Is the AI Dream Even Possible?

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REALITY CHECKS

Is the AI Dream Even Possible?

Welcome back. Over the last few months, we’ve seen a plethora of ‘mega deals’ between AI Labs and infrastructure and hardware providers that make the word ‘billions’ meaningless.

On the horizon, trillions of dollars in investment, the largest-ever commitment to a single bet: AI.

But today we’re going to assume we have the money, and instead ask: is this actually possible?

For that, we are examining the constraints of the physical world to determine whether these announcements are merely a means to inflate stock values or whether we are truly entering a world of hundreds of gigawatts of AI enthusiasm.

I’m pretty sure you’re now predicting I’ll be talking about energy constraints for the rest of the newsletter. And, well, energy is a constraint indeed.

But what if I told you that energy doesn’t come close to being the whole picture, and that the missing part hides opportunity?

Today’s newsletter is as insight-packed as they get.

Specifically, we’ll explain which companies are the real bottleneck out of the entire lot, three of which could have an excellent 2026 in terms of stock price, potentially becoming the best AI trade of the year, as investors, blinded by discussions of money, still fail to realize that the real bottleneck here is the physical world.

Let’s dive in.

AI Matters Way Too Much

Despite its lukewarm adoption to this day (except for non-GenAI AI applications, such as search or social media algorithms), AI’s role in the economy has grown unprecedentedly in recent months by masking the miseries of what’s otherwise a clearly recessionary global economy.

We are drowning

With Germany on a two-year recessionary run and poised for a third, and France’s politicians unwilling to make the necessary reforms to save its economy from an inevitable debt explosion and subsequent bailout, Europe appears to be a lost cause. Moreover, China is still seeing massive deflation and stagnant internal consumption.

However, the US isn’t in a sweet spot either. According to estimates, without AI investment, GDP growth in the last quarter would have been flat. And just in the last few days:

Food chains like Chipotle or Wendy’s are seeing catastrophic stock performance

Consumer staples, a thermometer of how things are in the street, are having a lukewarm year

And just Friday alone, the FED had one of its most extensive repo operations since 2020, injecting dozens of billions into the banking system (‘injecting’ being a euphemism for money printing), meaning the FED loaned money to some banks to provide liquidity (and the news above doesn’t account another $20+ billion in MBS (mortgage backed securities) emissions, pushing the liquidity injection to $50 billion in a single day).

Therefore, whether you believe the AI buildout is worth it or not for incumbents is one story; the fact that it is “saving” the economy is another (at least the metrics).

Hence, many investors, including yours truly, believe that the market’s capacity to withhold the…

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