Risk Factors Emerge Amid AI Investment Frenzy

Saudi Arabia is flooding the world market with an unprecedented volume of crude oil.

Following news of this supply expansion, Brent crude oil prices fell below $100, trading at $98 in the futures market, increasing downward pressure on oil prices.

The 10-year yield, in particular, surpassed 5.16%, and the 2-year yield reached 4.86%, nearing 5%.

The long-term 30-year yield also exceeded 5.5%, indicating broadening upward pressure on interest rates from short-term to long-term maturities.

Amidst the growth of the AI industry, market attention is focused on Micron Technology's earnings announcement scheduled for the 30th. Micron is projected to see a 90% increase in revenue next year.

Demand for High Bandwidth Memory (HBM) is expected to grow at a compound annual rate of 62% in 2027 and 69% in 2028, signaling continued growth in the AI semiconductor market.

Nvidia provided over $100 billion in guarantees for its key customers to lease data centers, a financing structure similar to car installments, aimed at boosting sales.

This situation raises warnings that a decline in GPU prices, the collateral, could lead to a chain of loan defaults, posing a risk to the overall financial system, similar to the past subprime mortgage crisis.

Financial authorities added that financial principles operate identically, as in the past subprime crisis. It is pointed out that the same financial principles that triggered the subprime mortgage crisis with falling real estate prices and rising loan rates could apply to GPU and server assets.

This operates under the same financial principles that caused the subprime mortgage crisis with falling housing prices and loan rate burdens, raising concerns that a decline in collateral value could lead to a chain of loan defaults.

SoftBank's SB Energy signed a 20-year long-term power supply contract with OpenAI. However, Oracle's recent declaration of force majeure due to power supply issues highlights the potential risks for power infrastructure-related companies like SB Energy.

The host expressed concern that power infrastructure companies might be exposed to greater risks due to energy supply instability than large tech companies that generate cash.

Cloud provider CoreWeave successfully reduced its loan interest rate from 13.7% to 8.1% through GPU-backed loan securitization.

Despite this, CoreWeave, Oracle, and several other companies still face high financial costs, using interest rates around 8%. In an environment of continuously rising interest rates, the financial soundness of corporate fundraising becomes even more crucial.

It is pointed out that current workers in their 30s and 40s have not experienced a high interest rate period since the mid-1990s, and thus may lack the ability to cope with the economic impact of such rate increases.

The experience gap between generations who remember Japan's past bubble collapse and 'lost 30 years' and the current generation is wide, raising concerns about the market's reaction to a new high interest rate environment.

There is particular vigilance against potential problems arising in other countries rather than within the U.S.

A University of Michigan survey showed consumer sentiment at 46, its lowest level, with 1-year expected inflation at 4.6% and 5-year expected inflation at 3.4%, indicating a deteriorating perception of the economy.

As AI investment drives GDP growth, the U.S. finds it difficult to abandon AI investment. However, the University of Michigan's consumer sentiment and expectations index is at its lowest level, indicating a worsening perception of the economy, and both 1-year and 5-year expected inflation are rising, showing entrenched inflationary pressures.

John Williams, President of the Federal Reserve Bank of New York, warned that it is time for the Fed to manage supply shocks such as oil prices and AI capital expenditures to prevent them from becoming entrenched in the economy.

Federal Reserve Governor Barry Blind advocated maintaining a restrictive monetary policy stance to return inflation to target, cautioning against inflationary psychology taking hold among households and businesses.

It was suggested that tariffs do not cause permanent price increases, and neither the current labor market nor the productivity effects of AI are acting as inflationary pressures.

He added that tariffs generally do not create persistent inflation, the current labor market is not a source of inflationary pressure, and the productivity-enhancing effects of AI are not yet clearly visible.

Federal Reserve Governor Barry Blind warned that current monetary policy is not restraining economic investment, and AI investments, among others, could increase inflationary pressures.

He stated that with inflation exceeding the target for over five years, an 'inflation mindset' has formed, and the psychology of businesses and households taking annual price increases for granted leads to real cost increases, thus emphasizing the need to maintain a restrictive monetary policy stance.

With the spread of agentic AI, 80% of middle management tasks, such as schedule management and document creation, are becoming more efficient. However, even as computers control their environment autonomously and technological development accelerates, human intervention remains essential for the final 20% of detail that determines the completeness of work.

Currently, AI has not yet reached the level of fully replacing middle management tasks, but with the advent of the agentic AI era where computers manage themselves, the pace of technological development is accelerating further.

The Japanese Yen recently rose close to 159 yen but showed signs of falling to the 157 yen range due to government intervention. The USD/CNY exchange rate remained around 6.7, continuing the yuan's weakening trend.

Despite the overall strength of the dollar, the Korean Won showed a relatively strong trend. This highlights the stability of the won compared to other major currencies.