In this episode of Facts vs Feelings, Ryan Detrick, Chief Market Strategist at Carson Group, and Sonu Varghese, Chief Macro Strategist at Carson Group, open with a cautionary tale from the AI-focused hedge fund Situation Awareness, whose founder went from up more than 400% year-to-date to a 67% collapse in July, a stark reminder that concentration, leverage, and liquidity can undo even the best fundamental research.
From there, Ryan and Sonu dig into the Fed’s latest meeting, where Chair Kevin Warsh’s refusal to offer guidance sent long-term yields soaring instead of calming markets, with the 30-year hitting its highest level since 2007. Sonu explains why nominal GDP growth running near 6-8% (even as real growth stays soft) points to a genuinely inflationary growth environment, and why the bond market, not stocks, may be the real test of the new Fed chair’s credibility.
The conversation then turns to earnings season and the eye-popping hyperscaler CapEx figures: Microsoft, Amazon, Meta, Google, and Oracle are now projected to spend over a trillion dollars in 2027 alone, close to 3% of GDP, with Microsoft and Amazon rewarded for showing results while Meta and Oracle get punished for spending without proof of ROI. They close with a look at GDP internals showing AI investment now accounts for more than 40% of real GDP growth, banks breaking out to new highs as a bullish signal, a weakening dollar, and seasonal risks heading into August and September.
Key Takeaways
- Situation Awareness, an AI-focused hedge fund, went from up more than 400% year-to-date to down 67% in July after a concentrated, leveraged bet unwound, forcing a distressed sale of stock holdings to Citadel.
- Fed Chair Kevin Warsh’s press conference offered little forward guidance, and long-term yields spiked in response, with the 30-year Treasury hitting its highest level since 2007 and 30-year mortgage rates climbing from 5.9% to 6.7% over the last five Fed meetings despite no rate changes.
- Nominal GDP growth has averaged 5.8% over the last six quarters (7.9% in Q2 alone), well above the 2010-19 trend of 4%, supporting the view that this is an inflationary growth environment even as real GDP growth lags at 1.9%.
- The five largest hyperscalers (Microsoft, Google, Amazon, Meta, Oracle) are now projected to spend over $1 trillion in CapEx in 2027 alone, up from earlier 2026 outlook estimates of $600 billion, with markets rewarding companies showing revenue results (Microsoft, Amazon) and punishing those that aren’t (Meta, Oracle).
- AI-related hardware and software investment accounted for roughly 42% of real GDP growth over the last six quarters and now represents about 5% of GDP, surpassing the peak proportion seen during the dot-com boom.
- Bank stocks (KBE) are breaking out to new highs after a base dating back to 2007, a signal Ryan argues is historically a positive one for the broader bull market, even as seasonally weak August and September approach in a midterm year.
Jump to:
0:00 — Welcome And Quick Banter
1:25 — Live Boston Show Announcement
3:24 — AI Hedge Fund Blowup Lessons
9:39 — Fed Meeting and Market Whiplash
16:47 — Nominal Growth and Sticky Inflation
28:37 — Hyperscalers March Toward One Trillion
32:34 — Earnings Reactions from Big Tech
43:45 — GDP Under the Hood and AI Share
48:56 — Markets Sideways Seasonality and Banks
53:33 — Dollar Drop International Angle and Wrap
Connect with Ryan:
- LinkedIn: Ryan Detrick
- X: @ryandetrick
Connect with Sonu:
- LinkedIn: Sonu Varghese
- X: @sonusvarghese
Questions about the show? We’d love to hear from you! factsvsfeelings@carsongroup.com
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