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With respect to the “AI trade”, there are now measured prices for “tokens” representing AI usage. While the marginal willingness to pay for “frontier intelligence” had been climbing for months, it now appears to have stabilized, and may even be slightly declining. But first, let’s define what exactly “frontier intelligence” is. Frontier AI is AI operating at or near the current limits of what is technically possible, whereas conventional AI simply solves well defined tasks. Frontier AI requires more computing power, and therefore is more expensive to use. Companies are beginning to ration weekly token budgets to employees, because they are beginning to understand the nature of AI budgeting and its cost. Wall Street assumes that most AI demand will be driven by “frontier labs” like Open AI or Anthropic, but real competition may emerge from either Meta, or

Grok, or the Chinese DeepSeek, whose prices are anywhere between (roughly) 50% to 90% cheaper. So far, globally, we will have committed between $1.4-$1.6 trillion by the end of this year. Some Wall Street firms estimate that another staggering $7 trillion will be spent between 2026 and 2031. The question is whether AI profits will eventually justify this level of investment. The answer to that will take years to understand, but in simple terms, the question is whether $7 trillion is already built in to today’s Nasdaq multiples. Some would argue yes. Others would argue that the future profitability of AI is completely unknown.

On Friday July 11, China’s Ministry of Commerce issued an immediate ban on helium exports to secure domestic supply for critical sectors like semiconductor manufacturing and medical technology. This comes at a time when the Middle East conflict has just re-ignited and Qatar’s supply of one third of the world’s helium is under threat. There is no viable chemical alternative for helium in advanced manufacturing processes of semiconductors, which requires liquid helium to cool tools during high temperature steps. Signs of a tight helium market are already showing up in the spot helium market. A disturbance in the helium supply chain could disrupt the manufacturing of semiconductors which are critical to the AI trade.

The predominant themes of oil and inflation have been top of mind over the past quarter as the Iran war lingers. Crude oil cheapened up considerably as it seemed that the war was winding down and dipped as low as $67 a barrel in June. Hostilities have now recommenced and the Strait of Hormuz is once again closed, with crude back to $80. It would not be surprising to see crude oil back at $100 before long. The temporary dip had a favorable impact on the June inflation number, which came in at 3.5%, less than expected as energy prices eased.

The “Core PCE“, (Personal Consumption Expenditures) the Fed’s preferred measure of inflation, came in at 3.4% in May 2026. That is up from 2.78% a year ago, for a year-over-year increase of 0.6%. Some of that inflation is due to tariffs, but it is now more likely coming from shocks in the energy market and fiscal recklessness.

At the June 17 Federal Reserve meeting, nine Fed policy makers forecast interest rate hikes later this year; five of these were voting members.

Although it is not often discussed, there is still some skepticism in the bond market about Trump‘s choice to lead the Fed. This is due to the possibility that Kevin Warsh is a Trump appointee, and that Trump has very vocally stated that he wants lower interest rates. It should be noted that Warsh’s father-in-law, Ronald Lauder, has been close personal friends with Donald Trump for over 60 years and is a Trump mega-donor.

While committing to the Fed’s 2% inflation target, Warsh recently suggested revisiting the way the Fed measures inflation, and is considering using a new measure called the “Trimmed Mean PCE“, which cuts off “outlying” statistics. Under this new methodology, PCE inflation would be only 2.4% currently, only modestly above its 2% target. For investors, the implication are significant:

• Headline PCE (~4.1%) suggests inflation has reaccelerated sharply.


• Core PCE (~3.4%) suggests inflation remains stubborn.


• Trimmed Mean PCE (~2.4%) suggest that most of the recent acceleration is concentrated in a relatively small number of volatile categories and that inflation is actually quite close to the Fed’s goal.

Inflationary pressures over the past 90 days are not only due to oil, which is temporary, but to reckless government spending. Long-term debt levels have been pushing bond yields higher globally, as we confront a crossroads between debt, inflation, and populist governments refusing to cut spending to curry political favor amongst their voters. The US will have a deficit of 6.5% of GDP this year, the largest deficit ever outside of wartime and emergencies. This is the real problem worth paying attention to.

This is not just contained to the US. Japan, for example, is borrowing more to help consumers cover higher energy prices. In the UK year-to-date borrowing is up 23.9% year-on-year. UK interest payable was up 54.4% year-on-year in May. The current UK budget deficit is up 25.5% this year, worse than forecast. The UK 30-year bond is at its highest level in decades.

In France, the budget deficit is near crisis levels, forecast at 5.1% for 2026 and 5.7% in 2027. Public debt is now at 115.6% of GDP. The European commission expects that to hit 120% by 2027. Meanwhile, growth is weak (forecast at only 0.5%), too weak to “grow out of” the debt. Even Germany, whose fiscal deterioration is less extreme than the UK or France, is borrowing at an alarming rate. The EC forecast Germany’s debt-to-GDP ratio to rise from 63.5% in 2025 to 68% in 2027.

In all five cases, (the US, Japan, UK, France, and Germany), there is an absence of political will to deal with debt. There is also a sense that dealing with that debt will be politically costly to any parties in power.

When investors suddenly demand much higher yields because they lose confidence that a country’s fiscal path will stabilize, the bond market of that nation suffers, as do borrowers, who must pay higher interest rates. France and the UK are on that path. If deficits in the US remain near 6 - 8% of GDP during a period of full employment, long-term yields could continue rising and create significant fiscal pressure.

The bond market, for now, remains focused on rising inflation, but that could also be accompanied by concerns over rising Treasury bond supply. Because the bond market looks years ahead, the focus may pivot to treasury bond supply which looks to increase in order to continue to finance the ever-growing national debt.

In summation, the 4-year technology bull market is overstretched and is due for a pullback, particularly in AI, semiconductors, memory, and data centers. Consumer Staples, Healthcare, Midstream Energy companies (pipelines), and Waste/Environmental Services should be favored for their safety and ability to withstand a generalized pullback. The stock supply liberated from SpaceX “insiders” in the second half will be substantial (potentially up to approximately $119 billion with the stock at $131, with potentially another $59 billion available to sell out to December 9, assuming a $131 share price) and will represent selling pressure on the Nasdaq. Additionally, the Iran war represents upside risk to the price of oil, and the threat of higher interest rates represents risk to an overvalued stock market.

For the first half of 2026, the S&P 500 index was up 9.55%, the Dow was up 8.85%, and the Nasdaq was up 12.78%.

Grant Rogers

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