Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, March 11, 2026

AI Summary. The International Energy Agency's member countries will release 400m barrels of oil from emergency stocks, the largest such release on record, to counter crude prices driven up by the war with Iran. Analysts estimate the release could fully offset lost supply only if the conflict ends soon.

Matthew Dalton, Bojan Pancevski and Laurence Norman Wall Street Journal
Date Posted:

The IEA is facilitating the release of 400mm barrels of oil from emergency stockpiles to offset the disruption from the “near total” closure of the Strait of Hormuz. A Capital Economics analysis finds the war has reduced oil supply by ~10mm bpd.

Can a record strategic reserve release offset war-driven oil supply losses?

Core argument: The International Energy Agency said member countries will release 400 million barrels from emergency stocks, the largest reserves distribution in history, in a bid to bring down crude prices that have soared during the war with Iran.

The International Energy Agency said its member countries would release 400 million barrels of oil from their emergency stocks, the largest reserves distribution in history, in a bid to bring down crude prices that have soared during the war with Iran. The release of strategic oil reserves could fully offset the lost supply due to the war, but only if the conflict ends soon, according to an analysis by Capital Economics. In the firm’s most “benign” scenario, if it takes a month for oil flows to normalize, roughly 350 million barrels of oil supply could be lost because the crisis is reducing supply by more than 10 million barrels a day. IEA members hold 1.2 billion barrels in public stocks, plus another 600 million in mandatory commercial inventories, IEA Executive Director Fatih Birol said Monday. By rough calculation, that is around 124 days’ worth of lost supply from the Gulf.

Takeaways by Macro Roundup® AI

  1. The International Energy Agency said member countries will release 400 million barrels from emergency stocks, the largest reserves distribution in history, in a bid to bring down crude prices that have soared during the war with Iran.
  2. Capital Economics estimates the strategic reserve release could fully offset lost supply only if the conflict ends soon, with roughly 350 million barrels lost in its most "benign" scenario of a month to normalize flows, as the crisis cuts supply by more than 10 million barrels a day.
  3. IEA members hold 1.2 billion barrels in public stocks plus 600 million barrels in mandatory commercial inventories, IEA Executive Director Fatih Birol said, around 124 days' worth of lost Gulf supply by rough calculation.

Related Articles:

  • The Long-Feared Persian Gulf Oil Squeeze Is Upon Us — With crude unable to reach world markets through the Strait of Hormuz, Iraq has cut output by more than two-thirds and producers in Kuwait and Abu Dhabi have slowed production as storage tanks fill. JPMorgan Chase analysts estimate regional daily output could fall by around 9m barrels, close to a tenth of global demand.
  • Global Economics Comment: Global Economic Impacts of the War in Iran — The main economic risk to major economies from the war in Iran is that higher energy prices lift inflation and slow growth, with oil near $80/bbl, up 14% since late February. Analysts project oil moderating to $76/bbl and then $65/bbl as the risk premium fades in a structurally oversupplied market.
  • The Oil Pipelines That Could Decide the Iran War — Saudi Arabia's 746-mile East-West pipeline to the Red Sea can bypass the Strait of Hormuz for up to 5m barrels a day, and a UAE pipeline to the Gulf of Oman for 1.5m, against roughly 20m barrels of daily crude and refined product flows through the strait.

AI Summary. About half of US counties lost population over a recent decade, a decline the authors attribute almost entirely to lower fertility rather than migration. In school district data, the per-student cost increases associated with 10% greater enrollment decline were 4x larger than the cost savings associated with 10% greater enrollment growth.

Jeffrey Clemens Aspen Economic Strategy Group
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The per-student cost increase from a 10% greater enrollment decline were 4 times larger than the cost decreases associated with a 10% greater enrollment increase, illustrating the fiscal concerns associated with retrenchment due to population decline.

Does population decline raise local government costs more than growth lowers them?

Core argument: Roughly half of US counties lost population from 2010 to 2020, a change explained almost entirely by declines in fertility rather than shifts in migration patterns.

Roughly half of US counties lost population from 2010 to 2020, explained almost entirely by declines in fertility rather than changes in migration patterns. Population decline confronts school districts, health systems, public-safety agencies, and transit authorities with the challenges of managing retrenchment. School districts, many of which have already faced substantial enrollment declines over the last quarter-century, provide leading indicators regarding the nature of these challenges. Both school districts and the subnational public sector as a whole exhibit evidence of economies of scale over the long run. In both settings, 10% more population growth has predicted just over 2% slower growth in per-capita expenditures historically. Because many school 15 districts have experienced population decline, their experience sheds light on the asymmetric effect of population contraction relative to growth; in the data presented above, the per-enrollee cost increases associated with 10% greater enrollment decline were four times larger than the cost decreases associated with 10% greater enrollment increase. Evidence points to the difficulty of closing underutilized facilities, frictions to retrenchment on labor costs, and the burdens of underfunded pension and retiree health liabilities as important challenges to jurisdictions undergoing population decline.

Takeaways by Macro Roundup® AI

  1. Roughly half of US counties lost population from 2010 to 2020, a change explained almost entirely by declines in fertility rather than shifts in migration patterns.
  2. For both school districts and the subnational public sector, 10% more population growth has historically predicted just over 2% slower growth in per-capita expenditures, evidence of long-run economies of scale.
  3. In school district data, per-enrollee cost increases associated with 10% greater enrollment decline were four times larger than the cost decreases associated with 10% greater enrollment increase.

Related Articles:

  • Plunging US Birth Rate Leaves Too Many Colleges With Too Few Kids — A falling US birth rate is projected to shrink the pool of college-age Americans, leaving schools with empty classrooms. Many smaller, lesser-known colleges are already firing professors, cutting liberal arts courses in favor of science and technology programs, or closing entirely.
  • Does School Spending Matter? The New Literature on an Old Question — Reviews of recent research find increased school spending is associated with improved student outcomes, with 92% of 13 multi-state studies reporting a statistically significant positive relationship. The studies span school finance reforms, tax limits, and recession-based analyses, and the authors interpret the consistent findings as evidence of a causal link.
  • Changes in the U.S. Economy and Rural-Urban Employment Disparities — Long-term shifts in the US economy — technological innovation and automation, declines in some energy extraction, greater globalization, and the move to a knowledge-based economy — have coincided with disproportionately negative employment outcomes in rural communities, especially for prime working-age men and those without a high school degree.

AI Summary. JPMorgan has marked down the value of certain loans in private credit funds' portfolios that serve as collateral for the funds' borrowing from the bank, limiting how much it will lend against them. Unlike most banks, which require triggers such as missed interest payments, JPMorgan reserves the right to revalue those assets at any time.

Jill Shah and Eric Platt Financial Times
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JPMorgan has marked down the value of loans made to software companies by private credit groups. These loans are collateral for JPM’s lending to private ventures more generally, reducing the bank’s loans to credit providers seen as increasingly risky.

Are banks tightening how much they lend against private credit collateral?

Core argument: JPMorgan has marked down certain loans held by private credit funds — specifically loans to software companies — which serve as collateral for those funds' borrowing from the bank, according to people familiar with the matter.

JPMorgan has clamped down on its lending to private credit groups, with bankers looking to cut risk as concerns mount over the credit quality of companies in their stables. JPMorgan is somewhat of an outlier in the private credit financing business as it reserves the right to revalue assets at any time. Most other banks require triggers such as missed interest payments. The bank informed private credit lenders that it had marked down the value of certain loans in their portfolios, which serve as the collateral the funds use to borrow from the bank, according to people familiar with the matter. The move will limit how much money JPMorgan lends to private credit groups against those loans going forward — a sign traditional Wall Street banks are growing cautious of an industry that has grown rapidly as non-bank lenders became top creditors to higher-risk borrowers. The loans that have been devalued are to software companies.

Takeaways by Macro Roundup® AI

  1. JPMorgan has marked down certain loans held by private credit funds — specifically loans to software companies — which serve as collateral for those funds' borrowing from the bank, according to people familiar with the matter.
  2. The markdowns will limit how much JPMorgan lends to private credit groups against those loans going forward, as its bankers seek to cut risk amid mounting concerns over the credit quality of companies in private credit portfolios.
  3. JPMorgan is somewhat of an outlier in private credit financing because it reserves the right to revalue assets at any time, while most other banks require triggers such as missed interest payments.

Related Articles:

  • Data Update 7 for 2026: Debt and Taxes — The author argues that companies are collectively over-investing in artificial intelligence and that markets will correct when that belief dissipates. Because debt, particularly private credit, now finances much of this investment, the author contends a correction would spread beyond equity holders and produce a banking-style crisis driven by non-bank lenders.
  • Has Private Credit Broken the High-Yield Spread Signal? — The high-yield bond market has stayed at about $1.4tn while private credit assets have grown to as much as $2tn, and the highest-rated BB portion of the high-yield index has risen from 41% to 51%. Private markets have shifted riskier borrowers out of high yield, making that index safer.
  • Private Credit: Characteristics and Risks — Private credit loans are negotiated bilaterally outside traditional regulatory requirements and are illiquid because no secondary market exists, leaving investors expected to hold them to maturity or face steep losses if they need to exit. Scarce data on this growing form of nonbank lending makes assessing its risks difficult.

AI Summary. The author estimates a 14.1% wage gap between H-1B visa workers and comparable U.S.-born workers after controlling for age, gender, education, geography, and occupation. Competing research finds a smaller gap, but the author argues it wrongly compares lottery winners' wages to native wages from before the visa recipients could begin earning.

George Borjas City Journal
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Responding to He and Ozimek’s claim that his paper overstates the wage gap, Borjas argues “H-1B workers should be compared to native workers in the year when they will be earning the bulk of the salary, not in the year when they were awarded the visa.”

How large is the wage gap between H-1B and native workers?

Core argument: The author estimates a 14.1% H-1B wage gap using H-1B wage data from the FY2021–FY2024 lotteries and the 2023 American Community Survey, controlling for age, gender, education, geography, and occupation, with figures inflation-adjusted.

The table summarizes the results of both my analysis and that of He-Ozimek. The first row reports a 14.1% wage gap estimated using H-1B wage data from the FY2021-FY2024 lotteries and the 2023 American Community Surveys (ACS), as I did in my original paper, [controlling for] age, gender, education, geography, and occupation. These numbers are inflation-adjusted, as the NBER paper notes. Row 2 presents the results implied by the He-Ozimek research design, which suggest a smaller wage gap, depending on the exact specification. There is, however, a fundamental error in that design. He-Ozimek calculate the H-1B wage gap by comparing the wage of the FY2024 lottery winners with the wage of natives in the 2023 ACS. H-1B workers should be compared to native workers in the year when they will be earning the bulk of the salary, not in the year when they were awarded the visa. The FY2024 H-1B lottery was conducted in March 2023. The actual employment of H-1B recipients begins after their H-1B status is approved and after the federal fiscal year begins on October 1, 2023; the earliest that FY2024 recipients could actually start earning was in the last quarter of 2023.

Takeaways by Macro Roundup® AI

  1. The author estimates a 14.1% H-1B wage gap using H-1B wage data from the FY2021–FY2024 lotteries and the 2023 American Community Survey, controlling for age, gender, education, geography, and occupation, with figures inflation-adjusted.
  2. The He-Ozimek research design implies a smaller H-1B wage gap depending on specification, but the author identifies a fundamental error in comparing FY2024 lottery winners' wages with native wages in the 2023 ACS.
  3. The FY2024 H-1B lottery was conducted in March 2023, and recipients could not begin earning until the last quarter of 2023 at the earliest, after H-1B approval and the October 1, 2023 start of the federal fiscal year.

Related Articles:

  • The H-1B Wage Gap, Visa Fees, and Employer Demand — An analysis merging Labor Department, Homeland Security, and American Community Survey data estimates the average H-1B visa worker earns about 16% less than a comparable US-born worker, implying payroll savings near $100,000 over a six-year visa term. Simulations suggest a $150,000–$200,000 visa fee would barely reduce hiring while raising $10bn–$20bn annually.
  • The Flawed Paper Behind Trump’s $100,000 H-1B Fee — Correcting for a mismatch in survey years and for comparing workers' place of work to natives' place of residence cuts the estimated H-1B wage gap to roughly one-third of the original claim. The remaining average masks that H-1B workers aged 21–22 earn about a 20% premium over comparable native-born workers, while a shortfall appears only after age 34.

AI Summary. Ukraine has produced drones built without Chinese components, though mass production remains unlikely because Chinese parts are much cheaper and China's manufacturing dominance makes any drone hard to classify as truly "China-free." Two Ukrainian companies making such drones were selected among 11 firms to compete for US Defense Department contracts for low-cost attack drones.

Maria Varenikova New York Times
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Two Ukrainian firms have built “China-free” supply chains for drone manufacturing. Overall, 38% of Ukrainian drones are manufactured with Chinese components, down from close to 100% at the start of 2024.

Can drones be built without Chinese components at scale?

Core argument: Two Ukrainian companies that have built "China-free" drones were selected to compete for contracts in a Pentagon "drone dominance program" under which the United States plans to buy thousands of low-cost attack drones.

Ukraine will not be mass-producing drones with no Chinese components anytime soon, because it’s still much cheaper to use them. Given China’s dominance of global manufacturing, it is hard to define any drone as truly “China-free.” Many components made outside China still contain Chinese parts or raw materials. But Ukrainian officials believe it is important to make drones with as few components from China as possible, and to be able to continue making drones if Chinese supplies should be cut off. Two companies in Ukraine that have built “China-free” drones were picked to compete for contracts in a Pentagon “drone dominance program” under which the United States plans to buy thousands of low-cost attack drones. One of the companies, Ukrainian Defense Drones Tech Corporation, where the men were soldering circuit boards in the basement workshop, was among 11 in all selected last week for possible American drone orders.

Takeaways by Macro Roundup® AI

  1. Two Ukrainian companies that have built "China-free" drones were selected to compete for contracts in a Pentagon "drone dominance program" under which the United States plans to buy thousands of low-cost attack drones.
  2. Ukraine will not mass-produce drones without Chinese components soon because using Chinese parts remains much cheaper, and Ukrainian officials aim instead to minimize Chinese content and sustain production if Chinese supplies are cut off.
  3. China's dominance of global manufacturing makes it hard to define any drone as truly "China-free," since many components made outside China still contain Chinese parts or raw materials.

Related Articles:

  • America’s Drone Dilemma — US drone makers are held back by scale: China's DJI is estimated to sell more than half the world's cheap first-person-view drones, giving China leadership in key components, since specialized chips are only worth developing if costs can be spread across many units. A 25% US tariff prompted DJI to shift US-bound production to Malaysia.
  • Can Drones Be Stockpiled? Europe Wrestles With Weapons Dilemma — European defense officials argue that small, cheap drones have proven as effective as heavy armour in Ukraine, but stockpiling millions of them risks holding weapons made obsolete within months by new software, radio frequencies, and autonomous navigation. Drones that dominate one week can be jammed or outclassed the next.
  • Why Every Country Needs To Master The Electric Tech Stack — Drones are the foundation of hard power in the early 21st century, so a country unable to produce them domestically is at a disadvantage. As electric motors overtake combustion engines as the core technology that makes machines move, the same supply chains and production processes used for electronics can also produce cars, drones, robots, and appliances.

Thursday, March 12, 2026

AI Summary. Conflict in the Middle East has cut crude and oil product flows through the Strait of Hormuz from about 20 mb/d to a trickle, prompting Gulf countries to cut oil production by at least 10 mb/d. Global oil supply is projected to fall by 8 mb/d in a single month.

IEA Staff International Energy Agency
Date Posted:

The IEA estimates that the effective closure of the Strait of Hormuz will lead to a net global decline in oil supply of 8mm bpd, as a 10mm decline in Middle East production is partially offset by increases from non-OPEC+ producers Kazakhstan and Russia.

How much does global oil supply fall when a shipping chokepoint closes?

Core argument: Crude and oil product flows through the Strait of Hormuz have fallen from around 20 mb/d before the Middle East war to a trickle, in what the IEA calls the largest supply disruption in the history of the global oil market.

The war in the Middle East is creating the largest supply disruption in the history of the global oil market. With crude and oil product flows through the Strait of Hormuz plunging from around 20 mb/d before the war to a trickle currently, limited capacity available to bypass the crucial waterway, and storage filling up, Gulf countries have cut total oil production by at least 10 mb/d. In the absence of a rapid resumption of shipping flows, supply losses are set to increase. Global oil supply is projected to plunge by 8 mb/d in March, with curtailments in the Middle East partly offset by higher output from non-OPEC+ producers Kazakhstan and Russia following disruptions at the start of the year. While the extent of losses will depend on the duration of the conflict and disruptions to flows, we estimate global oil supply [will] rise by 1.1 mb/d in 2026 on average, with non-OPEC+ producers accounting for the entire increase.

Takeaways by Macro Roundup® AI

  1. Crude and oil product flows through the Strait of Hormuz have fallen from around 20 mb/d before the Middle East war to a trickle, in what the IEA calls the largest supply disruption in the history of the global oil market.
  2. Gulf countries have cut total oil production by at least 10 mb/d as capacity to bypass the Strait of Hormuz remains limited and storage fills up, with supply losses set to increase absent a rapid resumption of shipping flows.
  3. Global oil supply is projected to plunge by 8 mb/d in March, with Middle East curtailments partly offset by higher output from Kazakhstan and Russia, and to rise by 1.1 mb/d on average in 2026, an increase entirely from non-OPEC+ producers.

Related Articles:

  • Global Economics Comment: Global Economic Impacts of the War in Iran — The main economic risk to major economies from the war in Iran is that higher energy prices lift inflation and slow growth, with oil near $80/bbl, up 14% since late February. Analysts project oil moderating to $76/bbl and then $65/bbl as the risk premium fades in a structurally oversupplied market.
  • The Long-Feared Persian Gulf Oil Squeeze Is Upon Us — With crude unable to reach world markets through the Strait of Hormuz, Iraq has cut output by more than two-thirds and producers in Kuwait and Abu Dhabi have slowed production as storage tanks fill. JPMorgan Chase analysts estimate regional daily output could fall by around 9m barrels, close to a tenth of global demand.
  • IEA Will Launch Largest-Ever Oil Release From Global Strategic Reserves — The International Energy Agency's member countries will release 400m barrels of oil from emergency stocks, the largest such release on record, to counter crude prices driven up by the war with Iran. Analysts estimate the release could fully offset lost supply only if the conflict ends soon.

AI Summary. Because innovation is intangible, risky, and hard to finance externally, firms with higher research and development intensity—R&D spending relative to total assets—tend to hold more of their assets in cash. R&D intensity has risen over the past four decades, with the increase concentrated among the most research-intensive firms.

Juan Sánchez and Masataka Mori Federal Reserve Bank of St. Louis
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American firms’ R&D relative to total assets saw a sharp rise starting in 2013. This rise in R&D intensity may make firms more dependent on external finance going forward.

Why do research-intensive firms hold more cash?

Core argument: Between 2013 and 2024, R&D intensity—R&D expenditures divided by total assets—rose by 6.9 percentage points at the 90th percentile and 3.4 at the 75th, compared with 2.0 at the mean and 0.9 at the median.

Innovation is inherently difficult to finance externally: It is intangible, risky and subject to severe asymmetric information. As a result, firms with higher R&D intensity—R&D expenditures divided by total assets—tend to hold a larger share of their assets in cash. The figure displays R&D intensity - R&D expenditures divided by total assets - i.e. it tracks how aggressively companies invest in developing new products and technologies relative to their size. R&D intensity has risen steadily over the past four decades, with the increase concentrated in the upper tail of the distribution. The figure shows a particularly notable acceleration between 2013 and 2024: The mean and median rose by 2.0 percentage points and 0.9 percentage points, respectively, while the 75th and 90th percentiles increased by 3.4 percentage points and 6.9 percentage points, respectively. Looking ahead, if AI-related investment continues to expand, firms may enter a period with lower internal liquidity and greater reliance on external financing. Because innovation is typically intangible, risky and difficult to pledge as collateral, such a shift could create financing challenges in the years to come.

Takeaways by Macro Roundup® AI

  1. Between 2013 and 2024, R&D intensity—R&D expenditures divided by total assets—rose by 6.9 percentage points at the 90th percentile and 3.4 at the 75th, compared with 2.0 at the mean and 0.9 at the median.
  2. Firms with higher R&D intensity tend to hold a larger share of their assets in cash, as innovation is intangible, risky and subject to severe asymmetric information, making it difficult to finance externally.
  3. R&D intensity has risen steadily over the past four decades, with the increase concentrated in the upper tail of the distribution, and continued expansion of AI-related investment could leave firms with lower internal liquidity and greater reliance on external financing.

Related Articles:

  • Tracking AI’s Contribution to GDP Growth — Investment in information processing equipment, software, research and development, and data centers contributed 0.97 percentage points to real GDP growth over the first three quarters of 2025, or 39% of total growth, compared with 0.81 percentage points and 28% during the dot-com investment boom of 2000.
  • Financing The AI Boom: From Cash Flows To Debt — Spending on semiconductor plants and data centers, negligible before recent years, has averaged 0.4 percentage points of US GDP growth, and total IT-related investment has reached 5% of GDP, exceeding its dot-com-era peak. Unlike that earlier boom, which was driven by firms using IT products, the current one is driven by IT producers.
  • The Intellectual Spoils of War? Defense RD, Productivity and International Spillovers — The authors estimate that a 10% increase in government-financed R&D, largely defense, is associated with a 4.3% rise in privately funded R&D across OECD countries, indicating "crowding in" rather than "crowding out." They also find international spillovers raise private R&D abroad, though the overall effect on US productivity growth is modest.

AI Summary. Splitting hyperscaler computing investment into maintenance spending, proxied by depreciation schedules, and growth spending shows that growth spending accounts for over half of suppliers' revenues but only a fraction of hyperscalers'. The authors argue this asymmetry makes Nvidia less cheap than Microsoft despite similar price-to-earnings ratios.

Tom Hancock GMO
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A slowdown in the AI buildout would not impact hyperscalers’ revenues, but would significantly impact suppliers. Thus, Tom Hancock argues, risk adjusted, “Nvidia is not as cheap as Microsoft, even though the difference in their current P/E’s is not large.”

Does growth capex exposure make chip suppliers riskier than hyperscalers?

Core argument: Growth capex accounts for over half of compute suppliers' revenues while supporting only a fraction of hyperscalers' revenues, so a pause in capacity expansion by hyperscalers would create a bloodbath in the supply chain.

It is helpful to split the investment spend at the Compute layer into two buckets. One is the “maintenance capex” that Hyperscalers need to maintain their current compute capacity. This is proxied by their depreciation schedules (and we think the controversy about whether 4, 5, or 6 years is the right number for a GPU is not of the highest consequence). The remainder is “growth capex.” This is investment to extend compute capacity. While the growth capex supports a fraction of the Hyperscalers’ revenues, it accounts for over half of the suppliers’. And so, if the Hyperscalers were to take their foot off the gas and say, “Hmm, capacity is good for the next year or so,” there would be a bloodbath in the supply chain. It is this risk that makes us think Nvidia is not as cheap as Microsoft, even though the difference in their current P/E’s is not large.

Takeaways by Macro Roundup® AI

  1. Growth capex accounts for over half of compute suppliers' revenues while supporting only a fraction of hyperscalers' revenues, so a pause in capacity expansion by hyperscalers would create a bloodbath in the supply chain.
  2. Nvidia is not as cheap as Microsoft despite a small gap in their current price-to-earnings ratios, because Nvidia carries the risk of hyperscalers slowing growth capex.
  3. Splitting hyperscaler compute spending into maintenance capex, proxied by depreciation schedules, and growth capex clarifies the investment picture, while the dispute over whether a GPU lasts four, five, or six years is not of the highest consequence.

Related Articles:

  • Big Tech’s $680bn Buy-Now-Book-Later Problem — Morgan Stanley's accounting team estimates that splitting hyperscaler capital spending into AI and non-AI components, with graphics chips assumed to last up to six years and warehouses 15 years, could quadruple Alphabet's depreciation expense within several years and lift Oracle's from $4bn to $56bn, equal to 28% of expected revenue.
  • Putting The Total Amount Of Hyperscaler Capex Into Perspective — Capital spending by the largest cloud computing companies is projected to reach about $646bn, roughly 2% of US GDP. For comparison, annual US consumer spending growth is around $1tn, total US bank loan growth was about $700bn, and US defense spending was $917bn.
  • Rough Notes, Feb 20, 2026: AI Capex in Q4 GDP, Anthropic Revenues, Agentic Domains, etc. — An early estimate puts the floor contribution of artificial intelligence capital spending to fourth-quarter US GDP growth at about 64%, and likely closer to 80% including externalities and multipliers, though the calculation is not adjusted for imports. The author also notes that token price deflation persists and that US-China token price differences are immense and growing.

AI Summary. Margin debt has reached a record high of about $1.3tn. Analysts argue this leverage could amplify any stock market downturn, as leveraged investors are forced to sell into falling markets.

Torsten Sløk Apollo
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Margin debt has hit a record high of ~$1.3T. Sløk notes this could amplify a correction as leveraged investors are forced to sell into falling markets.

Does record margin debt amplify stock market downturns?

Core argument: Margin debt has reached a record high of roughly $1.3tn.

With margin debt at record highs, any downturn in stocks risks turning into a sharper correction as leveraged investors are forced to sell into falling markets.

Takeaways by Macro Roundup® AI

  1. Margin debt has reached a record high of roughly $1.3tn.
  2. Sløk notes that record margin debt could amplify a stock market correction as leveraged investors are forced to sell into falling markets.

Related Articles:

  • Chart of the Day: AI Capex, From Bonanza to Burden — Stock price reactions to large artificial intelligence capital spending announcements have shifted from rewarding to penalizing companies, with the valuation multiple markets assign to such spending collapsing and likely turning negative. Technology companies once valued for low debt and low capital intensity are now among the leaders in both.
  • Valuing AI: Extreme Bubble, New Golden Era, or Both — By the investment firm's definition of a bubble — a price two standard deviations above an asset class's long-term real trend — U.S. equities are in bubble territory and extremely overpriced on historically effective valuation metrics, with a cyclically adjusted price-earnings ratio of 40 and a record share of the market trading above 10x sales.
  • Everyone’s Looking For A Bubble. No One Sees The Stampede — A proprietary model estimates monthly artificial intelligence revenue grew roughly 18-fold in two years, from $772m to $13.8bn, with AI accounting for an estimated 23% of Google Cloud, 10% of Azure and 5% of Amazon Web Services. The model's ratio of investment to revenue fell from 6.1x to 4.7x, still historically high.

AI Summary. Lower fertility cannot meaningfully reduce mid-century emissions because of timing: most people alive in 2050 have already been born, with United Nations projections implying about 75% of the 2050 US population will be over age 24. A 10% decline in births would cut the 2050 population by only about 2.5%, mostly children whose consumption and emissions are low.

Kevin Kuruc Aspen Economic Strategy Group
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Kuruc argues fertility changes reduce population far too slowly to affect near-term climate goals – particularly reducing carbon emissions. Further, smaller and older populations will mean greater fiscal constraints on environmental initiatives.

Can lower birth rates meaningfully reduce mid-century emissions?

Core argument: United Nations 2024 projections expect about 75% of the U.S. population in 2050 to be over age 24 and thus born before 2026, so fertility changes can affect only the remaining 25% of the population pyramid.

The reason that low fertility will not reduce long-run climate change is simple: timing. The timelines over which the world is aiming to substantially curtail emissions do not line up with the timelines over which fertility impacts the size of the population. It is too late for changes in fertility to make a large difference in population sizes this century, and by the end of this century, it will be too late for population changes to make a large difference to eventual warming. A large majority of the people who will be alive in 2050—a focal year in climate discussions—have already been born. Demographic projections expect that about 75% of the United States population in 2050 will be over the age of 24, and hence, born prior to 2026 (United Nations 2024). Even an immediate change in fertility can only affect the 25 percent of the population pyramid that has not yet been born, implying that, for example, a 10% decline in births would produce only a 2.5% decline in the size of the overall 2050 population. Moreover, these missing individuals would be mostly children—too young to have entered the workforce, when their income, consumption, and emissions peak. So, any realistic decline in near-term births would have a trivial impact on mid-century emissions.

Takeaways by Macro Roundup® AI

  1. United Nations 2024 projections expect about 75% of the U.S. population in 2050 to be over age 24 and thus born before 2026, so fertility changes can affect only the remaining 25% of the population pyramid.
  2. A 10% decline in births would produce only a 2.5% decline in the overall 2050 population, and those missing individuals would mostly be children, too young to have entered the workforce, when income, consumption, and emissions peak.
  3. The environmental case for low fertility turns on timing: it is too late for fertility changes to make a large difference in population size this century, and by the end of the century population changes will matter little for eventual warming.

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