🤖 AI vibe decoding

Not since Biggie Smalls and Tupac has there been an East Coast versus West Coast schism like the current perception gap over artificial intelligence.

• On Wall Street, the only type of AI exposure that’s worked lately is owning companies benefiting from shortages (memory chips) or ones that will benefit from expanding capacity of these scarce resources (semicap equipment). The theme has been a net negative for the market this year, based on how much software stocks thought to be at risk of severe disintermediation by AI have slumped.

• In Silicon Valley, commentators and VCs are pounding the table that AI has now proven its ability to transform computer-based work, thanks in large part to recent progress from Anthropic. That is, AI has gotten better at doing things — things that save time and have commercial value.

• This apparent discrepancy is primarily being recognized by tech types who claim their counterparts in finance are short-sighted and fail to appreciate the scale of recent breakthroughs.

But AI is certainly asking a lot more of investors. 

• It’s asking them to forgive a lack of free cash flow generation as money gets piled into massive capex instead of buybacks. 

• It’s asking them for a lot more money, both through debt issuance in private and public markets and, soon, a heck of a lot of equity supply from the likes of SpaceX/xAI, Anthropic, and OpenAI. 

• The valuations of these privately held companies have increased by about $550 billion since September.

It would be somewhat disingenuous for AI boosters to say that all these privatized tech gains, and the underlying progress upon which they’re based, wouldn’t also be someone’s pain.

The Takeaway

Not every great company is a great stock where it’s priced, and not every great stock is a great stock all the time. In the short term, initial conditions and positioning matter more than fundamentals in explaining price action. The hangover from capex binges tends to be a very difficult period for the big spenders (see: the aftermath of shale investment or the dot-com bubble) — and that’s not an indictment of the technology. If AI is a flop in ROI terms, it would not be the first time Silicon Valley vastly overestimated the commercial, real-world applicability of a new technology. 

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• Apple thinks different, no cap: Of course, Apple is spending billions on capital expenditure, but now that Microsoft, Meta, Google, Amazon, and the iPhone maker have all reported earnings and estimates for the hundreds of billions the group will collectively spend in 2026 are out, there’s a startling difference — Apple is the only one whose capex is going down. So while analysts may be applauding Amazon spending enough to buy Uber or 80% of the teams in the NFL, we’re warming to the idea that Apple focusing on its signature tech rather than AI was a smart bet.

• Is AI really taking our jobs? There has been a lot of ink spilled on the concept that AI is replacing human workers, and there’s no question the rate of layoffs in the US has been accelerating lately. Challenger, Gray & Christmas recently reported that nearly 55,000 job cuts were attributed to AI last year, but a growing body of research questions whether jobs are actually being lost to AI — or whether employers are simply “AI-washing.” We charted how companies are slashing jobs for an AI future that isn’t quite here yet.

• 💳 Cards: The odds that the United States caps credit card rates have shifted significantly over the past several weeks, according to prediction markets,* but have settled around a 26% chance. Things are choppy, though: on January 25, odds were as low as 18%, and they’ve gotten as high as 47% as of January 30.  

• 🇬🇧 United Kingdom: Political developments in the United Kingdom have deteriorated to the point that even Americans are hearing about how Prime Minister Keir Starmer may not be long for his position. Traders on Polymarket are pricing in just a 34% chance Starmer holds on to his job through 2026, with fellow Labor Party member Angela Rayner having a 19% chance of taking 10 Downing Street before the year is out, tied with Labor’s Wes Streeting.

• ✨ AI: Anthropic’s AI assistant, Claude, has had a great couple of weeks on the back of a model release that dialed up the LLM’s coding skills as well as the buzzy release of Claude Cowork. That’s sent it surging up the rankings on LMArena, and its chances of finishing the year as the Best AI of 2026 are up from 1% at the beginning of 2026 to 27% today. 

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.