Bill Ackman, founder of Pershing Square, stated that the Federal Reserve's decision to raise the federal funds rate by 25 basis points to 3.75%—4.00% may be a mistake. In a public post, he wrote that if old models no longer apply to the current paradigm, central banks may make incorrect judgments. Chairman Kevin Warsh also mentioned after the meeting that investments in AI-related equipment and software have grown nearly 20% over the past year.

Ackman's reasoning is that the returns from winning the superintelligence race are nearly infinite, and the demand for computing power and energy is insensitive to interest rates, meaning rate hikes cannot suppress data center and chip procurement. Additionally, interest costs will be embedded in the supply chain and pricing, driving up the prices of goods and services, creating a cycle of "more rate hikes, more inflation, and further rate hikes." He distinguishes the 2022—2023 cycle as a world before ChatGPT.

Bridgewater's analysis estimates that Alphabet, Amazon, Meta, and Microsoft will invest at least $650 billion in AI-related projects this year, a significant increase from approximately $381 billion last year. Gartner predicts global AI spending will reach $2.7 trillion by 2026, a year-on-year increase of 49.5%. Another investment bank estimates that the capital expenditures of the five largest cloud providers will be around $800 billion to $820 billion in 2026, potentially rising to $1 trillion to $1.3 trillion in 2027, with operating cash flow increasingly unable to cover these costs, leading to a shift towards bonds, project financing, and chip collateral financing.

Mark Zandi, chief economist at Moody's Analytics, also stated before the rate decision that the probability of policy error is "disturbingly high," with inflation around 3.4%, a significant portion of which comes from supply shocks such as energy and tariffs, which rate hikes cannot suppress. To bring inflation back to 2%, either AI investment must be curtailed, or the rest of the economy must be suppressed more heavily. He later noted that rate hikes and rising long-term yields have begun to erode non-tech sectors, while large firms can still absorb interest due to high profit expectations. CME FedWatch indicates that the implied probability of another rate hike in October is about 64%. The sellers are sectors that must roll over financing, such as housing, credit cards, and non-tech capital expenditures, while the buyers are cloud providers and chip chains that are still expanding their balance sheets according to arms race logic; funds are flowing from interest-sensitive sectors to data centers and power. The beneficiaries are platforms that can pass interest costs into cloud pricing, while other demand is pressured by the same interest rate knife.

Source: Public Information