infrastructure, they’re not sweating whether their cost of capital is 4.0% or 4.25%. They’re thinking about 10-year returns and staying ahead of the competition.
This isn’t your typical capex cycle where companies pause projects when money gets expensive. These tech giants are basically saying “shut up and take my money” to anyone building AI infrastructure.
Where the Fed Still Matters (A Little)
Okay, the Fed isn’t completely powerless. They can still mess with valuations – higher yields mean lower multiples, even if earnings keep growing. So yes, Powell can knock 3% off your favorite AI stock with a grumpy comment.
And if the Fed stays too tight for too long, they could break something in the broader economy. But right now? Labor’s cooling (not collapsing), credit’s tight (not frozen), and consumers are bending (not breaking).
The Bottom Line
The market’s center of gravity has shifted. It’s not about what Powell says anymore – it’s about which companies are building the backbone of our AI future.
So while everyone else is parsing Fed minutes, maybe focus on the companies actually making money from this AI gold rush. Because whether rates go up or down, those billion-dollar AI infrastructure checks are still getting written.
The AI revolution doesn’t need the Fed’s permission to keep rolling.