9-3-26 Is the Stock Market Expensive or Cheap?

The speakers linked AI investment directly to current economic activity: AI-related capital expenditures were said to account for all of approximately 1.5% GDP growth, while corporate borrowing to build data centers was supporting GDP and allowing lenders to charge higher rates. Commercial adoption is already broad—more than 50% of small businesses, 62% of medium-sized businesses, and 66.5% of large businesses—but electricity constraints and the need for AI-generated revenue to exceed spending remain key limitations.

The discussion challenged the case for tightening monetary policy into the current environment: recent inflation was characterized as primarily an oil- and war-related supply shock that rate hikes would not resolve, while the labor market showed weakness through 80,000 downward job revisions, roughly 30,000–35,000 average monthly job gains, and a participation-rate decline of more than 1%. Market estimates for a Fed hike ranged from roughly 53%–54% to 65%, with the outcome dependent on incoming employment and inflation data.

Markets were showing both enthusiasm for AI-related spending and a defensive, rapidly rotating leadership structure: Snowflake rose 23%–24% after announcing a deal with Amazon, while the broader market remained range-bound and high-beta semiconductor shares stayed under pressure as money moved toward value and defensive stocks.