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global · Friday, 22 May 2026
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Good morning. The global economy is finally pricing in the sheer cost of building a synthetic brain.
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SpaceX has formally filed for a $1.75tn IPO, James Murdoch is buying Vox Media, and LVMH is selling Marc Jacobs for $850m.
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The immense physical gravity of a synthetic brain
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Thoughts
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For two decades, the global economy relied on the technology sector as its primary disinflationary engine. The AI capital cycle is abruptly reversing that rule.
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Nvidia just posted an $81.6bn quarter, confirming that the rush for silicon remains absolute. But the hardware itself is getting exponentially more expensive. A single new rack reportedly now costs $2m, up from under $374k two generations ago. Federal Reserve chair Kevin Warsh explicitly warned this week that the soaring cost of this infrastructure is inflating producer prices across the supply chain, structurally altering the US inflation baseline.
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The macroeconomic bleed is clear. The Cleveland Fed's five-year inflation expectation has just hit a 19-year high. Central banks are finding themselves trapped between slowing growth and sticky prices. The European Central Bank is preparing to hike rates next month despite a severe services contraction, while Asian monetary policy remains frozen by the Hormuz energy shock. The massive capital being absorbed by the AI build-out is compounding these pressures rather than relieving them.
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If this dynamic holds, the era of software driving prices down through infinite scale is over. The market is funding an entirely new, highly expensive physical layer of intelligence. The sheer volume of money required to forge it guarantees that the base cost of doing business is going up everywhere.
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Enjoy the weekend. The central bankers are taking one too, whether the data permit it or not.
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| "They told us it was a cloud. It looks an awful lot like heavy industry." |
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