Rates Hold, AI Bets Rise, and the Machines Start Fighting Back

**Xavier Segura** (0:13)
Welcome to Digital Currents, brought to you by Morgan Creek Digital. I'm Xavier Segura. Each episode, we spotlight the topics and people changing the tech industry with a focus on AI, blockchain, chips, and big data. Thanks for listening and please make sure to subscribe if you like what you're here. And remember, stay current.
Mark, happy almost Friday. We're off last week for the holiday, and now we've got another one coming up, but we weren't going to let that stop us from getting an early recording.

**SPEAKER_2** (0:57)
No, I appreciate that. And yeah, so we do this nice thing that our COO came up with. We add an extra summer holiday, one in June, one in August. Oh, this is July 31st, but same thing. So people get a long weekend, May, June, July, August, and then into September. So it's kind of nice, but that means we're recording here on Thursday.
Kind of caught me off guard. So I don't have the normal orange, but I do have the light orange. And then the sock game, I'm in the office too, is the Bitcoin roller coaster.
So in the office instead of at home. But Bitcoin roller coaster, it is summertime still, it's hot. And we've gone up and down and up and down. And both in crypto markets, but also in actual markets. I mean, it has been a roller coaster ride, particularly scary one, if you jumped into any of the, you know, totally vertical things like Sandisk and Hynix and all that. I mean, they have gone, they're making the Eiffel Tower pattern and-

**Xavier Segura** (2:12)
Well, maybe we start there, Mark. Maybe that's a good place to begin, because as we always talk about, we are both a macro and a micro show, where we'll go like very in the innards of like what makes a successful investment in a startup company to, you know, how do rates affect how companies are getting financing? And then therefore, their infrastructure cross can be impacted by that, because that's what they're largely using the financing for, which is a spoiler about what we'll talk about a little bit later with the cost of hardware going up. But the Fed held rates steady, Mark. Although three members voted to hike, and now that's kind of putting the new focus, as it always does, on the next meeting, and kind of unpacking that a little bit more, because there's direct impacts to what that will do for our token markets, right? Because there's always a betting angle to this, right? There was a third coming into the week, there was a 35% chance of a rate hike according to the CME futures. But we held steady for the fifth meeting in a row.
Despite this kind of mixed picture and economic activity, I'm not sure, Mark, if this is a case of the emperor has no close just yet, but I'm beginning to feel the breeze a little bit if you catch my drift.

**SPEAKER_2** (3:32)
It is feeling breezy. Well, look, the crazy part is coming into the year, everyone, and I do mean everyone, was convinced that we were going to get a bunch of rate cuts this year. Because the Trumpster was basically saying, you're fired. He was going back to his apprentice days and saying, J-Pow, you aren't doing what I want, so you're fired. Now, remember, they're supposed to be independent, and the Fed's not supposed to do the bidding of the White House, but whatever. So J-Pow is like, no cuts for you, buddy, and to the end in May, didn't cut. And so everybody's like, oh, war is just coming. He's going to cut. And then he gave his first speech, and he was like pretty hawkish. And everybody's like, whoa. And actually the market tanked for a couple of days. And then, of course, Trump and everybody else, no, no, no, he didn't mean that. He's really dovish, and he's going to cut because he's going to cut. And so here he had his chance, and unfortunately, the economic data came in supportive actually of of hikes. Inflation was still running a little hot. And in fact, he got a little reprieve. And a couple of weeks ago, the inflation number came in just a little less hot. Now, we've been above the 2% target for like 64 months or something like that. And then is it even a target, right? If you've been above for five years, is it really a target?
One would argue no. And so but it was lower than expectations. So, okay, now I don't have to raise rates because things are cool. Like, 3.5% inflation is not cool in any way, shape or form, but whatever. And it's not 3.5% because it's worse than that if you do anything. Because remember, PCE, you know, the thing that the Fed uses to measure inflation doesn't include food and energy. And prices have doubled because of the conflict, not war, whatever you want to call it, skirmish. And food prices have gone batshit crazy. And I was just actually just before we started, I was reading this this thing about some woman went viral because she wrote this big thing on the back of her receipt saying, yeah, I only tipped $9. And yes, my bill was was $600. But the fact that I chose an expensive entree instead of a cheap entree, did you do any more work? Was the plate heavier? Did you walk more steps? And like, that's actually an interesting point. I mean, $50 entree, $20 entree, does it really? And if I order a $200 bottle of wine, do you do any more work than a $10 bottle of wine?