Oct 28, 2026 · 49 min
Fed uncertainty collides with the AI spending test
Closing Bell 10/28/26
The episode connects an unresolved inflation and rate outlook with the market’s central question: whether Big Tech can turn enormous AI investment into durable growth.
- 1The Fed’s ambiguous guidance leaves investors weighing persistent inflation, tighter financial conditions, and another possible December rate move.
- 2Oracle’s financing plans suggest AI infrastructure spending may become more self-funded, though higher rates still constrain the buildout.
- 3Microsoft and Alphabet must show accelerating cloud growth, resilient advertising, and disciplined capital spending to validate AI valuations.
Don't miss
Jeffrey Gundlach explains the sharp drop in 10-year Treasury yields through institutional rebalancing and foreign buying, then argues for fewer Fed meetings.
The brief
Chair Warsh presents a strong economy and persistent inflation, but offers little forward guidance, leaving markets to infer whether December brings another rate move.
The panel debates whether tighter financial conditions and wider credit spreads are already doing the Fed’s work, even as inflation remains above target.
Jeffrey Gundlach links falling 10-year yields to institutional rebalancing and foreign buying, while backing fewer Fed meetings and more strategy-focused discussions.
Oracle’s financing plans raise a crucial question for the AI buildout: can cloud growth and cash generation fund infrastructure without relying as heavily on external capital?
Microsoft and Alphabet face different tests, but both must prove that cloud growth, advertising, and earnings can justify elevated AI capital spending.
What was said on this episode
26 statements · 12 positive · 13 negative · 1 neutral
Headline CPI will begin with a four.
“we're going to start seeing the headline cpi left of the decimal point start with a four”
Listen at 6:17
The Fed should raise interest rates.
“I think the Fed should be raising interest rates”
Listen at 7:36
SpaceX debt spreads widened to junk-bond levels.
“SpaceX came out at a triple B and it immediately widened down to a jump bond type of spread in the market.”
Listen at 9:06
Oracle debt trades like single-B-minus credit despite its BBB-minus rating.
“Oracle came out at a triple B minus, which is clearly not being embraced by the market as the correct weighting because it's trading like a single B minus company.”
Listen at 9:14
Government borrowing and AI demand are pressuring interest rates upward.
“interest rates are really starting to suffer from excessive borrowing by governments and excessive and huge demand from AI.”
Listen at 13:54
Interest rates should rise at upcoming Fed meetings.
“I feel like rates should be rising in the meetings ahead.”
Listen at 14:30
The Fed is not changing its trajectory because of politics.
“I dismiss this idea that the Fed is is changing their their trajectory based upon politics.”
Listen at 15:05
The Fed will probably hike rates in December.
“Base case is probably a hike in December.”
Listen at 15:42
Without an oil-price decline, the Fed must hike in December.
“absent a crack in the oil price, I think they have to hike in December.”
Listen at 16:04
The Fed will need to address inflation through interest rates.
“I think that the Fed is going to have to address this through rates.”
Listen at 19:19
Greater Fed uncertainty does not benefit markets or the economy.
“I don't know that anybody is better off, that the markets are better off, the economy is better off with that kind of uncertainty.”
Listen at 19:57
Gundlach recommends allocating about 30% to equities.
“I'm really looking at about a 30% allocation to equities.”
Listen at 21:15
The U.S. dollar will decline.
“I think the dollar still goes lower.”
Listen at 22:33
Gundlach recommends a 20% commodities allocation.
“I still like 20% in commodities.”
Listen at 22:47
Gundlach is not interested in ten-year Treasuries below 5% yields.
“I think the 10 year got below five below five. I'm not really interested in the 10 year.”
Listen at 26:50
The Fed should hold six policy meetings annually.
“I would actually be very much in favor of six meetings starting immediately.”
Listen at 27:43
Oracle can self-fund much of its subsequent AI buildout.
“a lot of the AI build out thereafter can be self-funded.”
Listen at 30:09
Higher capital costs increase Oracle’s sensitivity to AI financing.
“Oracle in a way is responding to not just the higher cost of capital, but this idea that they become much more sensitive to AI financing.”
Listen at 31:22
The Fed will not try to slow AI growth after strong earnings.
“I think you're going to be in a position to say big beats are great because the Fed's not going to try to slow AI growth.”
Listen at 32:57
Markets will be materially higher in six months.
“I think we end up materially higher in six months.”
Listen at 33:52
Gundlach recommends overweighting hyperscalers and semiconductors.
“I want to be overweight the good stuff, a lot of which is hyperscalers, we'll see on the prints tonight, but over the next few quarters, semiconductors.”
Listen at 34:28
NVIDIA, memory stocks, and Broadcom will outgrow the market for years.
“those things are going to grow much faster than the market for the next two, three, four, five years.”
Listen at 35:29
P/E multiples will stop contracting as rapidly as since July.
“the price to earnings is going to stop contracting at the rate it did since July”
Listen at 35:52
Gundlach favors stocks and U.S. equities.
“I like stocks. I like U.S. equities.”
Listen at 36:52
The weakest AI-trade stocks since July will outperform in the rebound.
“I think the stuff... in the AI trade that's been the worst performing since July 1 is going to catch up the most.”
Listen at 36:56
Hyperscalers’ AI spending will not slow.
“The spending's not going to slow from the hyperscalers.”
Listen at 40:28
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
Weekly email
State of the Pod, every Monday
The week's most-discussed names and stories from podcasts, with the moments behind them. Free, five minutes, unsubscribe in one click.