https://www.nytimes.com/2025/11/22/business/the-ai…
The A.I. Boom Is Driving the Economy. What Happens if It Falters?
A windfall for companies that build data centers and their suppliers is overshadowing weakness in other industries.
By Ben Casselman and Sydney Ember, The New York Times, Nov. 22, 2025
The U.S. economy in 2025 is split in two: Everything tied to artificial intelligence is booming. Just about everything else is not.
A.I. developers and chipmakers are raking in hundreds of billions of dollars in investments. Data centers the size of theme parks are sprouting around the country. Utilities are racing to build new power plants and to bring old ones out of retirement to meet surging electrical demand. Workers with the right skills — from the developers building A.I. models to the electricians wiring the facilities that run them — are commanding premium salaries.
In the rest of the economy, the picture is different. Unemployment has risen, hiring has slowed and industries including manufacturing and home building are cutting jobs. Consumer sentiment has slumped amid high prices. The public sector has been weighed down by budget cuts and federal layoffs. Tariffs, and the uncertainty surrounding them, have been a drag on international trade and led to slower investment by many companies…
By one measure, investments in computer equipment and software accounted for more than 90 percent of growth in gross domestic product in the first half of the year… [end quote]
All METARs know that the economy and the asset markets are different. About 40% of the cap-weighted S&P500 index is the Mag 7 stocks whose valuation is driven by AI speculation. This concentration is extremely risky since so many investors buy index funds.
Recent articles have exposed the circular investments among the AI companies and low ratio of end-user spending to the gigantic and growing capital investments in AI. The bubble valuations of the stocks are beginning to penetrate speculators’ overheated, greedy brains.
https://www.wsj.com/finance/stocks/ai-investors-wa…
AI Investors Want More Making It and Less Faking It
Lackluster responses to Nvidia results and the chip maker’s deal with Anthropic point to a worsening environment
James Mackintosh
By James Mackintosh, The Wall Street Journal
Silicon Valley’s startup model encourages “a fake it until you make it” strategy: Pretend to be successful to attract the coders, venture capitalists and customers that bring actual success.
Artificial intelligence took the idea to an extreme, and investors are catching on.
The hustle rests on one basic flaw in the current approach: Providing AI services costs more than customers pay, so the more customers companies attract, the more they lose…
The flaw is that investors already realize what’s going on. They may conclude that they don’t want to pay the big costs needed to get to the deeply uncertain end point. The drop in AI infrastructure shares this month shows that caution is setting in…
Nvidia is selling a lot of chips—but that’s an essential part of the infrastructure spending in the faking it stage, and if there’s a bubble, this is exactly what you should expect. The stock closed down, with a huge price swing not seen since the April tariff selloff… [end quote]
The stock market popped when Nvidia reported good earnings but almost immediately reversed and fell. What a wild swing!
https://finance.yahoo.com/quote/NVDA/?fr=yhssrp_ca…
The question is whether that was a one-day zigzag or whether the mood of the market has changed fundamentally. Is this noise or a trend change? The market is still in its historic bubble. When will it pop?
The stock indexes fell last week, especially the tech-heavy NASDAQ. The trade changed to risk-off as the SPX and junk bonds fell relative to the 10 year Treasury price. The Fear & Greed Index is in Extreme Fear.
Treasury bond yields are gradually rising. It’s worth reading this article about the impact of government deficits. Remember that bond values drop when yields rise.
https://tipswatch.com/2025/11/23/bond-king-has-a-d…
The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, is stable with very loose financial conditions. However, the Financial Stress Index is gradually rising.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2025 was 4.2 percent on November 21. That is unusually strong growth.
The Atlanta Fed’s Underlying Inflation Dashboard shows every parameter in the red (0.5% or higher above the Fed’s target). The Atlanta Fed’s sticky-price consumer price index (CPI)—a weighted basket of items that change price relatively slowly—rose 2.5 percent (on an annualized basis) in September, following a 3.6 percent increase in August. On a year-over-year basis, the series is up 3.3 percent.
Because of the government shutdown the Consumer Price Index for November 2025 is scheduled to be released on December 18, 2025.
The options market has been fluctuating wildly regarding whether the Federal Reserve will cut the fed funds rate in December. Given the high economic growth rate and inflation they should hold pat.
The METAR for next week is cloudy. The market’s mood is nervous and worried but that could just be noise. The euphoria seems to be draining away but not yet to the point of popping the bubble.
Wendy
https://stockcharts.com/freecharts/candleglance.ht…
https://stockcharts.com/freecharts/candleglance.ht…
https://stockcharts.com/freecharts/candleglance.ht…
https://www.cnn.com/markets/fear-and-greed
https://stockcharts.com/freecharts/yieldcurve.php
https://www.chicagofed.org/research/data/nfci/curr…
https://fred.stlouisfed.org/series/STLFSI4
https://www.multpl.com/shiller-pe
https://www.cmegroup.com/markets/interest-rates/cm…
https://www.atlantafed.org/research/inflationproje…