Keep One Eye on the AI Trade, the Other on Inflation as Fed Faces Interest Rate Test

• Fed Chair Warsh indicates AI could be a 'positive supply shock' long-term, reducing prices, but short-term AI spending is inflationary.
• Import prices rose 1.1% M/M (8.1% Y/Y) and export prices rose 2.2% M/M (11.6% Y/Y), exceeding estimates and confirming inflationary trends.
• Crude oil remains elevated around $95, with geopolitical tensions between the US and Iran escalating, not de-escalating.
• Memory and cloud sectors, including companies like CoreWeave and Micron, are experiencing significant pressure and volatility, with CoreWeave down 15% for the week.

The discussion highlights a muted start to Friday's trading after recent volatility, with mixed equity futures. Fed Chair Warsh's comments suggest AI could be disinflationary long-term, but immediate-term AI spending is inflationary. Rising import/export prices confirm persistent inflation, while oil prices remain elevated due to geopolitical tensions. Certain tech sectors like memory are facing significant pressure.