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Blackwell Bottlenecks and Embodied AI: Why Hardware Will Dominate 2026

Published on December 14, 2025

Jordi Visser

In this week’s video, I break down the weekly movers in a busy week as small-caps hit new all-time highs alongside transports, midcaps, and microcaps. Markets are pricing in a higher probability of reflation with PMI-sensitive factors surging, copper breaking to five-year highs, and the CRB raw industrials index reaching new yearly highs. The Fed cuts rates and the Press conference was the most dovish in years while three FOMC members dissented and they announced bill purchases. Oracle’s 11% weekly plunge highlighted balance-sheet risks facing hyperscalers as AI capex spending accelerates without immediate revenue visibility.

The critical insight from Gavin Baker’s interview with Patrick O’Shaughnessy: we’re entering a 3-4 quarter “ROIC air gap” where billions in training capex generate zero revenue before inference monetization begins. The binding constraint has shifted from GPUs to electrical power, gas turbines, transformers, and grid interconnects now determine who wins. Blackwell’s transition from 30kW to 130kW per rack requires liquid cooling and reinforced infrastructure, effectively stalling 2024 hardware progress while reasoning models bridge the gap. This creates forced rotation into assets traditional investors have avoided: utilities, energy infrastructure, Bitcoin (as grid-stabilizing “virtual batteries”), Tesla (approaching unsupervised robotaxis in Austin within weeks), and small caps benefiting from diffused hardware capex.

Chair Powell’s press conference revealed the Fed now views AI as a primary driver of stronger GDP and a contributor to labor market weakness, with payroll data potentially overstated by 60,000 jobs monthly. The shift from compute power to electric power infrastructure favors companies controlling bottlenecks over those waiting in line. With massive IPOs from SpaceX, OpenAI, and Anthropic likely by 2027 competing for growth capital, and software companies facing margin compression from AI-native startups, alpha is migrating toward physical infrastructure buildout. Michigan consumer confidence sits near 45-year lows, the opposite of bubble conditions, while PMI indicators, earnings revisions across 12 of 16 global sectors, and the beta-over-quality factor all signal cyclical acceleration ahead.

Timestamps:

(00:00–02:22) Reflation signals: S&P down 60bps but small caps up third straight week, IWM/midcap/microcap new all-time highs, Aussie 10-year rates breaking higher, CRB raw industrials surging, copper at 5-year highs
(02:22–04:19) Factor rotations: Size rolling over (PMI bullish), growth-over-value compressing, earnings revisions accelerating in 12/16 global sectors, transports leading despite weak current data
(04:39–06:27) Disinflation evidence: Gas at pump down 16 cents since November, owner’s equivalent rent back to 2019 levels, ECI declining, quits rate falling, 2-year inflation swaps at yearly lows
(06:52–09:35) Fed Chair Powell’s key points: Labor market weaker than headline data, payrolls overstated 60k/month, AI layoffs now visible, AI primary GDP driver, productivity shift structural not temporary, service inflation cooling
(10:56–15:26) Bubble debate: Russell Napier/Howard Marks perspectives, key difference is demand remains ahead of supply, infrastructure lags digital demand, Michigan consumer confidence near 45-year lows (opposite of dot-com peak)
(15:44–17:20) Oracle warning: Down 32% from September highs, CDS spreads widening, balance sheet concerns as hyperscalers face revenue timing risk from heavy capex
(17:20–22:53) Gavin Baker insights: Must use top-tier paid models to judge progress, Blackwell transition most complex in history (30kW to 130kW racks), reasoning saved scaling progress, 3-4 quarter ROIC air gap before inference revenues arrive, SaaS companies face structural headwinds like post-fracking energy, Meta couldn’t run 100k GPU cluster coherently
(26:36–27:55) ROIC air gap visualization: Training capex (Blackwell buildout) precedes revenue by quarters, creating balance sheet pressure for hyperscalers while opening opportunities in power/grid infrastructure
(33:04–35:46) Recursive self-improvement: Eric Schmidt/San Francisco consensus places this 2-4 years out, will accelerate AI beyond current pace, Pentagon forming AGI steering committee, military has vested interest in continued progress
(36:08–37:54) Tesla robotaxi: Elon Musk announced unsupervised full self-driving in Austin “in about 3 weeks” with no one in vehicle, marks opening act of embodied AI race, Colossus 2 first gigawatt data center enabling rapid progress
(38:11–40:18) Hardware cycle implications: 17-year software stagnation (like Corning) ending, VLM/VLA transition demands physical infrastructure, lidar for non-vision autonomous systems, gas turbines/transformers/solar all underinvested
(40:38–42:36) IPO wave ahead: SpaceX, OpenAI, Anthropic, xAI need capital for hardware buildout, creates growth-multiple compression risk for incumbent software, IWM-over-QQQ “Black Widow” trade works when PMIs rise
(42:57–47:06) Bitcoin/crypto: Most asymmetric career bet, still in technical downtrend until 92-93k breaks, Ethereum needs 3k hold, beta-over-profitability correlation, JP Morgan arranging Galaxy bond on Solana, banks seeking Saylor Bitcoin advice, tokenization enabling illiquid asset liquidity (private credit/CRE)

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