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After Amazon (AMZN) and Google’s (GOOGL) earnings announcements, a narrative emerged that these two companies could provide Nvidia (NVDA) with more competition, which caused Nvidia to get hit with some profit-taking on Thursday.
First, this narrative is truly ridiculous, since Amazon and Google are not making the GPUs that do regenerative AI. Second, there is no doubt that Amazon and Google can team up with AMD or other companies to make AI devices, like a “Super Alexa” that learns what you do in your household. However, good as Super Alexa gets, it is not doing any of the regenerative AI, where computers make their own decisions. So, I stand by my sincere belief that Nvidia is effectively a monopoly with no real competition for its GPUs.
We have to keep our eyes out for the bond vigilantes now that the federal government’s cumulative debt exceeds 100% of GDP. Treasury Secretary Scott Bessent and incoming Fed Chairman Kevin Warsh certainly have their hands full. There has been talk that Bessent and Warsh may explore coordinated action to push Treasury yields lower.
This is just Wall Street gossip, since Warsh must first get more members on the Federal Open Market Committee (FOMC) to agree with him. However, as more central banks conduct quantitative easing (i.e., money printing) due to shrinking demographics in Asia and Europe make balancing bloated government budgets harder, the U.S. will have some flexibility. Whatever Bessent and Warsh do, they do not want to weaken the U.S. dollar, since a strong dollar is naturally deflationary, because it lowers the price of commodities (priced in U.S. dollars) and imported goods.
Speaking of the Fed, the big surprise for the week is that Fed Chairman Jerome Powell decided to stay on the FOMC as a Governor when Kevin Warsh takes over as the new Fed Chairman in May. The FOMC statement has an 8 to 4 vote, with three hawks (Beth Hammack of Cleveland, Neel Kashkari of Minneapolis, and Lorie Logan of Dallas) and one dove (Stephen Miran) dissenting from the official statement that telegraphed a possible key interest rate cut. Due to a divided FOMC, it appears that Kevin Warsh will have to work hard to get all the FOMC members to achieve a consensus.
Two of the three hawks in the FOMC have spoken and apparently, they are worried about higher diesel prices increasing transportation costs, which in turn can increase goods prices. Neel Kashkari, the President of the Minneapolis Fed, in an essay said, “I believe the FOMC should offer a policy outlook that signals that the next rate change could be either a cut or a hike, depending on how the economy evolves.” Kashkari added that “This could tighten financial conditions somewhat today, pushing back against a high-inflation scenario that could require an even stronger monetary policy response in the future.”
In a separate statement, Cleveland Fed President Beth Hammack said the economy has been resilient so far this year, and rising oil prices add to broad-based inflationary pressures. Specifically, Hammack said, “Uncertainty around the economic outlook has increased in 2026 and makes the future path for monetary policy more uncertain, as well.” Hammack added, “I see this clear easing bias as no longer appropriate given the outlook.”