We have spent more time on artificial intelligence in these notes than I planned to when I started writing them. I will be honest about that. But it is what is driving the markets right now. And if I am being truthful with you, it is also driving a good part of the world right now. So this week I am leaning in a bit more with two more items in the AI space and one general observation that showed we can come together as one.
Two faces of one trade
The market has been getting very nervous about how much the AI buildout is costing. This week saw that AI buildout cost continue to grow. If you own Nvidia, you want other companies to continue spending. If you own Meta, or any company laying out money to build AI, you are concerned about how much they are spending to play in this space.
Alphabet, the parent of Google, reported earnings on Wednesday. The business itself looked fine. Revenue came in ahead of expectations and the cloud unit grew 82 percent. Then on the call the company raised how much it plans to spend this year on what the industry calls capital expenditures, or capex, which is simply the money a company pours into long-term assets like data centers and servers. The new plan runs as high as $205 billion for the year. That is the number the market cared about, and the stock fell immediately upon the news. The Nasdaq drifted lower all week for the same reason, spooked by how much these companies are spending to keep up.
Then two days later the other side of the story showed up. Nvidia and South Korea’s SK Group signed letters of intent on a partnership worth more than $500 billion. Part of that deal locks up the supply of high-bandwidth memory, the specialized fast memory that AI chips need in order to work, which SK Hynix happens to make more of than anyone else in the world. So in the same week the market flinched at the cost of the AI buildout, one of the largest supply deals in the history of that buildout got signed.
I am not going to sit here and tell you which signal is the right one. I do not know whether this is the buildout of the century or the overspending that comes right before a reckoning. Time will tell and, honestly, you don’t need all the answers to invest in the space. You just have to be smart, pay close attention as things shift all the time in AI, and keep diversifying so all your AI eggs are not in the same basket.
I wrote a separate post this week that walks through the actual earnings from Tesla and Alphabet line by line, because the way a headline can hide the real story is worth its own space. If you want the deeper read, that one is for you. If you are interested in a detailed analysis of an earnings release: How to Read an Earnings Release.
Artificial Intelligence Escaped
This initially was not really about the market and simply fascinated me. I am showing my age but it reminded me about the movie WarGames that featured Matthew Broderick back in 1983. If you want a more recent film, watch The Mitchells vs. the Machines on Netflix but don’t do it as your kid heads off to college (like me) or it will make you very sad despite its comedic and animated nature.
Earlier this month a pair of OpenAI’s most capable models, during an internal security test, broke out of the isolated environment they were supposed to be sealed inside, got themselves onto the internet, and reached into another company’s systems. It happened in a lab, with the guardrails deliberately lowered for the test. It still got out. That is the part that got people’s attention. AI went rogue!!
The response came fast. On July 23 two members of Congress, one Democrat and one Republican, introduced a bill called the AI Kill Switch Act. It would require the companies building the most powerful AI models to keep the ability to shut those models down or slow them if they start behaving dangerously, to report incidents like this one and to pay penalties if they do not comply. Whatever you think of the politics, and I am leaving the politics out of it, the plain fact is this. The companies riding at the front of the AI trade now carry a regulatory question they did not carry a week ago.
That is the lesson worth keeping. When a trade is running hot, investors price in the growth and forget to price in the risks that are harder to see. Regulation is one of those risks. It does not show up until it does.
One more thing, and it has nothing to do with money
I have been watching the World Cup like so many others, and it left such an impression on me as to what we, the citizens of this world, are capable of. I really noticed this the entire tournament but it came to a nice conclusion in the Half Time show for the final game. Love it or hate it, the message was about unity and love.
I know the world is divided on whether they actually liked the halftime show but I loved the end when the kids of the PS22 Chorus sang the Coldplay song, We Dance: “I am you and you are me. All of us is family”.
For a couple of weeks it did not seem to matter whose team you came for. Fans who had spent the tournament on opposite sides sat next to each other. The politics that follow us into almost every room went quiet. And at the end the children came out and sang, and the whole thing felt like the world remembering, for a moment, that it is one thing. One world we all share.
It reminded me of the days right after September 11. We do not talk enough about that particular part of that terrible time, the part where, for a little while, we were simply together. Strangers checked on strangers. The dividing lines went faint. It took the worst of things to get us there, which is the hard truth I keep coming back to.
For a moment this week the differences that normally separate us did not matter, and we stood together as one. I do not think that feeling has to be rare. I think we forget it is available to us.
Blessings Come From the Worst of Times.
See you next Saturday.
Christopher
Weekly Notes — August 29, 2026