Daily Commentary

MarketMinder’s View: As this article references several companies, please note MarketMinder doesn’t make individual security recommendations—any firms mentioned here are coincident to a broader theme we wish to highlight. Here is another fear surrounding the booming AI industry, this one regarding accounting treatment of graphics processing units (GPUs), chips used for advanced large language models—and one of AI firms’ biggest costs. Companies buying loads of pricey GPUs are required to estimate how fast they will depreciate for accounting purposes. As the fear goes, “Choosing a longer period spreads out the cost over more time, allowing companies to report higher profits now. But there’s a risk in claiming that equipment will be good for six years if, in reality, it will have lost almost all of its value in four. A company might have to buy new, even more expensive chips sooner than expected. Any loans it took out using the now-useless chips as collateral, meanwhile, could get complicated. At the very least, a company might have to write down the value of obsolete equipment, creating a one-time hit to profits.” First, as the headline inadvertently demonstrates, this isn’t a “big unproven assumption,” but an issue investors are aware of. Capital depreciation isn’t a hidden risk, but one of many factors companies report—and analysts question. It is just receiving more attention now amid all the AI hype (and pushback), which also shows potential accounting discrepancies aren’t flying under the radar. Suprises move stocks most, and this isn’t among them. Second, contrary to concerns, the Big Tech firms buying all those GPUs have increased the useful life of their servers and network equipment over the last five years through software efficiency gains, extending their assets’ life. We don’t dismiss the potential for this to become a risk, but for now the fear seems overstated. For more on mushrooming AI fears, please see yesterday’s commentary “What to Make of AI Bubble Talk.”

MarketMinder’s View: As headlines like this imply, stocks’ rise hinges on “rate-cut hopes” spurred in part by “dovish remarks from Fed policymakers” and potential Fed personnel changes next year that will supposedly introduce members more amenable to said cuts. The problem with these views, as we have explored before, is that monetary policymakers’ minds are unreadable and—more importantly—rates don’t drive stocks anyhow. There are plenty of instances when seemingly “dovish” central bankers about-face, which is why we always caution against taking their words to the bank. But even if the Fed were to suddenly hike rates unexpectedly, would that fundamentally alter stocks’ course (some possible sentiment-related moves notwithstanding)? Consider: The upper end of the fed-funds target range is currently 4.0% but the average rate banks pay on savings deposits (as of November) is 0.4%, per the St. Louis Fed. Their funding costs remain close to zero, which means they are still making money lending at longer term rates above the benchmark 10-year Treasury’s 4.0%. This is a big reason why banks’ loan growth has almost doubled to 5.2% y/y through November 12 from 2.7% at 2025’s start. Credit is fueling economic growth—and earnings. Fed rate cuts (or even hikes!) likely wouldn’t alter that picture much with banks’ funding costs still pinned near zero, which is one reason we find all the Fed talk and speculation overblown.

MarketMinder’s View: “The Commerce Department said durable goods orders climbed by 0.5 percent [m/m] in September after spiking by an upwardly revised 3.0 percent in August. Economists had expected durable goods orders to rise by 0.3 percent compared to the 2.9 percent surge that had been reported for the previous month. The bigger than expected increase by durable goods orders partly reflected surges by orders for electrical equipment, appliances and components and primary metals.” Now, lumpy aircraft and defense orders influenced the prior “surge.” But: “The report also said orders for non-defense capital goods excluding aircraft, a key indicator of business spending, advanced by 0.9 percent for the second straight month.” These data suggest the outlook for a major part of business investment was faring fine as Q3 ended, which is also the most important takeaway here: This is old, old news. We are almost in December. September’s orders help confirm growth is chugging along, but that is about it.