AI Companies' Blockbuster Earnings Spark Rate Hike Warnings, Korea Already Feels the 'AI Hangover'

Ahn Jun-hyeon of Angle Gauge TV initially declined to appear on the Mable Show, but decided to attend to voice his opposition to the recently controversial inheritance and gift tax reform proposal. He strongly criticized the reform proposal, saying it effectively nullifies the Commercial Act revisions made so far, and explained that his main goal was to raise awareness of this issue.

However, since the issue had already been sufficiently discussed and the possibility of reconsideration had been mentioned, Ahn changed his stance and said he would instead discuss how to grow Korea's capital markets on the Mable Show.

According to the CFO, SpaceX's xAI business is generating annual revenue of $10.5 billion after investing $15 billion over the past year.

Ahn interpreted this to mean "we essentially recover our investment within one year," emphasizing that AI-related investments can recoup costs and generate profits in a very short time.

The AI industry's massive profits are intensifying the race to build AI data centers. Angle Gauge's Ahn Jun-hyeon stressed that AI-related products and services are "selling at high prices," explaining that this is why data centers must be built as quickly as possible.

He added that because investment can be recovered in one year if built quickly, the core of the current AI data center market is a "race against time," where companies don't mind high costs for components, materials, or labor.

Elon Musk's AI data center strategy clearly illustrates this race against time. Rather than exploring alternatives, he said he would build his entire infrastructure on Nvidia's GPU system, 'Vera Rubin.'

Angle Gauge's Ahn Jun-hyeon explained that since Nvidia already has extensive experience building systems with MVLink, this is the best way to get high-performance GPUs as quickly as possible. He analyzed that this decision was made on the judgment that even if costs are high, the investment can be recovered quickly.

Generally, when CPI comes in stable, Treasury yields are expected to fall on hopes of a steady policy rate, and that is considered the normal reaction.

However, after this CPI release, the 10-year Treasury yield did not fall even 1bp, and the 30-year yield actually rose slightly. While the short-term 2-year and 1-year yields fell 2bp and 2.5bp respectively, the lack of major change or rise in long-term yields suggests the market still reflects concerns about long-term inflationary pressure.

This abnormal movement in long-term Treasury yields was also clearly visible in the US Treasury auction results. The yield at the US 10-year Treasury auction hit its highest level since 2007. Since 2007 was before the Lehman crisis, returning to yield levels of that time carries significant meaning.

This phenomenon shows that the market is expecting a high-rate environment from a long-term perspective, beyond just short-term inflation concerns. Yield levels before the Lehman crisis reflected the unstable economic conditions just before the global financial crisis, so careful analysis of how current high rates will affect the economy is needed.

He said that if data centers boost productivity, that is positive, but hyperscalers' investments worth hundreds of billions of dollars are competing for scarce resources such as land, power, and skilled labor, driving up costs.

He also expressed concern that if stock price gains and wealth effects from AI expectations bring forward consumption and investment, it could overheat the economy in the short term and raise inflation. This shows the Federal Reserve is watching the current AI boom not only as positive but also as a factor adding inflationary pressure.

This is interpreted as a declaration that the Fed will focus on its core goals of controlling inflation and maintaining employment stability, and will not directly intervene in stock market fluctuations.

She took a hawkish stance, specifically stating that if economic indicators call for a hike, she would support one as early as the September FOMC meeting.

Such remarks show that discussions on additional rate hikes are active within the Fed and that proactive measures to control inflation could be taken. Combined with inflationary pressure from the AI investment boom, the Fed's rate-hiking stance could become even stronger.

The Bank of Korea Deputy Governor also stated his view on domestic economic conditions. He said the July rate hike marked entry into a new rate-hiking cycle, and that barring a special economic shock, he judges further rate hikes to be likely.

This suggests inflationary pressure is persisting domestically, and shows the Bank of Korea intends to continue a tight monetary policy to stabilize prices.

This makes clear that the Bank of Korea will prioritize inflationary pressure and price trends across the macro economy over conditions in particular industries when setting monetary policy.

He interpreted that the Bank of Korea judges "the economy is too hot, and if this continues long-term inflation will rise sharply, risking missing the Bank's founding purpose of price stability."

Ahn also added that he sees current inflation as stemming from fundamental changes rather than a short-term phenomenon, and that the Bank of Korea's awareness of the need for a quick response will act as upward pressure on the exchange rate.

In particular, strong earnings from data center specialist companies stand out.

Companies such as CoreWeave provide data center services in a different form from Amazon, Microsoft, and Google, and are directly benefiting from the growth of the AI market. These firms play essential roles in building AI-era infrastructure, and their earnings demonstrate the broad ripple effects of the AI industry.

This has raised concerns, as there is precedent for similar deregulation during the IT bubble period, after which the market suffered serious damage.

Ahn Jun-hyeon of Angle Gauge cited past bubble cases and warned that while deregulation can spur short-term investment, it may fuel market overheating and potential risks over the long term. Amid the explosive growth of the AI industry, this move by regulators raises questions about market soundness.

This view offers important implications for investment strategy in both markets.

This change in attitude is closely tied to corporate currency strategy, and is an important point showing how exchange rate movements affect corporate finances and investment decisions.

They suggested an approach of looking for contrarian investment opportunities in undervalued industries that have drifted away from market attention. This strategy is interpreted as based on potential recovery and a belief in value investing.

This is because, as in SpaceX's case, a company can raise funds through an IPO and then pursue business expansion through additional rights offerings.

Ahn Jun-hyeon of Angle Gauge stressed that since Anthropic is a user of AI data centers, investors should watch closely what fundraising strategy it pursues after listing. He advised investors to closely monitor Anthropic's movements after listing and to decide carefully on investment when plans for additional capital raising, such as a rights offering, are announced.