🏦 America’s central bankers

Last week we heard from the man who runs the most important central bank in America. Later in the week, we also heard from the Fed Chair.

Yes, Nvidia earnings coupled with the Fed’s annual symposium at Jackson Hole meant that we got an unusually high degree of candor from the two institutions upon which today’s markets rely most heavily.  

First, the Fed. Chairman Kevin Warsh spoke at Jackson Hole and, with the rhetorical strategic ambiguity that defines the institution, affirmed that the 2% inflation target is absolutely an important priority and — while he didn’t say when rates would go up or by how much they would rise — the market took his point. The market-implied chance of a rate hike in 2026 increased from 59% to 69%* as traders read between the lines.  

Second, Nvidia. Nvidia has been described as the central bank of AI by Luke Kawa, the writer behind the now must-read Entrypoint newsletter, and that could not be more apt now. The chip juggernaut realized early on in the AI boom that it could — and arguably must — leverage its vast resources, investing in its customers and suppliers and even prospective rivals in order to play this technology out to its fullest. 

• Nvidia’s public and private equity holdings reached $95.6 billion at the end of July, including stakes in Intel, CoreWeave, and Nebius. By comparison, that figure was under $100 million as recently as 2020. 

• It’s also guaranteeing a whole lot of investment, with the company disclosing $108.5 billion in guarantees, most of which is tied to OpenAI’s data center buildout. 

• While the details are still a bit murky, reports last week that Nvidia was making a move on Hugging Face, the repository of models that has been the central clearinghouse of decentralized models for much of the boom; this would give Nvidia a solid strategic position as OpenAI seeks to create its own chips. 

• Earlier this month, Nvidia and a consortium of Wall Street groups announced $500 billion in capital to provide financing for customers to pay for compute.

But is Nvidia getting too far out ahead of its skis, doling out too much money elsewhere while its own shareholders get nothing? Heck no, its projected revenue will increase 70% next year, well above the 45% expectation, and the market responded by making its stock go up one Palantir. 

The Takeaway

“What is Nvidia” should be a rather simple question — they make chips, chips that have become very important for the economy, and they have made strategic investments to both expand and protect that business — but for traders, Nvidia is especially interesting because for a manufacturer of semiconductors it sure doesn’t trade like a semiconductor manufacturer. 

From Kawa’s EntryPoint: “Nvidia is barely behaving like a semiconductor company. The most valuable publicly traded company has a correlation of near zero with the Philadelphia Semiconductor Index!”

Instead, he writes, “The company is no longer a hardware seller whose high-powered offerings are well-supported by a software that developers are intimately familiar and comfortable with [...] the stock has become more of an amorphous bet on the future of AI, because it’s taken on a role as a facilitator of the growth of the entire ecosystem.”

Nvidia is living the poker player’s dream: make enough good plays with the chips, soon you’re running the table, and eventually you just become The House. 

• Walt Hickey

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

• 🎬 Oscars: We are a week away from TIFF, the film festival where many serious Oscar contenders will make their debut. One to watch out for is, incidentally, “The Debut,” which is directed by Jesse Eisenberg and stars Julianne Moore and Paul Giamatti. Moore is currently an early favorite for Best Actress, with markets pricing a 31% chance. 

• 🎮 Five Star Wanted Level: Thursday’s exclusive look into GTA6 has certainly increased expectations around the game, with market prices indicating a 75% chance it wins the Game of the Year award for 2026 as of Friday, up from 59% earlier in the week. 

Texas’ power grid, after a rough couple of years, is having an incredibly boring summer, and it’s thanks to a build out of batteries that has allowed the grid to use its vast solar energy generation ability as the sun begins to set. On August 23, ERCOT set a record for maximum battery discharge: 13,256 megawatts at 7:45 pm.