August 06, 2026

The first chart below shows that the consensus expects hyperscaler capex to run at roughly 3% of GDP every year from 2027 to 2029, up from 0.3% of GDP in 2019 and 1.4% in 2025. The second chart shows that this is more than twice the peak of the telecom and fiber buildout of the late 1990s, which topped out at 1.2% of GDP in 2000 before collapsing and tipping the economy into the mildest post-war recession. The third chart shows that the data-center buildout is still less than half the size of the housing boom, which peaked at 6.6% of GDP in 2005. There are three ways to look at this data: In level, the ongoing data-center buildout sits between the fiber and housing cycles: more than twice the fiber peak, less than half the housing peak. In cumulative change, what matters is not the level of the share but how much it moves, because that is what adds to or subtracts from GDP. On the data in these charts, data-center capex rises 2.5 percentage points, from 0.6% of GDP in 2023 to 3.1% in 2027, against 0.4 percentage points for telecom in the late 1990s and 2.2 percentage points for housing from the mid-1990s to 2005. On this measure, the data-center buildout is the bigger capex cycle. In speed, the contrast is sharper still, and it holds even when each cycle is measured over its own fastest stretch. Data-center capex adds 1.7 percentage points in just two years, from 1.4% of GDP in 2025 to 3.1% in 2027, or roughly 0.85 percentage points a year. Housing's quickest phase, from 5.1% in 2002 to 6.6% in 2005, ran at 0.5 percentage points a year, and telecom's at around 0.15. The AI cycle is building at close to twice the pace of the housing boom at its fastest. The bottom line is that the data-center buildout is smaller than housing in level but larger in the change in share of GDP, and faster than either previous cycle. The same arithmetic runs in reverse: housing's unwind, from 6.2% of GDP in early 2006 to 3.0% by the end of 2008, is what made that recession severe, while telecom's much smaller reversal produced the mildest one. A cycle that builds at 0.85 percentage points a year can unwind at a similar pace, and that, rather than the buildout itself, is the macro risk if AI demand disappoints.

August 05, 2026

Fed Chair Kevin Warsh has been unfairly criticized. The decision to eliminate forward guidance isn't reckless. It's pragmatic: It stops policy inertia and restores real market signals Explicit rate commitments lock the Fed into predetermined paths. This makes it harder to pivot when conditions change. It ends false certainty Forward guidance creates a false sense of predictability, which distorts asset pricing and encourages excessive risk-taking. The bottom line is that Warsh's logic is sound. Cleaner data signals are better than false certainty, and the Fed gains flexibility. But Warsh could dampen this newly introduced volatility by providing clearer framework guidance. Without it, markets struggle to understand how the Fed will reach 2% inflation. Is it through higher rates, a smaller balance sheet or tighter financial conditions? This uncertainty has steepened the yield curve and pushed up risk premiums, see also here. By eliminating forward guidance, the Fed gets more flexibility. But higher volatility is the cost, and the cost can be minimized by providing clearer framework guidance.

August 04, 2026

While 91% of Japanese and 88% of American households have air conditioning, just 4% of UK homes do, see chart below.