Bottom Line: AI Revenue Expectations
At $400-600bn ARR, 2029/2030 AI related capex plans are likely to come to fruition. Currently, the stocks most levered to AI related capex are getting very little credit for 2029 and beyond AI capex according to 22V Data & Infrastructure analyst Dauvin Peterson. Hence the significant compression in PEs for many AI related buildout baskets. We have recommended being long a basket of Dauvin’s “coiled springs” AI buildout names based on the idea that the $400-600bn ARR will be achieved (see my conversation with Dauvin HERE). These names have witnessed PE compression at the same time EPS expectations have increased meaningfully.
Relevant News: CNY
The PBOC’s unusually direct defense of its currency policy reinforces 22V China Team’s view of limited CNY upside over the next 3–6 months. Beijing does not see CNY appreciation as a solution to trade tensions and is unlikely to pursue a stronger currency while China’s economy remains weak. A stronger CNY would weigh on exports and jobs, while doing little to stimulate domestic consumption. The PBOC also wants to discourage appreciation bets that could lead to a sharp reversal, particularly while the Fed is hiking rates. Although currency policy could become a sticking point in US-China negotiations, the US remains more focused on rare earths and AI competition.
Things to Watch [Consensus, Results]:
Strategy:
The Selloff in AI Stocks and 10yr Yields is Tied to the Importance of AI ARR Reaching $400-600bn Exiting 2027 – (HERE)
Dinner attendees saw economic growth as sustainably strong despite 10yr yields being near 5.3%, and the breakfast survey is consistent with that: 62% see the 10yr at 5.25-5.50% over the next six months and another 15% at 5.50-5.75%. Only 23% expect yields below 5.25%. The S&P 500 view was more divided than usual: 46% expected the S&P to be up 5-10% and another 8% expected more than 10%, but 38% expected it down. 
Europe:
Last Chance Saloon for the EU and China to Avoid a Major Trade Confrontation But a Sign of White Smoke – (HERE)
EU-China trade tensions are rising as the EU pushes for a managed trade agreement ahead of next week’s EU leaders meeting. Germany’s shift toward France’s more confrontational stance strengthens the credibility of EU trade threats, though Beijing is unlikely to accept Brussels’ demands without testing EU political cohesion. While gradual escalation remains a real risk, a joint statement suggesting progress on hybrid vehicles and rare earths indicates any escalation has at least been postponed, which should be good near-term news for firms dependent on bilateral trade.
