Nov 3, 2026 · 42 min
AI spending faces its proof point as midterms approach
Markets Ahead of the Midterms
The episode connects political gridlock, slowing consumers, financing risks, and demands for AI returns to the next phase of market leadership.
- 1Investors see the AI sell-off as potentially excessive, but debt-funded infrastructure spending is raising sharper questions about future returns.
- 2Midterm uncertainty may favor gridlock, while data-center restrictions, Europe’s weakness, and currency shifts complicate the macro outlook.
- 3ETF flows are rotating toward healthcare and AI infrastructure as investors seek diversification, volatility protection, and broader earnings growth.
Don't miss
The Anthropic discussion turns abstract AI enthusiasm into an investor test: rapid revenue growth must be weighed against unexpectedly large losses, rising expenses, and customer concentration.
The brief
Jordan Jackson argues that the AI sell-off may be overdone, but the scale of data-center spending and corporate-credit exposure is forcing investors to scrutinize demand, pricing, and confidence in the trade.
Steve Englander says markets often prefer congressional gridlock, yet midterm fights over data centers could slow infrastructure investment, growth, and potentially bond yields while reshaping the dollar and euro outlook.
ETF flows show investors rotating from hyperscalers toward infrastructure bottlenecks such as photonics and optical components, while healthcare and pharmaceuticals emerge as diversifiers from concentrated AI exposure.
Anthropic’s prospective IPO brings the central tension into focus: rapid revenue growth and a large cash position sit alongside heavy losses, rising expenses, and questions about customer concentration.
Amy Wu Silverman says AI hedging is unusually difficult because the theme cuts across market factors; options and subsector-level hedges may matter as earnings and spending decisions approach.
What was said on this episode
21 statements · 13 positive · 7 negative · 1 mixed
AI stocks trade about 25% below their start-of-year levels.
“You're getting these stocks at, let's say, a 25% discount relative to where we were at the start of the year.”
Listen at 3:04
AI-related demand visibility extends through 2028.
“When we look at customer orders, when we look at backlogs, we've got demand visibility, I would say, out to 2028.”
Listen at 3:23
Hyperscaler cloud revenues are growing more than 50%.
“Cloud revenues up over 50% across. the hyperscale of search.”
Listen at 3:31
The current AI market presents a buying opportunity.
“I think, you know, all things point to a market that, you know, this is a buying opportunity.”
Listen at 4:39
AI financing risks are becoming more significant.
“I do think, though, the financing aspect does become more interesting”
Listen at 5:54
The Fed will probably deliver one or two additional rate hikes.
“I think we're probably looking at one or two. more rate hikes coming coming from the fed”
Listen at 7:06
Healthcare has provided diversification from the AI trade despite expensive valuations.
“healthcare has kind of been, we acknowledge that the sector itself is expensive, but it does. has proven to be that zig on the AI zag.”
Listen at 7:54
Markets prefer political gridlock to partisan alternatives.
“I think the markets actually prefer gridlock. to any of the partisan alternatives.”
Listen at 13:41
Technology investment in the U.S. supports the dollar.
“That's dollar positive, that it induces direct investment in the U.S. and induces portfolio investment.”
Listen at 15:51
The dollar outlook remains positive but faces political headwinds.
“So we're still dollar positive, but cognizant that the politics may sort of... put some headwinds in the dollar's way going forward.”
Listen at 16:24
A Republican electoral upset would hurt markets.
“it would be negative for markets”
Listen at 17:07
Narrow split control of Congress would be the best market outcome.
“The best outcome for markets, I think, would be if the Republicans sort of kept the Senate narrowly, you know, 50 or 51 seats. And if the Democrats ran the House or won the House narrowly.”
Listen at 17:32
Europe-wide political and economic unrest will persist.
“I don't think the unrest is going away.”
Listen at 19:08
Markets will penalize European governments for fiscal spending.
“The markets will punish them if they try and spend the money.”
Listen at 19:24
Europe’s pension arithmetic cannot support retiring at 60 after starting work at 25.
“You can't start working at 25, retire at 60, and live at 85.”
Listen at 20:12
AI remains a long-term bullish buying opportunity despite the sell-off.
“we're still bullish on the sector long term. We actually see this as a potential buying opportunity”
Listen at 21:36
The outlook for the remainder of the quarter is bullish.
“we're actually pretty bullish on the rest of this quarter”
Listen at 21:50
ETF flows are rotating from hyperscalers into AI infrastructure bottlenecks.
“a lot of the flows are leaving some of the hyperscalers, some of the mega cap companies into more of those bottlenecks.”
Listen at 22:07
Gridlock would likely prevent major regulation or policy shifts for two years.
“It essentially just means that we're probably not going to have any massive regulation or policy shifts in the next two years.”
Listen at 25:37
Broadening market performance may gain fundamental support.
“this broadening trade that we've seen play out in the markets from a technical perspective in the last couple of weeks might actually be supported from a fundamental perspective.”
Listen at 27:14
Fundamentally supported non-tech companies would boost markets into 2027.
“if we can see fundamentally supported companies outside of the tech trade, I think that's really bullish for markets heading into 2027.”
Listen at 27:39
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.
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