In this week's Stansberry Investor Hour, Dan welcomes Marko Papic back to the show. Marko is the chief strategist and head of GeoMacro at BCA Research, a global investment research firm.

Marko kicks things off by discussing the "second derivative of AI capex," which signals the beginning of the end of the AI boom. Due to tension in the Middle East potentially starting to ease up, the market is nearing the peak of the "Wall of Worry," and as a result, investors could lose a component that helps fuel the current rally. Additionally, Marko says that AI is inflationary. It takes labor, copper, and electricity to construct and run a data center, and with oil prices not likely to return to the levels they were at before the conflict at the Strait of Hormuz, that will just compound the inflation. Marko details what you can expect from the "endgame" of the Hormuz blockade...

It's pretty clear to me that both Iran and the U.S. don't have an interest in crashing the economy... [Iran] does not want to get the entire world to effectively hate them. So they have an interest in certainly raising gasoline prices in the U.S. and making life uncomfortable for President Trump... The reason they didn't destroy all of [the liquefied natural gas] facilities in Qatar, the reason that they haven't targeted every single piece of infrastructure in the Strait of Hormuz, the reason they didn't sink every ship they could have sunk... is that at the end of the day, every single thing that makes Iran a modern economy is imported from China or through other intermediaries. They need China on their side, not as an ally, but not as a pariah... Iran and the U.S. had so many opportunities to go to full war at this point. This is like two guys at a bar and you're watching it from the back.

Next, Marko delves into oil prices and demand. He says that the conflict is starting to give several impressions to other countries after this passes. The first is that the U.S. creates demand when it has a desire to obtain resources and seeks them out. Countries will then start hoarding them as a means of securing them. The second impression the conflict shows is that our allies might not be able to rely on us in a prolonged conflict. Marko says that the raid in Venezuela earlier this year and the Strait of Hormuz situation were both supposed to be short-term incidents. The U.S. did not intend for the blockade to last as long as it has. So in the event of a drawn-out conflict, our allies might have second thoughts about asking for aid. However, even if we are shut out, Marko says America is integrated into the global infrastructure...

Think of American hegemony as a global superpower, as a geopolitical hegemon. Think of that as software. That's software that was running the planet... And so everyone's decided that the U.S. is no longer a hegemon. So we're now running under a different operating system... But here's the interesting thing. The hardware that used to run this software [is] intimately interrelated with the software itself. So the physical infrastructure of planet Earth, the physical infrastructure is built for America... All of Canada's pipelines go to America... Australia imports refined kerosene from South Korea... Because America's got it... How is that possible? Because America.

Finally, Marko sums up the three main reasons why an "inflationary brew" is developing for data centers. The first is that Federal Reserve Chair Kevin Warsh might not be as dovish as hoped prior to entering the role. And it doesn't seem like President Donald Trump will do much to deter him from raising interest rates. That will make building data centers more expensive. The second is that the major AI IPOs are creating a massive supply with little liquidity. With many individual investors primarily having exposure to the S&P 500 Index, they'll be gaining exposure with their 401(k)s but won't be actively buying or selling them, resulting in stagnancy. And lastly, AI capex is slowing down since it's not feasible to build as many data centers as these companies desire...

You've got [the first ingredient], which is [that] inflation leads to higher interest rates. The second is the IPOs, which increase the supply of stocks. And then the third one is that our growth engine – the consumer – has not been spending for the past 18 months, 12 months. It's really just been this pace of AI data-center build-out. And I think that's going to normalize, which is negative.

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The transcript is coming soon.

This Week's Guest

Marko Papic is the chief strategist and head of GeoMacro at BCA Research. Prior to his work at BCA Research, he was a partner at an alternative asset-management firm in California, where he provided his investors and clients with controversial market calls, bold views, and around-the-clock research. He helped seed global macro hedge funds and curate several funds across public and private markets. His work on incorporating geopolitics into the asset-management industry has become part of the Chartered Alternative Investment Analyst ("CAIA") curriculum. He has lectured at top universities and frequently appears in global news media. Marko is the author of Geopolitical Alpha: An Investment Framework for Predicting the Future.