The AI Trade Will Work
Federal health care spending costs more than any other part of the federal budget. Total federal spending on Medicare, Medicaid, ACA subsidies and CHIP, child health care, exceeds spending on Social Security, defense or interest on the federal debt. That will continue to be the case over the next ten years and longer, unless Congress legislates.
https://www.crfb.org/blogs/cbo-projects-high-federal-health-program-costs
Germany, Chancellor Merz of Germany is making a major mistake by currying favor with China and its absolute ruler, Xi Jinping. China’s grand manufacturing strategy is to destroy the manufacturing sectors of the major countries including Germany and for that matter the United States. At this very moment, China’s EV exports into Europe are rapidly taking market share from the major European car manufacturers.
Stellantis was once a great European vehicle company. Misguided EV policies in the United States, think Biden’s climate mandates, and Chinese penetration of the European car market are slowly destroying Stellantis.
https://www.cnbc.com/2026/02/06/stellantis-reset-business-electric-vehicles.html
China continues to produce and burn record amounts of coal. Climate change is global.
https://www.dw.com/en/china-boosting-coal-capacity-at-record-high-report/a-73753189
The average rate on a 30 year mortgage is now at 5.98%, the lowest rate in three years.
https://www.nytimes.com/2026/02/26/business/mortgage-rates-30-year.html
Traffic accidents increase by 15% on days when a new hit music album is released. Drivers stream the release and become distracted.
https://www.nber.org/papers/w34866
Jobless claims remain low. A recession and a bear market for that matter are unlikely.
Markets and Stocks
Equities closed lower on Thursday. The S&P 500 fell 0.54%. The Nasdaq Composite dropped 1.18%. Nvidia fell 5% despite delivering great results. The stock suffered its worst fall since April of last year. Other great technology stocks also fell.
I remain all in on the AI trade.
Jason Furman is also a believer in AI. Competition is intense in the space. Prices to use AI are declining rapidly. Annual deflation for AI usage is around 70%. As prices fall, demand will increase. Think of Jevons Paradox.
https://www.nytimes.com/2026/02/25/opinion/ai-industry-competition-innovation.html
I remain pound the table positive on Nvidia and the entire AI stack. Retail investors are aggressively buying Nvidia. Retail will be correct. Sometimes institutions are too clever by half. The hyper scalers will refuse to be second class in AI.
Equities are mired in a trading range. For the S&P 500, the range is 6720 on the bottom and 7002 at the top. For the Nasdaq Composite which is 3% below its all time high, resistance is at 26182.
I remain very positive on equities in the United States, Europe and in India.
Nvidia
The company reported great numbers. I wrote the linked piece on the quarter. The stock is very cheap. Bank of America raised its price target to $300. Q4 registered the fastest growth rate for the company in the last four quarters.
CoreWeave
The company delivered better than expected revenues; nevertheless, the stock fell 7% in the after market. Still, the numbers were outstanding. Year on year revenue growth exceeded 100%. At the end of the day, good numbers will deliver outstanding stock performance.
https://www.cnbc.com/2026/02/26/coreweave-crwv-q4-earnings-report-2025.html
Rolls Royce
RYCEY is up 9x since I first started to write about it. The company is raising guidance and announcing a major share buyback program. The stock should continue to easily outpace equity markets both in the U.S. and also in Europe.
Defense Stocks
The United States must pivot from its current weapons platforms which are too expensive. “If we spend more money only on old expensive weapons, we may be ready for the first day or week of a future war. But we will leave ourselves dangerously unprepared for day 30 or day 300, when we’ll need an abundance of new and cheaper weapons.” https://t.co/7VmvC74LMh
Defense companies such as Anduril are the future. I recently wrote the linked Washington Examiner piece on Anduril.
The United States just deployed its first kamikaze drone unit to the Middle East. Each drone costs $30,000 to manufacture.
Gold and Silver
CDE continues to look great.
Indian investors are rushing into gold at an unprecedented pace:
Gold ETF inflows in India are up to ~250 billion rupees, an all-time high.
As a result, inflows into gold funds have surpassed equity mutual fund inflows for the first time. This comes as gold ETF inflows have
