Scoop Full of Money

Stock manias are not a zero interest rate phenomenon

It’s time to put to bed the notion that ZIRP fuels zanier, riskier investing

5/14/24 2:27PM

“We hope the Federal Reserve is taking note of the gambling that’s being done with the zero-interest money it’s pumping out,” wrote the Washington Post’s Editorial Board in late January 2021, chiding the US central bank for its supposed role in fueling the meme stock moment.

“It is hard to imagine anything like GameStop if the Fed hadn’t cut rates to zero, promised to keep them there, and pumped more money into the system,” wrote John Authers, a columnist at Bloomberg Opinion, a month later.

Well, it’s easy if you try.

Now that [gestures wildly at the stock charts of GME and AMC] is happening again and the Federal Reserve’s policy rate is above 5%, can we scrap the notion that there’s some kind of mechanical relationship between the interest rate that banks charge one another on overnight loans and the sliding scale of sane-to-crazy things Americans are willing to invest in?

To quote Mark Dow, founder of Dow Global Advisors (and one of the best all-round thinkers on financial markets, for my money), “The relationship between policy rate levels and risk appetite formation is neither predictable nor stable.”

And to be clear, this isn’t something we needed to wait until now to adjudicate. This is just another reminder. The late 90s happened! Pets dot com and so on. This case was closed before it was even open.

Dow, again:

2005-2007 banks were 30x levered, there was no QE and Fed funds rate was at 5%

1998-2000 equities had highest valuations ever. There was no QE and Fed fund rate was at 5%

2015-2021 Japan & EU run largest QE on earth, JP and EU equities don't experience massive asset inflation https://t.co/MuKaCtY7vO
— Dow (@mark_dow) October 1, 2021

Now, there’s a completely separate question of whether this episode says anything about if the stance of US monetary policy is doing enough to put downward pressure on inflation. I’m all for having that debate — at least it’s a debate we haven’t had the answer for more than two decades.

Tasha Matsumoto

Stocks bounce back after volatile trading session

The S&P 500 and Nasdaq-100 recovered from an afternoon dip, and the Russell 2000 notched another all time high.

Michael Jordan #23 dribbles towards the net circa the 1990's during a game.

Matt Phillips6h

Diverse partnership’s $40 billion data center may the future of funding for AI

Another day, another multibillion-dollar data center deal.

The announced $40 billion buyout — including debt — of Texas-based Aligned Data Centers on Wednesday was the first for a consortium established last year by a diverse base of investors including giant money management firm BlackRock, Abu Dhabi-based technology investment fund MGX, and Microsoft.

Some analysts suggest the variety of investors in such a deal — including tech giants, sovereign investment funds and the private pools of capital controlled by entities like BlackRock — will be an increasingly common site, as the enormously expensive buildout of AI infrastructure continues over the coming years.

Analysts at Morgan Stanley recently estimated that there will be some $2.9 trillion of spending on data centers globally by 2028. Some $1.4 trillion of that will be covered by the cash flows produced by giant hyper scalers like Microsoft, leaving a need for some $1.5 trillion from other sources. The analysts wrote that their “broad takeaway was bullishness on the availability of those sources of capital.”

Nvidia, Microsoft, xAI and BlackRock part of $40 billion deal for Aligned Data Centers

Luke Kawa7h

Rigetti Computing tanks amid souring retail sentiment, bearish options bets

Rigetti Computing is getting taken to the woodshed on Wednesday amid souring retail trader sentiment and options bets on near-term downside.

In particular, one post on Reddit’s wallstreetbets forum from user bespoketrancheop, which shows the Google Street view (circa March 2025) of Rigetti’s listed headquarters, is generating a lot of attention. It’s the most popular Rigetti-centric post on the subreddit in the past seven months.

Rigetti HQ — r/wallstreetbets via bespoketrancheop

Per our executive editor, it’s giving this:

But as one commenter notes, this isn’t exactly new news: “People been posting this since it was $11,” with another pointing out that “making an assessment on a google street view is lazy dd [editor’s note: due diligence].”

For what it’s worth, Rigetti’s Quantum Fab manufacturing facility in Fremont looks a lot more like a place where next-gen technology is being developed and a lot less like the middle school one of my colleagues went to.

Of course, it’s impossible to single this out as <the> specific catalyst for the price action in Rigetti today. But since there’ve been dozens of days in the past couple months where quantum computing stocks went up on no news whatsoever, it stands to reason there are also going to be days when they go down for no (good) reason whatsoever.

More important, perhaps, is the flurry of major options bets positioning for downside in the quantum computing company this week. Put options with a strike price of $50 that expire this Friday are in demand. That contract had open interest of under 7,000 heading into today but has already seen volumes of more than 30,000, suggesting fresh wagers made on a pullback in the formerly high-flying stock.

Luke Kawa8h

AMD soars as HSBC hikes price target to a Street high of $310

Shares of Advanced Micro Devices are soaring after HSBC analyst Frank Lee strapped his price target for the chip designer to a rocket ship, hiking it to $310 from $185. The new price target ties that of Arete Research’s Brett Simpson for the highest on Wall Street, per data from Bloomberg.

The recently announced deal with OpenAI, which was followed by news that AMD will deploy 50,000 AI chips in Oracle’s data centers, catalyzed a massive wave of Wall Street love for AMD.

But that’s just nowhere near enough compared to what the stock deserves, per Lee, who sees AMD’s MI450 series of AI chips as being sufficiently competitive to Nvidia’s offerings. Through 2030, he sees the revenue opportunity of the OpenAI deal to be $80 billion.

“We believe the Street has underestimated the AI GPU revenue with our estimates 50% and 45% above consensus for 2026e and 2027e, respectively,” he wrote. “We believe there could be further upside driven by pricing premium as well as additional AI GPU volume.”