“AI Compute Futures” — Has Wall Street Gone Too Far?

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“people I think just this summer kind of looking around and saying like well I want to go on vacation”

but also this is going to be a really expensive disaster. This week on explaining to me how to make the most of that precious PTO. New episodes, Sundays, wherever you get your podcasts. Welcome to Proftory Markets. I'm Adelson. It is August 13th. Let's check in on yesterday's market vitals. The S&P 500 climbed to what a fresh record following the latest inflation report more on that in a moment on Calshy the Aussie rate hike this year fell to 54% mean while the

Dow was roughly flat. Brent Crude was relatively stable as was the yield on tenure treasuries.

Core we've shares rallied 19% after doubling its second quarter revenue and finally space X shares

rose 10% after Elon Musk posted a recording of a company all hands on X. In the meeting, Elon told employees that AI revenue will exceed all other space X revenues by next month. Okay, what else is happening? Wall Street will soon be trading AI computing power like a commodity. The CME, one of the world's largest futures and options exchanges announced yesterday that it will start launching compute futures in October. Each contract will represent one month's

rent on an Nvidia chip. The idea in the CME's words is to turn computing power into a quote standardised tradable commodity. This could give data centre providers and AI companies both price transparency and the ability to hedge against swings in the cost of compute. But it all rests on two big questions. Number one is compute actually a commodity and number two should we actually be trading it. Hit it break this down with speaking with Rohan Goswami business reporter at

Semaphore. Rowan, this is the new future of AI. We're finalizing it. We're turning it into a

“commodity. That's the new plan from the CME. What is your reaction to this? Does this make sense to you?”

Look, we've heard a story a few months ago. This is not a new thing. Actually, this has been in the worst for some time. Larry Fink made an oblique reference to it at Milkin. Earlier this year that compute was going to become a financialised resource. And you quickly saw a couple of data providers actually step up to try and create the infrastructure for the CME and for ICE to actually offer these as products. I think they like to say that it's like oil or it's like electricity,

it's scarce, it's hard to transport, it's sort of diffuse. I don't know that I fully agree with that. I've only because oil is not something oil is actually finite, right? And so the idea that this is one to one with oil falls apart there a little bit. And it's also, again, I know you and Ed Zetron have talked about this lot. I know you've written about this a lot. It really poils down to what one player decides to do. And that's in video. If you think about the forward curve of

an asset, you can basically, and for those who don't really understand it, that's the idea of like

what direction month by month a commodity will trade in so they can go up, they can go down, right? And if they go down, that's basically suggesting that in the future, things will become cheaper. So theoretically, you'd want to see a downward trending forward curve with compute futures, right?

people to actually get their hands on compute. Of course, this isn't actually a free marketplace.

It's entirely up to Nvidia, right? The maker of these chips to actually determine the prices. And they are one could argue disincented from creating a world where there is a price transparency, right? They don't actually want people to know how much this costs. And B, from actually making things cheaper, because theoretically, as the cost of compute goes down, their chips become less valuable. Of course, there's more nuance to that. And I'm not, you know, certainly not you or Ed Zetron

level versus this, but there are some sort of competing incentives here. And also, I think as you alluded to, raises a broader question, which is, do we want to financialize this stuff, right?

“I know you talked about this yesterday, but this isn't the only way that Wall Street is starting”

to dip its toes really aggressively into a space that had kind of before been a closed loop. Right. So we'll get to the Nvidia part in a moment, because it's true. Nvidia is such an

important piece of this because this first contract that CME is going to release here is going to

be on the H100 chip, which isn't video chip. But I just want to linger on the commodity piece of this for a moment. It seems like there is a lot of debate right now as to whether we can actually call AI compute a commodity, like oil, like gold, like wheat, all of these commodities that change that trade on the CME. And it seems like one of the big issues is this idea that it isn't fungible. It isn't an identical commodity wherever you go because there are different types of chips,

chips can depreciate over time. You know, one generation of chip might be worse and older and less sophisticated than another. To what extent do you think that is a problem or is that something that the exchanges can just figure out? The exchanges to a degree have kind of figured it out. If you're thinking about units of measurement for whatever it is, hot rolled steel is probably a good example, right? Not all steel is created equal. Some steel is crappy, some steel is good,

which generally we've agreed to come together and say, okay, as an index and as a forward curve of a commodity, it is a essentially monolithic thing and very few if any CME customers are taking

“custody of physical commodities, right? So I think the fungibility or the tangibility of it is less of an”

issue. And I think there's actually really utility as you point it out for hyperscalers or even for frontier labs if they know that demand is going to ramp up over time or they want to manage their downside. There are actual and users here. But I think that like broadly speaking, the comparison again, like I hate to keep coming back to this, but it is not ever in my opinion going to be a real market because it would be an alligous to standard oil, right? If there was one company

that basically controlled in its entirety the flow of oil. Now you could argue that of course the the OPEC countries kind of functionally do that, but there are a lot of countries that are not part of OPEC and don't engage in that, right? But here there's no other game in town except for Nvidia, right? So if Nvidia's stated mission is to make ships less scarce to bring more ships into the ecosystem, you're depending on them basically to set the price not just now, but down the road

of this asset. Yes, and it seems that it's this all relates to Nvidia,

and more specifically to this $500 billion memorandum of understanding for nothing package that they

announced with the Avengers of Wall Street. Yeah, they are black stone, black rock, goldmen, etc. It seems as though this is the first step to legitimize AI compute specifically in video compute as a commodity that can be used as collateral to raise hundreds of billions

“pops, trillions of dollars of debt. Is that the gist of what's going on here? I think there's a”

fair read there, but I also think it's kind of it's a risk spreading mechanism, right? If you think about the deals that Nvidia has cut or set it will cut, right, recall the $100 billion. Again, remember memorandum understanding this line with OpenAI, I don't even remember when that was, right, this is all been concentrated in this multi trillion dollar juggernaut that is basically lending its balance sheet to companies that don't have credit ratings. It's a profit,

OpenAI, Frontier Labs, hyperscalers, they're stepping in and they're saying, look, we are good for the money, go ahead and buy our stuff. Now, if you are an Nvidia shareholder, if you are an Nvidia bondholder, if you are the US government, frankly, that at some point starts to make you really uncomfortable that all this risk is lying and is concentrated with one entity that is incented to behave like a monopoly, right? If you think about what

Nvidia is doing, they're subsidizing their chips at the expense of any potential new entrance and trapping these labs inside of their ecosystem. Now, this is functionally doing the same thing, because of course, Nvidia isn't bringing all these guys together to go buy chips from a competitor, but it is at least spreading the financial risk ground, but also the financial upside, right? If you think about what it does for a Goldman or KKR or a Blackstone, it provides them exposure

around Nvidia's diligence around their ability to design these labs. If you are bullish about

“this space, it's great. You are partnering with someone who knows what they're doing and all you're”

doing is being good for the money. Looking at this memorandum of understanding, whatever we want to

call at the $500 billion. memorandum is of understanding. memorandum does. As several pointed out,

it is not one cohesive vehicle. These are one off vehicles that we don't really yet have much clarity on. Yes. No, that is helpful clarification. Jensen Huang has said that this should a swage concerns about circular financing. The circular financing concerns, of course, being that these companies are investing money into each other and then those companies pay the money back to them, which then the original company books has revenue and then we think that the

whole economy is growing, but really the money is being recycled. This has been discussed a lot on this podcast. Jensen Huang says that this should make those concerns less of a concern, or put them to bed. Does it? Should this? What do you think? I mean, I think,

look, as the public markets and the private markets have started to look increasingly similar.

So, two of the risks associated in the public markets. And if you look at the S&P 500, I don't know off the top of my head what percentage gains have been propelled by Nvidia and any sort of AIJs in trade, but it is completely fair to say that you are either an AI have or have not and the have nots go like this right now and the have generally lumpy go like this, right? So, and that the same is true in the private markets. If you look at the sales that are getting

the real sales, not the private to private stuff, it is stuff in and around AI. It is cooling systems. It is energy. It is land. It is actual data centers, right? Everything is an AI trade. And so, at the end of the day, just because more people are financing it, it doesn't change

“the key man risk. I think about, like, there was a company in the late 90s, right?”

Very famously went bankrupt later on. I was rather required. Lusen, right? Which had a massive backlog of orders. Totally into the tens of billions of dollars and they said there is no need for anyone to be worried here. We are financing these things. We are helping people with these things. We are going to help our customers get here. Of course there is demand, right? Well, of course, the dot com a bubble burst. All their customers went bankrupt and Lusen was left with this

theoretical backlog of orders that actually amounted to nothing. Shareholders were wiped. It was acquired. It is one of those situations where I look at this and I go, well, there is no really avoiding this risk. Just because there are more players involved, doesn't mean the actual risk has gone down. Yes. Yeah, I research associate Dashlon pointed me to another late 90s anecdote. He pointed out that Enron actually tried to turn internet bandwidth into a tradeable commodity as well. Yes.

It seemed like a good idea. Then we overbuilt the fiber optic cable and then suddenly the capacity floated the market, the prices collapsed and suddenly looked like a very bad idea. Is that a good analogy? In fairness to Enron, Enron actually did build a very pioneering energy trading desk that was acquired. I can't remember who, maybe it was Citadel or another firm. But an incredibly lucrative desk that actually formed the bedrock of a lot of sort of commodities trading

“in that space generally. But to return to compute futures, I honestly, I don't know. I think at least”

with Enron at Ben with everyone was using this. This was something that everyone touched. You could see a market emerging for it at some point. But if you are fundamentally bearish on this space and think everything is going to zero, it's not like the Enron at where at some point, there will be enough human beings to say shade this demand. If you think this is a dud, if you think this is going to zero, which some people do, and you think it's very circular, then yes, the comparison

is apt in that it's fraudulent, but it's not an app comparison that it's not going to go in. Yes. All right. Very helpful, very clarifying. Ron, guess what I mean is business reporter at

Semaphore. Appreciate your time. Thank you. Appreciate it as always, Ed.

After the break, an update on inflation. And by the way, starting Monday, this show is taking a summer break for the next two weeks. We will be back on August 31st with a fresh episode. We'll see you there. Support for the show comes from BCX, the public ticker for private tech. For generations, American companies have moved the world forward through their ingenuity and determination. And for generations, every day Americans could be a part of that journey through perhaps the

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We're back with "Proftary Markets". Inflation cooled slightly in July, but it remains stubbornly above

the feds to percent target. The consumer price index rose 3.4% from a year ago and course EPI which excludes food and energy rose 2.5% both would down a tenth of the percentage point from the growth that we saw in June, gasoline prices fell from a month ago, but remain 25% higher than they were last year. Meanwhile prices continued to outpace wages, leaving consumers with less buying power than they had a year ago. Still stock prices rose on the report and government bond yields

retreated. Joining us to break down this inflation report was speaking with Mark Zandy, chief economist at Moody's Analytics Mark. It's good to see you. I was surprised by this report. I had predicted earlier. I thought that inflation was going to rise from the previous month. I mean it rose 3.4% from the year ago, but I thought that we'd see higher growth than we did.

“That's not what we saw. We saw a little bit lower kind of in line. What do you make of this report?”

And what does it say about where we're headed in terms of inflation? Well, it was a very consistent with consensus. Economists that look at this stuff, get surveyed. A very source is put together a average of those forecasts. This was kind of right down the line, right exactly where we're anticipated. Taking the monthly inflation numbers at face value, I'd say it's pretty benign. I think if we continue to get these kinds of reads, that's a good sign. A lot depends on what

happens with the Iran war and where oil and gasoline prices are going. And they're already up from where they were in July. So that auger is poorly for the month of August. And inflation remains as you point out, stubbornly high and well above the Fed's target. But I'll take it. You know, look, we've got to start somewhere. Hopefully this month, last month, take it together, and we get a few more months together. That will indicate that inflation's moving in the right

direction. On gas prices, they are down. They were down very slightly from June. June was not great in terms of gas prices. But it seems that they're rising again when we look at the price of oil right now, which just a couple days ago, breached $90 a barrel again, because it seems that we thought that we had a deal last week. I mean, I feel like a broken record here. We keep on saying that there's a deal. And there isn't a deal. We had the same thing

last week. Oil prices were coming down. And then it didn't materialize. Then I guess trade

How important is oil in terms of inflation going forward? And do you predict that it might get worse?

Well, it's critical. Obviously, gas prices are going back to food. A lot of that is based on the

“cost of diesel, because you have to transport the food from the seaport or the farm to the store shelf.”

The price of oil flows through to all kinds of other prices of other goods. So it's really critical. It has an outsized role in the kind of collective thinking of Americans, because that's the salient price. They see that price every day when they go to work. They take their kids to school. So when gasoline prices are moving north, that makes everyone understandably upset. Very difficult to change or driving behavior to adjust. So it's not great. You know,

it looked like, as you said, it looked like the war was going to wind down in July. We got some oil flowing through the straight. Oil prices got back down. We got gasoline below four bucks

a gallon, which, you know, just for context, it was below three dollars a gallon before the war

started up. But it's pushed back up. We're now back at four bucks, 10, four bucks, 15. And that's where we stay. You know, okay. It's a hardship, but we'll adjust. We'll live with it. But, you know, if the war goes off the rails in the straight doesn't reopen at some point here in the next few weeks, next couple months, in inventory of oil globally continue to wind down. At some point, prices are going to jump. And we're going to be looking back at four bucks, $55 in that'll be a

real problem. So I don't think we can, you know, it's very difficult to fort can't forecast it, because obviously it depends on, you know, these dynamics are impossible to gauge. But, you know, hopefully the parties involve, I figure out a way to, you know, end this thing, get the straight up and get oil prices down. If they don't, and oil prices go up, then as I said, we got a problem. You mentioned earlier how prices are rising faster than wages. And that seems to me to be like

“the most important statistic when it comes to the consumer economy. Like, is, is inflation”

eating into your buying power or making your buying power and spending power go down? Currently,

the answer is yes. And the answer has been yes for quite some time now in 2026. What does this mean

for one consumer spending, but also just the consumer economy going forward? Do you think that this is a trend that will continue? Yeah, totally. This is a big deal. You know, even it's even broader than just wages. So if you look at real, so that's after inflation, disposable after tax, so accounting for the tax, customer learning that you're income. So again, that's the shoot match for, that's the fodder, the financial fodder for spending. That's actually falling. It's declining

it's on a year over year basis, through the second quarter and coming into the third quarter. And, you know, obviously with these inflation statistics and prospect for our gasoline prices, it looks like it's going to continue. Wage growth continues to decelerate because of the tough labor market. So, you know, and that's the average, right? So that means half of Americans are seeing their real income, their real purchasing power actually decline. Now, they can cushion

the effect on their spending for a while, and you see that in the drawdown and they're saving, people's saving rate over all saving rate has come way in. It's not at a record low, it got, it got lower during the housing bubble, you know, leading up to the GFC, the global financial crisis. But other than that, this is the lowest saving rate we've ever seen. So we're kind of right on the edge for the consumer, the typical consumer, not the high end net worth consumer, because

they've got other risk financial resources. But for the typical American, and certainly for the folks in the bottom half below below the average, you know, this is, this can't be sustained for very long, and consumer spending will slow. Now, one thing, just one other quick note, one thing that is important to keep in mind, the folks, and we've talked about this in the past, the folks in the top part of the income distribution, the well-to-do, they drive the train,

right? They account for the bulk of spending. So if they kind of hang in there, you know, the economy can kind of struggle through even if the folks in the bottom two thirds of the distribution of income are struggling and they certainly are. I don't know if you've seen these comments from Treasury, the Treasury Secretary Scott Basin, but he said recently, he went on TV and said that he's sick of hearing about the K-shaped

economy and said that the K-shaped economy was over. I'm paraphrasing, I believe, but that was the main thrust of his argument that we're no longer seeing this growing disparity between the rich in America and the poor. Yeah, I saw that. Is that a lie? What do you make of that? Well, it's not consistent with the data. You know, and there's a lot of different data here, so that makes it difficult to debate. There's no smoking gun data point. We can point to say,

“aha, that's what we should all call us around. But if you look at the plethora of data”

information that's available, I think it's pretty clear that the income wealth and consumption distribution has gotten more skewed over time, and it's very skewed at this point in time.

or 20% of the income distribution account for 60% of the spending. So that gives you a sense of the,

you know, the skewness that exists in the data. And, you know, you can see it in, you know, the spending data, you can see it in the consumer sentiment surveys. I mean, you know, even though we don't have a clerical at data point to point to, there's a lot of enough other data to suggest that the K-shaped economies is in full force and real problem for the folks in the bottom part of the K. We also got the jobs report last Friday. The US

“economy lost 23,000 jobs. The participation rate fell to 61.4% I think that was the lowest”

number in several years. What do you make of the jobs market right now? What does it say about the overall US economy? And then also, how does it impact the Fed's decision? Because asked about it's, of course, inflation, but also the labor market. A lot of debate here too, the my sense is the job market's struggling. We're not creating any jobs. We've seen that, you know, over the past year, over the past year and a half, the job growth we are getting is in really one big sector of

the economy that's health care. There's a net job growth is basically zero. The unemployment rate

has come in recently in the last few months, but that's only because of the decline in labor force participation, as you mentioned. Pretty short decline. I think there's probably a lot of measurement problems going on there, but it's fundamentally saying that if you lose your job, I think what's going on is that if you lose your job, very difficult to find another because no one's hiring. We know hiring rates are incredibly low. And so many people become discouraged and just kind of

step out of the labor market, at least for a while. And I think that's bicing down the unemployment rate. So just if you do a little bit of arithmetic, and you assume that the unemployment rate, excuse me, the labor force participation rate had not changed from where it was a year ago,

the unemployment rate would be over five percent. So we would have a very different kind of discussion

if that were the case. In consistent with that is going back to the wage growth, you don't see wage growth decelerate, it's certainly to the degree that it has. It's now below the rate of inflation plus pretty typical growth, unless you've got a pretty tough labor market, one that's struggling.

“And again, I think that's the case. So as you point out, the feds are in a pretty tough spot, right?”

I mean, what do they do? They respond to the weaker economy job market by cutting interest rates, doesn't feel like that's what they have in mind. Or do they respond to the high persistent inflation in raise interest rates and take their chances with the job market in the economy? My sense is that they'll probably be able to get through all of this without doing anything, kind of thread the needle. Because there's so much uncertainty here, the data's all over the place.

But you know, the data point we got last Friday, the job numbers in today's data, the CPI, would suggest that they've got a little bit of room to maneuver right down the middle, keep rates unchanged. And I think that's the most likely scenario. Oh, though, I'm outside going back to consensus, I'm outside the consensus, consensus now holds that the feds will have to raise interest rates to battle inflation of some point later this year

“into next. Before we let you go, if you had to give the US economy a grade right now,”

a letter grade, how would you grade it? You know, I give it a C minus, you know, it's growing. We're getting 2% growth, but it's not enough growth to create any jobs and make people feel comfortable about their financial situation. So, you know, it's not a recession, it's not, I don't think we're close to recession, but we're, it's a pretty uncomfortable place fragile place to be, so I'd say C minus. And I'm a pretty easy grade.

Moxani is Chief Economist at Moody's Analytics. Moch, appreciate your time. Yeah, any time. News from OpenAI. Long time executive and Chief operating Officer Brad Lightcap is leaving OpenAI after eight years. The COO said he's grateful to have spent most of the last decade building the company, but he is now moving on to, quote, something new. Now, there's nothing unusual about a long time executive, leaving a company that

happens all the time, as you know, what is more unusual, though, is more than 10 executives, leaving a company. That doesn't happen very often at all, but it did happen to OpenAI. Yes, in the past few months alone, nearly a dozen leaders at OpenAI have left the company this week, for example, just one day before the COO announced his departure, OpenAI's head of ethics, Chloe Baccalao, also left. And just weeks before she left, OpenAI's head of safety systems,

Johannes Heidecker, also departed. That departure was proceeded by Chief Futurist Josh Akiyam's exit. And just weeks before that, we also saw exits from Bill Peables, OpenAI's head of Sora,

Srinivas Nareyanan, OpenAI's head of B2B applications, also left, so did the head of robotics,

Caitlyn Kalanowski, and so did Chief Communications Officer Hannah Wong, all of these people left

“within the past several months, which begs a pretty important question, why are they all leaving?”

Now, to be clear, I don't know, but given the fact that the company keeps continually delaying

its IPO, combined with the fact that it keeps on racking up tens of billions of dollars in losses,

you have to at least wonder if the leaders of OpenAI are simply losing faith in the company. And if that is true, well, then that is a big problem, because as we've discussed, the market has become increasingly dependent on the survival and the success of OpenAI. Just as a reminder, OpenAI made up 70% of Microsoft's AI sales last year, and alongside anthropic, it'll make up nearly three quarters of Amazon's AI sales this year. So if the stock market has become a giant bet on AI,

and if AI has become a giant bet on OpenAI, then what does everyone bailing on OpenAI say about

“the stock market? On the answer is probably nothing good. Now, that doesn't mean that you should”

sell everything. We have never, ever recommended selling, and I doubt that we have a will to be honest,

as we've said over and over, the stock market is a long-term success machine. You're better off riding out the corrections versus trying to time them, but it does mean that we should keep very close tabs on OpenAI. We don't have much transparency into the financials of the company,

“because it's still private. But we do have transparency into the staffing. We know who's joining,”

and we know who is leaving. And if a company's people or any indication as to how a company is doing, well, then the signs that OpenAI are quite plain to see. It's not going great. Okay, that's it for today. This episode was produced by Clay Miller and Alison Weiss and to engineered by Benjamin Spencer. Our video editor is Brad Williams, our research team is Dan Chalon, Kristen O'Donnell, Hugh and Mia Silverio, and our social producer is Jake McPherson. Thank

you for listening to Prop G-Markets from Prop G Media. If you like what you heard, give us a follow. I'm Ed Allison. I will see you tomorrow.