Warren Pies: The Scramble for Compute Cures All Ills | Two Wolves of “Hockeysticking Earnings” and Hormuz Oil Shock (Plus Caliban)

**Jack Farley** (0:00)
Today, I'm speaking to one of the best and most data-driven analysts around, Warren Pies of 314 Research. Few have been seeing the ball clearer than him. The last time I spoke to him, Warren was calling for S&P to 7000 by 2026, which obviously happened. We do talk about the historic oil shortage in the Strait of Hormuz that is terrifying. There's no denying it, but there's another more powerful force at play that Warren says is driving markets. Warren has an AI research and charting tool called Caliban. He and his team have been using it internally for a while, but it just became available to the public. You can request a free trial to Caliban in the link in the description. Discounted access on annual and monthly subscriptions to Monetary Matters listeners are available. But before that decision, you can check out Caliban for free. All you have to do is enter your name and email address for a free trial. Let's get into it. I'm joined once again by Warren Pies, founder and CEO of 314 Research as well as Caliban. Warren, great to see you.

**Warren Pies** (0:52)
Good to be with you, Jack.

**Jack Farley** (0:53)
Warren, you write how the market is dealing with two wolves. What exactly are those wolves?

**Warren Pies** (1:01)
Maybe I'm too online, but I think of the meme that is all over social media, you know, there are two wolves inside of you. And it's just this like the old parable, like you have two wolves inside of you, a positive wolf, a negative wolf, and whichever one you feed is the one that wins. And I just think of that when I see this market, because I think there's really like two big forces at work in the market and they're battling it out. They've been battling it out since, I would say, by some measures from since mid-March and then definitely since April 7th, 8th, when the Mythos Preview came out. And those two big forces in my view is of course the closure of the Strait of Hormuz. And I think that as a oil analyst and somebody who began their career in that space, very concerning situation there for me. And it's something that we've been really been monitoring the situation closely and reporting on it and writing about it and worrying ourselves. And then on the other hand is just the real acknowledgement that there's a step change happening in the AI space. That much of the promise of AI is starting to be fulfilled through this kind of agentic explosion. And I think it was really, we saw it first in our GPU availability data.
And so this is our proprietary data set that where we go out every day and look at the Neo clouds and ask across these different vintages of GPUs, how easy is it for us to obtain these? And we saw, like I said, in mid March or so, availability collapsed. We were wondering, you know, what's going on? It seems like there's a real scramble for compute. And of course, then we saw SMH or the semiconductor industry start to move. And then finally you had the Mythos leak and, you know, some people kind of scoff at that. I mean, once that leak happened, the market's basically been straight up every day more or less. And it's been lead led by the areas you would expect. And so that Mythos leak, I think what it represented was that frontier models continue to get better. You feed more compute, better models. That whole train of events is intact. And that is honestly the lifeblood of the current bull market. So Strait of Hormuz closure, we can get into that.
The explosion in compute demand and improvement of frontier models, we can also talk about that. Like these are the two things fighting it out. And clearly, equities are looking into the future more. They're less of a, I used to say oil is the shortest duration asset on the menu.
And that's true. It's still true.
Equities have a longer duration. I mean, they're discounting things into the future. Oil is not capable of doing that. So, it's not totally surprising to me that equities are doing so well in the face of these AI moves. And it's starting to look through Strait of Hormuz. It's saying, unless we get worst-case scenario over here, we're going to look through that and focus on the positives developing in the AI space.

**Jack Farley** (3:58)
So, those two major forces that are fighting to capture or suppress investor animal spirits are AI and the closure of the Strait of Hormuz. Clearly, the explosion in AI is winning. That has kind of been your expectation. Earnings expectations has been going up. You've been paying attention to that. In your 2026 outlook, you said that you thought that we were on the cusp of a large earnings boom. Just how big is this earnings boom? And what level of confidence did it give you? Is it giving you now as to your bullish outlook stocks? I'm terrified by what's going on in the Strait of Hormuz. I've covered that amply on this channel, and I will continue to do so. The price of oil is going up, but it really has not dented the stock marker at all. Every day, we're making new all time highs. So let's just cover this earnings exposure. What's going on here?