AI could drive the cost of expertise toward zero.

Generally, JPM is bluntly optimistic about AI. It’s still early and looks very promising.

AI Revolution

Bullet Points:

• AI is still gaining momentum.
• “We do not see a bubble to burst”
• Nest phase for AI is agentic AI
• AI investment is now about 1% of GDP, previous bubbles peaked at 2%-5%.

How to know if these is a bubble, and why AI is not

Key Takeaways:

• AI Supply < Demand while a bubble is the other way around
• AI is not overleveraged, whlie a bubble is the other way around
• AI has positive cash flow, while a bubble drains cash
• AI earnings justify growth, while a bubble does not
• JPM’s FOMO: “The biggest risk, to us, is not having exposure to this transformational technology.”

The bottlenecks: Power, Water, and Data Privacy

AI relied on data centers, data centers rely on, or abide by:

• Power: needs constant, reliable power supply. Look for renewables in the chain of generating, storing, transisting power.
• Cooling: Water
• Privacy consensus

Look for builders, not users

JPM’s 4 part strat:

1. Focus on large-caps
2. Dig deep into the AI supply chain: Power, Semiconductors(Not just chips, storages, disks, memories are all semiconductors), transistors, transformers, networking equipment, fiber and subsea cables, liquid cooling systems, mining, rare earths, land and water rights…
3. Pick AI winners: Pick the ones that can use AI to actually generate growth
4. Go private: The gems are in the private market, which are mostly the direct enablers of AI: platforms, apps, ecosystems. These are the true drivers and main part of the next phase of growth.

Good to knows:

• Businesses are staying private longer.
• The “Mag 7” of private markets: OpenAI, SpaceX, Bytedance, Anthropic, Databricks, Reliance Retail, Stripe.
• App layer companies almost always contribute more growth than infrastructure in a tech innovation cycle.
• JPM’s take on our stand in this AI cycle: Phase 2: Infrastructure phase.
• JPM’s take on labor market: AI will disrupt, there’ll be pain, new players will press on the old.

Geopolitics

3 Pillars of economy today:

• Post-Bretton Woods Dollar system
• Peace dividend post-war
• GLobalization

From cheap to control

• US and China have been decoupling since 2018

China

The big take:

JPM’s is bearish on China.

Key Takeaways:

• China is exerting its geopolitical influence.
• “Foreign Direct Investment into China turned negative for the first time in decades.”
• Corporate earnings failed to rise along with exports.
• SEA become the largest export market in 2023 for China.

JPM:

“Over the last 3 years, more than 300 anti-dumping trade cases have been filed against China, up 3x from 10 years ago.” “China’s pivot to other non-US trading partners may not be a bullish sign for all emerging markets.” “Privates… have outperformed their benchmarks over the last decade and offer exposure to opportunities in India and Japan.” “China investment thesisis… may be narrow in scope but deep in potential.”

Glossary:

• Dumping: A producer exports a good to a foreign market and charges artificially low prices which pressure local producers and raise unemployment.

Europen Defense Capex

Takeaways:

• Check German, Rheinmetall, Leonardo, Baykar

South America

Takeaways:

• SA owns many of the critical inputs the AI revolution relies on.
• 40% of global copper production and 38% of world reserves
• Chile produces 27% of global copper
• Peru boasts the world’s largest silver reserves
• Mexico is the largest silver producer, Chile and Argentina are #1 and #3 in the world in terms of economically extractable reserves
• Venezuela holds the world’s largest proven oil reserves
• Brazil is the dominant oil producer in Latin America and the second-largest producer and exporter of iron ore
• Brazil is a key exporter of agricultural commodities such as soybeans, coffee, sugar and beef, aluminum, nickel, and manganese

Look for:

• Lithium, copper, silver
• Railways, highways, Panama Canal, trade routes
• Green energy infrastructure, Brazil, Chile

Energy

In the know:

• EU banned Russian gas, purchase some 750 billion of US energy, Japan follows. Japan’s energy is expensive too.

Dollar

• Dollar will remain the OS of global finance, it’s position is secure
• Since RU/UR war, global central banks bought record amounts of gold to hedge US dollar. Gold gained ATH 2025, it will likely still rally in 2026.
• Crypto is anoter challenger.

Implications

Look for:

• North American infrastrucure, utilities, industrials, logistics, power generation, semiconductors, critical minerals.
• Tactical opportunities in Chinese stocks
• Security and defense
• liquefied natural gas, renewables, grid modernization
• Regional alignment in critical sectors: semiconductors, data centers, energy, transportation

Expect and prep for:

• Higher inflation
• Regieme shifting
• Increased volatility
  • Gold and energy commodities as hedges

Inflation

AI, Geopolitics may directly impact your welath planning and portfoilo building.

Inflation’s impact is more subtle, more long-term.

Fixed income

• Bonds can hedge against equity drawdowns since their correlation decline
• Goods inflation in US will still trend upwards from tariffs
• Bond yields higher, solid 5% in 2025, look foraggregate bonds(Bloomberg US Aggregate Index)
• Inflation to hit 2.3% over the next decade

Drivers of inflation

I skipped it.

Risks of rising debt

Most countries debt-to-GDP ratio gone up post-pandemic. US is now at 120%.

Worst housing affordability since the 80s.

What to do about it

Mitigate inflation risk, manage stock-bond correlation, add fixed income to portfolio, and buy:

• Commodities
• Global Infrastructure, global real estate
• 60/30/10(60 stocks, 30 bonds, 10 alternatives) wih 10% in alternatives of a portfolio is better than 60/40(60 stocks, 40 bonds) portfolio 70% of the time.

The alternatives:

• Macro Hedge funds
• Diversified hedge funds
• Infrastructure
• Private equities
• EU large caps(high volatility) …

Search for that 10%.