Since my note last week, the micro take has played out more of a backseat role whilst the 10Y treasury rates continue to climb…now at 4.784%.
It continues to be a battle between the state of the macro (bearish high beta stocks & bullish commodities) and the state of the micro which continues to shine positively through all higher beta AI infrastructure names.
Commodities
Last week we saw some slight consolidation amongst the commodities and some slight bullish moves across the AI infra names.
iShares MSCI Brazil ETF (EWZ) is showing some signs of a breakout too which is a positive sign for the commodity markets.
Macro environment
It’s early days right now but my stance sits more on the more bullish side (through to the end of the year and most definitely if you look out to 2027/2028) mainly because yields are more of a distraction relative to everything else going on.
Historically the traditional playbook guides to rising long-term yields as a crisis signal. But aside from the headlines look at what is actually happening:
Credit markets aren’t moving. Junk bond spreads (the premium risky companies pay to borrow) are near record tights meaning there isn’t much default risk right now.
Inflation expectations, although slightly high right now, are sitting ~2.5%. Inflation expectations aren’t pricing in anything too worrying right now.
Investors clearly need lower rates at some point soon because the market can’t be fully driven by the earnings growth of AI companies. That is currently the reason why returns are subdued but I currently don’t think the macro environment is a strong enough reason for a major pullback.
It’s key to understand that although the yield chart isn’t that pretty…it’s just one part of the story that retail seem to understand most cleanly. The more downstream environment isn’t too bad right now.
Micro environment
On the micro we have:
S&P PEG at 30-year low.
KB Securities (largest investment bank in South Korea) said the memory market will see the “tightest supply conditions in history.”
Nvidia (NVDA) forecast to grow +70% in FY28 even despite being supply constrained.
Broadcom (AVGO) forecast 100% growth in both FY27 and FY28 (for AI semiconductor revenue) whilst being supply constrained.
Broadcom (AVGO) CEO: “Demand for lasers, whether it is EML lasers, CW lasers, is far surpassing supply out there in the industry.”
Credo Technology (CRDO) growing revenues by 115% with the optical transceiver market growing from 60 million units (2026) to 175 million units (2030).
The above are just new narratives from the last 7 days.
When you understand that the yield story is perhaps not as bad as headlines are suggesting (of course something we need to watch) then it really comes down to the fact that we’re entering a year where hyperscaler CapEx is set to be $1.3T.
This large number tends to create the bubble label but it shouldn’t. The size of the spend is not the test people need to focus on. It’s whether paid demand is still running ahead of what can actually be built and that answer remains an astounding yes.
That creates flows throughout the entire supply chain from optics, to memory, to cooling, to power that are quite hard to comprehend because the numbers are so different to what investors have been used to for decades.
The one part of this system that isn’t debatable therefore is that we’re in an undersupplied market. We’re being held up because of atoms (turbines, grid queues, HBM etc etc). It’s why players like Anthropic are still signing ~$517B worth of capacity deals in the last eleven months.
There is a time when an overbuild becomes a risk. It’s something to monitor but for the time being I don’t think we’re close. Being bearish on AI infrastructure is likely the wrong side of the trade if you have a 2+ year timeframe and are willing to look past headlines about rising yields (which may I make clear again are important to monitor…I just don’t think they’re more important than the above).
Crypto environment
And then we also have the crypto markets which are continuing their breakout.
For the last two years, BTC hasn’t done anything relative to the entire AI market around it. We had ETFs get launched, a more crypto friendly administration, and institutional custody mature…but the underlying prices did nothing.
This is slowly changing.
The reason is key. BTC is no longer a retail, leverage, and risk on trade.
The world is starting to realize quickly that AI agents need a financial system that:
Settles at machine speed, 24/7, without a bank cut-off.
Can make programmable payments (pay, stop, split, escrow) without a human in the loop.
Hold and post on-chain collateral.
And the financial system we have to date (with limited banking hours, with quarterly reconciliations etc) simply isn’t fit for agentic purposes whilst Bitcoin, Ethereum, and the crypto ecosystem does.
What’s Mispriced?
This is a section looking at the potential opportunities I’m seeing at the moment. I’ll split them by how I see the risk profile (high risk → low risk).
I’ll tend to aim for at least 3+ opportunities in every article I publish here…but that depends on what the market is offering.
You’ll also likely see overlap week to week. I am not a trader that changes his mind every few hours, days, or even weeks. If I see an opportunity, that opportunity sometimes stays around for weeks.
Last week I touched on:
Aeva Technologies | AEVA - Still remains a watchlist position.
Quantinuum | QNT - Still remains a watchlist position.
Nvidia | NVDA - Still remains a position I’m happy holding.
This week we’re looking at the below:
Coinbase | COIN (Low Risk)
The wider COIN thesis is in line with my narrative on crypto above.
In terms of valuation, here’s the brief valuation write up I wrote to paid subscribers on August 25th:
