Global Macro Trading
The AI Capex Cycle
The AI capex boom is driving an inflationary counter-cycle within the longer-term dollar-credit contraction outlined in our Fundamental Thesis.
We expect this cycle to unfold in three phases: an inflationary buildout, a sharp risk-off reset, and a policy-driven final advance into the AI capex peak.
Macro defines the opportunity. Price structure determines the trade.
Price Structure Confirmation
Phase 1 depends on two key structures: USD/JPY maintaining its multi-year rising trend, and crude oil extending its bull market from the 2020 lows toward the pre-GFC high near $150.
A premature break of USD/JPY’s rising support, or a breakdown in crude’s advancing structure, would challenge the Phase 1 thesis.
USD/JPY · Weekly · Nov 2
Multi-year rising support remains intact. Watching for a final advance toward or above the 164–165 highs before a potential sharp reversal.
Phase 1 — Inflationary Buildout (Current)
AI capex, power and grid investment, and fiscal support drive nominal growth, fueling inflation and supporting risk assets.
The dollar weakens toward its target zone on the Fundamental Thesis chart. Rising oil prices, inflation, and bond yields eventually tighten credit conditions, setting the stage for the Reset.
Phase 2 — Risk-Off Reset (Projected)
Rising oil prices, inflation, interest rates, and tightening credit trigger a sharp sell-off in risk assets, compounded by growing doubts about AI economics.
The dollar rallies sharply, potentially exceeding its 2022 high near 115 on the dollar index.
Phase 3 — Final Advance (Projected)
Policy intervention stabilizes markets, easing financial stress and setting the stage for a final advance in risk assets toward the AI capex peak.
Risk assets recover and push to new highs.
Beyond the Cycle
As the AI investment cycle peaks and unwinds, the longer-term dollar-credit contraction outlined in the Fundamental Thesis reasserts itself.
For informational and educational purposes only. Not investment advice.