Every Friday, we’ll break down the biggest stories shaping business, technology, politics, and culture — and connect the dots across the conversations happening throughout the Prof G universe.

This week, George Hahn unpacks what happens when rules stop applying equally. We discuss presidential stock trades, political accountability, wealth taxes, China’s shifting leverage over America, and why wars cost more than governments admit.

We’d love your feedback as we build this show. Let us know what you think at info@profgmedia.com.

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In Davos, Canadian Prime Minister Mark Carney had a warning for nations that have relied on the U.S.-led world order that provided (relative) peace and prosperity for eight decades. “If we’re not at the table,” he said, “we’re on the menu.” Heading home after last week’s summit with Chinese President Xi Jinping, President Trump made clear that whether Taiwan was at the table or on the menu was entirely his call. “I don’t talk about those things,” Trump said, referring to a private conversation in which Xi asked whether the U.S. would use military force to defend Taiwan. “There’s only one person that knows that — you know who it is? Me. I’m the only person.” But the question isn’t whether Trump will stand by the U.S. commitment to an independent Taiwan — breaking faith with our allies is a feature of his administration, not a bug — it’s how much he needs to be given to look the other way. A: Significantly less than Xi was previously prepared to pay.

Quid Pro Quo

The conventional wisdom was that China was preparing to invade Taiwan in the next few years, but that’s shifted. The most recent U.S. intelligence assessment, in March, concluded, “Chinese leaders do not currently plan to execute an invasion of Taiwan in 2027, nor do they have a fixed timeline for achieving unification.” Seeing Iran and Ukraine deploy asymmetric warfare against opponents with superior firepower may have given China’s hawks pause. Also, not a single member of the Chinese military has combat experience.

Meanwhile, the Tracking People’s Daily newsletter, analyzing 7,000 official Chinese statements since 2021, noted that Beijing had softened its rhetoric from Biden to Trump, despite the trade war. Biden was seen as a systemic threat who was determined to “encircle and suppress” China, according to Tracking People’s Daily, while Beijing views “Trump’s transactionalism [as] something [it] understands and can work with.” I believe Xi made a deal with Trump: Look the other way on Taiwan, and in exchange Beijing will purchase enough Trump meme coins to make him wealthier than the CEOs who accompanied him at the summit. One sign of a deal: Trump said he would withhold a $14 billion arms package from Taiwan, without receiving any concessions.

If Xi bribing Trump sounds implausible, consider the record. Trump has enriched himself and his family by $4 billion in his first year back in office. Citizens for Responsibility and Ethics in Washington, a corruption watchdog, flagged examples of Trump conflating personal business with U.S. interests in Brazil, Indonesia, Serbia, Syria, and Vietnam. Several months after Qatar gifted Trump a $400 million plane to replace Air Force One, Trump issued an executive order to provide Qatar a U.S. security guarantee with conditions similar to NATO’s Article 5. Probably just a coincidence. But wait … there’s more. Justin Sun dodged an SEC lawsuit alleging securities fraud after announcing he’d purchased $75 million worth of the Trump family’s World Liberty Financial coins. According to Bloomberg, 19 of the top 25 wallets that purchased Trump meme coins to secure a dinner date with the president were owned by foreign nationals. And for those with the means to erase their criminal record, Trump reportedly commands low-seven figures for a pardon.

But all of that is nothing compared to the shakedown he perpetrated on American taxpayers with a $10 billion lawsuit alleging the IRS had failed to keep private the tax returns Trump once promised to release. This week the DOJ announced a settlement in the form of a $1.776 billion fund to compensate Trump allies, including January 6 insurrectionists.

The Real Money

Of course, the real money is in market manipulation, from suspicious puts placed just before tariff announcements to oil bets made minutes before Trump announced a ceasefire with Iran. Trading on inside information is a bipartisan tradition, but Trump’s transgressions are orders of magnitude more brazen and profitable than anything we’ve seen. It took Nancy Pelosi four decades in Congress to amass $130 million in the stock market. Trump recently disclosed 3,700 stock trades from the first quarter of this year valued somewhere between $220 million and $750 million. We need investigations and prosecutions. However, the Supreme Court immunized the president, and he promised to grant preemptive pardons to everyone “within 200 feet of the Oval Office.” Besides, there isn’t anyone to bring the case, as Trump has gutted the DOJ, SEC, IRS and other agencies responsible for rooting out financial corruption.

Repatriation

China doesn’t need to fire a shot to repatriate Taiwan. According to a Bloomberg analysis, a conflict over Taiwan would cost the world economy an estimated $10.6 trillion, roughly 10% of global GDP, in the first year alone. By comparison, the OECD predicts the Iran war will slow global GDP growth from 2.9% to 2.6% in 2026 and from 3.0% to 2.5% in 2027. Taiwan is the digital economy’s carotid artery, but, more important if you’re Xi, it has deep economic ties to China. An estimated 80% of Taiwan’s businesses are linked to China. Despite Taiwan’s recent efforts to disconnect from the mainland, China remains its second-largest trading partner, behind only the U.S., with exports accounting for 20% to 25% of GDP. Meanwhile, China has a history of deploying economic coercion. Between 2010 and 2022 the Mercator Institute for China Studies documented 123 instances of economic coercion from the PRC. It has also executed a multidecade campaign to isolate Taiwan in diplomatic terms, reducing the number of countries that officially recognize the island nation to 12. Add on cyberattacks, espionage, and disinformation, and Xi doesn’t need a D-Day-style assault. China’s “soft invasion” has already made inroads and will continue to advance until Taiwan capitulates.

Checkmate

Taiwan’s most valuable company, TSMC, controls 72% of the global foundry market, producing chips for AMD, Apple, Nvidia, and Qualcomm. The company also produces 90% of the world’s most advanced chips. Taiwan’s dominance isn’t an accident, but the result of a state policy to leverage chipmaking for national security purposes. In 2001, journalist Craig Addison coined the term “Silicon Shield” to describe how Taiwan’s chipmaking monopoly resulted in a de facto U.S. defense commitment, even though we dropped our recognition of Taiwan in 1979 in order to normalize relations with China. Two decades later, there’s a crack in the Silicon Shield. “The single biggest threat to the world economy, the single biggest point of single failure, is that 97% [sic] of the high-end chips are made in Taiwan,” Treasury Secretary Scott Bessent said in January at Davos. “If that island were blockaded [or] that capacity were destroyed, it would be an economic apocalypse.” Another way of putting that: If push comes to shove, the U.S. and the rest of the world would likely choose stability over Taiwan’s sovereignty.

Actually, we might not have a choice, considering how drones have disrupted warfare. China produced 2.5x the number of drones we produced in 2025, but as Noah Smith observed this week, “Drones use lithium-ion batteries and rare earth electric motors, both of which are almost entirely manufactured in China.” Currently, China controls 60% to 70% of rare earth mining and 90% of the global processing capacity. As Deng Xiaoping famously said in 1992, “The Middle East has oil, China has rare earths.” Adding chipmaking to its economic arsenal would give China unilateral power to tax the global economy, as well as leverage over other nations that far exceeds the $1 trillion it deployed to fund infrastructure projects around the world via its Belt and Road initiative.

Thucydides Trap

In his 2017 book, Destined for War, former U.S. Assistant Secretary of Defense Graham Allison wrote, “When a rising power threatens to displace a ruling power, alarm bells should sound: danger ahead. As a rapidly ascending China challenges America’s accustomed predominance, these two nations risk falling into a deadly trap first identified by the ancient Greek historian Thucydides.” At their summit, Xi asked Trump whether the two nations could avoid the Thucydides trap and “forge a new paradigm for major-power relations?” Trump registered the insult — the implication of U.S. decline — but blamed Biden and insisted that the U.S. is the “hottest nation anywhere in the world.”

Future historians will likely have trouble gauging Xi’s skill. On the one hand, he’s a serious statesman. On the other hand, his opposite number is Donald Trump. Regardless, the Chinese see blood in the water, even if American leadership won’t acknowledge we appear to be committing superpower suicide. In January, a Beijing think tank published a report called “Thank Trump,” which concluded that tariffs, attacks on allies, anti-immigration policies, and the president’s war against American institutions have strengthened China while weakening the U.S. Citing polarization, government dysfunction, and “Latin American-style instability,” the report’s authors labeled Trump an “accelerator of American political decay.” A decade ago, our priority was to manage the Thucydides trap such that we maintained our leadership of the rules-based world order, avoided conflict, and increased global prosperity. Today, we’re riding shotgun with a president who never met an American interest he didn’t seek to monetize. Superpowers don’t die when adversaries breach the gates. They die when the people inside start auctioning off the gates.

Memorial Day

I write often about what we’re losing by dismantling the rules-based order, less often about the cost of building it in the first place. It’s Memorial Day weekend in the U.S. — a holiday meant to honor those who died serving our country, though most Americans observe it by barbecuing, drinking, and shopping. Pulling down the U.S.-led order robs our children of their future, but it also demeans the memory of American sons and daughters who gave what Lincoln called the last full measure of devotion. Shame on Trump. Shame on his enablers. And shame on us if we fail to pull the country off of Trump’s auction block.

Life is so rich,

P.S.

My Prof G Markets co-host Ed Elson was live on Substack this week sharing “The New Normal,” his presentation about the forces shaping the global economy. Ed’s talk is available exclusively to Prof G + members for one week and one week only. Say no to FOMO by saying yes to a Prof G + membership. Upgrade here.

1. For the first time, China had the upper hand at a US-China summit

2. At Cannes this year, China was impossible to ignore

China’s Upper Hand at the Beijing Summit

For the first time at a U.S. - China summit, China held the stronger position going in. The U.S. arrived with a long list of asks: rare earth access for weapons manufacturing and tech supply chains, Chinese cooperation on ending the Iran conflict, and market access for American companies. Trump called Xi a great leader, said it was an honor to be his friend, and declared the relationship would be better than ever. China did not reciprocate in kind.

The summit’s most significant outcome was the formation of two new bodies — the U.S. - China Board of Trade and the U.S. China Board of Investment — alongside a joint commitment to what China calls a constructive relationship of strategic stability, a formal step away from adversarial posturing. Trump invited Xi to visit the U.S. in September; Xi accepted.

The two sides' official readouts told different stories. The U.S. announced China agreed to purchase 200 Boeing aircraft, renew licenses for around 400 American businesses, and buy at least $17 billion annually in agricultural products through 2028. Beijing acknowledged some of those commitments without citing figures, and focused instead on structural trade expansion and tariff reduction. The U.S. White House fact sheet led with rare earths. Beijing's readout did not mention them. There was no movement on chip export restrictions or tariff levels. On Iran, Washington noted that both sides agreed a resolution to the Strait of Hormuz conflict is in their shared interest. Beijing said nothing.

Trump traveled to Beijing with a delegation of 17 executives, among them Tim Cook, Larry Fink, David Solomon, Jane Fraser, and Kelly Ortberg. Two flew with him on Air Force One: Jensen Huang, who joined as a last-minute addition after boarding during a refueling stop in Alaska, and Elon Musk. Both had a lot riding on the trip:

• Jensen Huang — Drew the most attention. Nvidia’s CEO spent days in Beijing: eating bingfen, hand-pulled noodles, squid tentacles, and fermented soybean milk. None of that was incidental. Nvidia, whose market cap sits around $5 trillion, has seen its China market share fall to essentially zero under U.S. export bans. Ten Chinese companies have U.S. authorization to buy Nvidia’s H200 chips, but no shipments have moved. The bottleneck is Beijing.

  

• Elon Musk — Was seeking regulatory clearance to expand Tesla's self-driving operations in China and looking to source around $2.9 billion in solar panel manufacturing equipment from Chinese suppliers.

The through line across all of the executives: China is not just a market to sell into. It is a supply chain, a regulator, and a strategic partner they cannot afford to lose.

Alice’s Take: Xi played the relationship skillfully. When he linked China's national rejuvenation with Make America Great Again at the state banquet, he was speaking directly to Trump — signaling that the two leaders are pulling toward the same thing. That's a deliberate revival of the G2 framing China has long wanted. The readout contrast tells you where the real priorities lie. Washington was focused on business: Boeing, agricultural exports, rare earths. Beijing was focused on structure: the two new boards, tariff reduction, expanded investment access for Chinese companies in the U.S. Those are longer-term asks. China got continuity, expanded strategic dialogue, and kept rare earths entirely off the table — which is the point. They're holding that card for Taiwan.

James’ Take: Two things stood out to me from the summit. First, for the first time in the history of these summits, the Chinese leader walked in with the upper hand. Second, the two countries are now formally working toward what China calls strategic stability, which means climbing down from constant adversarial posturing.

On Jensen Huang: the ball is no longer in America's court. China has been building around U.S. export restrictions through Huawei's Ascend clusters, and the compute need is only growing. Whether Beijing approves H200 imports is a political decision, not a technical one. On the broader CEO delegation: these executives aren't just trying to sell into China. They need continued access to Chinese inputs. China can manufacture high-quality goods cheaper and faster than anywhere else. That's not a supply chain you walk away from.

China is Arriving at Cannes - And It’s Not Just About Movies

Cannes is the world's most prestigious film festival, and this year China was impossible to ignore. Now in its fifth year at the festival, the China Pavilion featured film previews, cultural programming, and demonstrations of Chinese AI video technology. Gong Li, the actress who appeared in many of Zhang Yimou's defining films, opened the festival alongside Jane Fonda.

Chinese box office receipts have already surpassed $1.89 billion this year, driven in part by government initiatives converting film sets into tourist destinations — a program projected to generate around $26 billion in domestic revenue. A Chinese TV series, Pursuit of Jade, became the first Chinese show to reach the global top 10 for non-English content on Netflix. Meanwhile, Chinese AI video models are outperforming American competitors across multiple benchmarks. Short-form AI-generated video, distributed through Chinese TikTok equivalents, is expanding alongside the theatrical market. The head of Wing Sight, which produces AI-generated film content, estimated the Chinese AI film market at approximately $15 billion. The volume of video content on Chinese platforms gives domestic AI companies a training data advantage that Western platforms cannot currently match.

Alice’s Take: After COVID and a few years of Western indifference, Chinese cultural exports feel like they're returning to the enthusiasm of the early 2010s. What's different now is that Chinese creators and the government are actively projecting that richness outward — from traditional kung fu films to new animation to AI-generated content. Domestically, cinema is also benefiting from a cost-conscious moment. Going to the cinema is cheap relative to other entertainment, and the government has been actively promoting it. The AI angle is the bigger story though: China's edge in short-form video AI comes down to data. Douyin's user base generates content at a scale that Instagram can't match. That lead will compound.

James’ Prediction: Seeing Gong Li open Cannes alongside Jane Fonda was a genuine signal of how far China’s cultural footprint has extended. The vibrancy underneath that moment is real: box office already past $1.89 billion, Chinese video AI models outperforming American counterparts on key benchmarks, and the first Chinese show in Netflix’s global non-English top 10. We’re watching an inflection point.

James’ Prediction: Within five years, the highest-grossing actor in the world will be Chinese. China is already the second-largest film market globally, and when it becomes the largest, a Chinese actor at the top is the natural conclusion. This trend is already in motion.

Alice’s Prediction: Beijing will approve H200 imports within the coming months. Jensen Huang has built real goodwill with everyday Chinese people, and you can see it across social media. He knows how to play the game between the US and China, and he is one of the last figures who can genuinely benefit from both sides. Beijing simply does not have enough capacity through Huawei and SMIC to meet the compute demands AI will generate. The H200s get approved.

Ray Madoff is a professor at Boston College Law School and the author of The Second Estate: How the Tax Code Made an American Aristocracy.

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They also preview the next major showdown in Texas, where a high-stakes runoff in the GOP Senate primary could further cement Trump’s influence over Republican politics if Ken Paxton defeats incumbent senator John Cornyn, who’s served in the Senate since 2002. Paxton — the once-indicted former state attorney general — recently received Trump’s endorsement.

Meanwhile, Democrats release their long-awaited 2024 “autopsy” report, after months of internal debate and delay. The document was meant to provide insights in detail about what went wrong for the party in the last presidential election, but, as DNC chair Ken Martin himself admitted, the document itself does not …

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They discuss what just war doctrine actually requires, why democracies that skip the constitutional process lose wars, and why the Pope’s standoff with Trump is more consequential than it sounds.

Content warning: This conversation includes some graphic descriptions of violence and sexual violence.

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Patrick Boyle is a professor at King’s College London, former hedge fund manager, and host of one of the most popular finance YouTube channels. Zed Francis is the CIO & Co-Founder at Convexitas.

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Our podcasts scratch the surface … our keynotes get subterranean.

Today at 12:30 p.m. ET, my Markets co-host Ed Elson debuts an all-new keynote presentation exclusively for Prof G+ subscribers, only on Substack.

The New Normal identifies the most important – and least discussed – forces reshaping the global economy, from how loneliness is producing the next generation of billion-dollar businesses, to the erosion of “brand America” and the desperation driving the casino economy.

Come for the rigorous analysis, stay for the practical insights into how these tectonic shifts should inform the worldview of the next generation of investors (emerging fund managers, take note).

Prof G+ members will also get same-day access to the replay, for one week only. Don’t miss it.

Register for The New Normal

Freebie

Speaking of going deep … Prof G+ Deep Dives tackle the topics that our audience cares most about – storytelling, the social media reckoning, and your brain on AI.

Curious? This week only, we’re unlocking a Deep Dive for all of our subscribers. Tune in for a taste of what our Prof G+ subscribers receive regularly – deeper analysis, sharper context, and conversations you won’t hear on the main feed.

Our freebie this week is about debt. America used to borrow to build the future. Now it borrows to maintain the present. I break down how this paradigm shift has permeated every layer of our economy, from trillion-dollar government interest payments, to leveraged corporate bets on AI, to consumers financing food delivery.

I’m joined by Morgan Housel, author of The Psychology of Money, to help unpack the behavioral economics of debt, and why borrowing increasingly feels less like a choice and more like a survival strategy.

Check out Debt Is Replacing the American Dream. Ready to take the Prof G+ plunge? Subscribers get access to our full back catalog of past Deep Dives, plus other exclusives.

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The Week

We get it – we release a lot of content.

Introducing The Week from Prof G Media, the latest addition to The Prof G Pod lineup. Every Friday, we curate the highlight reel of our most incisive takes across business, technology, politics, and culture, and catch you up on what you missed.

Hosted by George Hahn, the voice behind the No Mercy / No Malice pod, The Week will make you smarter in under 15 minutes.

The Week is available now across all major audio platforms, and will drop on YouTube this Friday. Our Substack fans got early access to the video version last week – check it out here.

Still feeling overwhelmed? We respect your inbox. Customize your Prof G Media account settings below, and decide what you want from us (and what you don’t).

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The Business of Being Me

This week, the editorial team at Substack released a generous profile of me and my team, in which I get candid about the business of Prof G Media. For those of you newly subscribed to this publication as a result, thanks for joining us.

We hope to make it worth your attention.

Life is so rich,

Scott

Jason Calacanis is the Host of the All-In Podcast. Bradley Tusk is the founder and CEO of Tusk Ventures.

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They also unpack a massive primary night across the country, including Congressman Thomas Massie’s high-stakes battle against a Trump-backed challenger in what has become the most expensive House primary in American history.

Plus: lawmakers begin sounding the alarm about AI chatbots spreading election misinformation, raising new concerns about how voters will navigate truth, trust, and political persuasion in the age of artificial intelligence.

They also discuss the tragic shooting outside a mosque in San Diego being investigated as a hate crime, and why podcasts may be killing off the era of the …

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In previous months, wages rose faster than inflation. That’s no longer true. Real average hourly wages fell last month for the first time in three years. As a result, consumers are not happy: The University of Michigan consumer sentiment index just hit its lowest level in recorded history.

Two forces are driving this pain: 1) Tariffs: It’s estimated Trump’s tariffs cost the average household $1,000 in 2025 – a figure set to rise to $1,300 this year. 2) The Iran War: Since Operation Epic Fury began, the price of goods like oil, fertilizer, and food has exploded – price hikes costing the average American household $410 a month. Undo these actions and prices will moderate over time. Carry on and they’ll continue to rise. This momentous decision lies in the hands of one man. Last week, President Trump revealed the plan. In sum: Expect inflation to get worse.

Who Cares

For most Americans, inflation matters a lot. It’s the difference between saving vs. spending, vacationing vs. staying at home — and, for 34 million Americans, eating vs. going hungry.

But there’s one group who’ve decided inflation doesn’t matter at all: investors. Last week’s worse-than-expected inflation report had almost no impact on stocks. Aside from an initial dip, the highly inflationary war in Iran hasn’t made a dent either — the S&P 500 is up over 7% since the war began. Despite some initial bickering, investors have reached their final conclusion on the war and its price impacts: “We don’t care.”

Why don’t investors care about inflation? On its face, their reasoning is actually quite sound. While inflation is painful for consumers, it’s NBD for stocks. Technology companies now account for nearly half of the entire S&P 500 (the top ten make up 40%), and none of them are affected by higher gas prices. If the war made it impossible to ship, say, software then it’d be a different story, but it doesn’t. So, when it comes to consumer inflation, technology companies — and therefore, the stock market — are “insulated.”

Feels Like ‘22

I’ll cut to the chase: I disagree. Let me take you back to 2022, a year that looked eerily similar to today, and which ended up being the worst year for the stock market since the Great Recession.

As with 2026, our big problem in 2022 was inflation. It was also triggered by two major forces: 1) Covid, which blocked up supply chains, making it harder to ship goods around the world thus raising prices. 2) The Ukraine War, which resulted in Russia cutting off its oil supplies and driving up fuel prices around the world. (Side note: neither were self-inflicted.) Like bankruptcy, the crisis happened slowly then suddenly. U.S. inflation hit 4% in April 2021. Within twelve months it had doubled.

For the same reasons they aren’t too worried today, investors weren’t too worried then. Per a March 2022 Baird report, the tech industry offered “very limited direct exposure to higher input prices.” Conventional wisdom was that consumer inflation doesn’t hurt the stocks that matter (tech).

But then … something strange happened. Meta reported their ad business was slowing. This was surprising but not awful. Then came their cardinal sin in Q2: For the first time ever, the company’s revenue declined.

What seemed impossible soon became standard. Meta later reported that ad revenue had fallen even further. Snap’s revenue flatlined. YouTube’s revenue shrunk. Google’s search business went into decline, as did the company’s ad network. The digital ad market was collapsing, and the biggest victim was Big Tech.

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Why did this happen? Meta’s 2022 SEC filing lays it out perfectly: “As macroeconomic pressures reduce the likelihood of consumer purchases of discretionary goods and services, advertisers are more likely to reduce their spending as they anticipate a lower return on investment.” In other words, consumers were spending less (due to inflation), which caused advertisers to spend less too, which … hurt Big Tech.

It was at that moment we realized how unprotected tech companies really are, as they rely heavily on advertising. Ads make up almost a tenth of both Amazon and Microsoft’s business. For Google, about 75%, and for Meta … almost 100%. Most of us already knew that less advertising meant less Big Tech revenue. What we forgot, however, was that less shopping also meant less advertising. As a result, Big Tech was a victim of inflation. Their pain just showed up further down the chain.

The hit to equity markets was enormous. Google stock fell 38% that year. Amazon fell 49%. Meta, 65% The Nasdaq dropped 30%, its worst year since the dot-com crash. The tech industry was brought to its knees by none other than the thing it was supposedly impervious to. And here we are again, calling markets “insulated.”

Chain Reaction

You can see how this might all play out today: Tariffs remain intact. The Strait of Hormuz remains blockaded. Oil prices continue to rise. Higher freight costs lead to higher wholesale costs, which lead to higher retail costs. Consumer spending starts to fall. Ad budgets get restricted. Instagram CPMs decline. Big Tech revenues go from double-digit growth to single-digit growth to no growth at all. With each falling domino, a step-change in Mag-7 multiples. And then … boom: bear market.

You might say this year won’t look like 2022 because of AI. You might say we’re less dependent on digital advertisers because of, say, Nvidia and Broadcom. That’s true, but remember who Nvidia and Broadcom depend on: digital advertisers. Meta, Google, Amazon, and Microsoft make up nearly half of Nvidia’s revenue. Fifty percent of Broadcom’s revenue comes from five (unnamed) companies. It’s widely agreed that three of them are Google, Meta, and TikTok.

You might then argue that lower ad revenues don’t necessarily mean Big Tech won’t spend big on Nvidia chips. History suggests otherwise. One of Meta’s first moves after they reported bad earnings in 2022 was to reduce CapEx by about 13%. Amazon did the same thing. Google went from 30% CapEx growth to 2%. It became known as the “Year of Efficiency” — three words that would make Jensen Huang throw up if he heard them today.

We’re actually more dependent on these companies in ‘22. AI spending drove two-thirds of GDP growth last quarter. It’s expected to make up 40% of earnings growth in 2026. America is a giant bet on AI — or, more specifically, a giant bet on Big Tech spending gobs of money on AI. Do anything to change that, and portfolios could go kaput.

Hut Hut Hike

Inflation is already starting to break down the original bull thesis for 2026. Going into the year, we all agreed we were entering a lower interest rate environment. It wasn’t necessarily our reason to be bullish, but it was certainly our reason not to be bearish. Ever since we bombed Iran, however, that argument has collapsed. It’s unlikely we’ll see any cuts this year, and after last week’s inflation print, the chances of a rate hike rose to 37%. Rate hikes hurt stocks in ‘22 — they could hurt them again this year too.

I’m not saying any of this is inevitable — I’m simply saying it’s possible. So far investors have disregarded this fact.

Optimists

The big question: Why are investors telling themselves the same story they told in 2022?

On the one hand, there are various scenarios in which a 2022-like bear market would not play out. Maybe the Iran War will come to a swift conclusion. If not, maybe consumer spending will stay resilient in the face of inflation. If not, maybe ad budgets will keep growing anyway. If not, maybe Big Tech will keep spending like there’s no tomorrow. Lots of ifs, lots of maybes … but it’s all possible.

Ultimately, however, I don’t think investors are all too interested in these questions, because they know getting rich largely comes down to one thing: optimism. Almost no one has gotten rich shorting the market. Even fewer have gotten rich not investing in the market. The truth is, there’s simply more money to be made when stocks go up — and it’s the investor’s job is to imagine every which way that could happen. Investors are, by definition, optimists.

Are they right? Over the long term, yes. The S&P 500 has risen 107% since its 2022 low. The Nasdaq has risen 153%. While stocks do go down, generally speaking, they go up. That is the prevailing thesis driving markets right now, and though it might sound dumb, it’s true.

Learning

It’s late, I’m tired, and I have several podcasts tomorrow morning that I’m not prepared for. The more I consider how little time I have, the more anxious I become. My brain is telling me they won’t go well.

At the same time, though, most of my podcasts have ended up fine. Actually, better than fine: According to my podcast app, my latest is the 49th most-downloaded episode in the country. Come to think of it: If I had to put money on it, I’d bet tomorrow’s recordings will go well. Why wouldn’t they?

I’m learning.

See you next week,

Ed

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Anthony Scaramucci is the founder and managing partner of SkyBridge Capital. Mike Isaac is the technology correspondent for the New York Times.

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Alice Han and James Kynge break down the biggest takeaways from the high-stakes Trump-Xi meeting, from the economic promises and simmering Taiwan tensions to the surprising role top CEOs like Elon Musk and Nvidia’s Jensen Huang played throughout the trip.

They discuss the real winners and losers of the summit, what companies like Apple, Tesla, Nvidia, and Boeing stand to gain, and whether any of the promised deals will actually materialize. They also unpack China’s warning on Taiwan, the broader geopolitical stakes surrounding Iran and global energy markets, and the symbolism behind Trump’s visit to the Temple of Heaven.

Plus, they examine China’s growing influence at Cannes, where AI, robotics, and film technology showcased the country’s expanding soft power ambitions.

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Scott and Jess also unpack growing speculation that the administration could be laying the groundwork for a future military operation in Cuba, following new sanctions and eyebrow-raising intelligence claims involving military drones.

Plus: Senator Bill Cassidy became the first Republican senator in nearly a decade to lose a bid for renomination, after voting to convict Trump in his second impeachment trial. They discuss how this outcome reinforces the Trump-centrism of the Republican party,…

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America used to borrow to build the future. Now it borrows to maintain the present.

In this Deep Dive, Scott breaks down how debt became embedded in every layer of the economy — from trillion-dollar government interest payments, to leveraged corporate bets on AI, to consumers financing groceries and food delivery.

Then, Scott sits down with Morgan Housel to unpack the psychology of debt, financial insecurity, and why borrowing increasingly feels less like a choice and more like a survival strategy.

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For years, you wouldn’t use a word like that to describe the average Democrat, who campaigned on economic centrism and had a reverence for institutions and compromise.

That’s how our wing of the party ended up with a set of rules. Defend the private health care system. Preserve the court. Keep the filibuster. Never raise taxes.

The era that advice was built for no longer exists. Today, Republicans use power aggressively, institutions are crumbling, and voters are furious about the price of everything. It’s no wonder Democrats are changing too.

They’re starting to accept that you can’t just make a case for the status quo when voters are crying out for something to believe in. You can stay moderate on a wide range of economic and social issues while recognizing that the biggest challenges of our time require better solutions.

If you’re a Democrat who wants to stay relevant, it’s time for a new version of moderation. It’s time to rage.

From ACA to M4A

We remember when calling for “Medicare for All” was radical. At the time, Obamacare was still in its first decade, and Democrats were proud of what it did. The goal for most moderates was to defend and expand it. Putting health care in the hands of the government seemed like too big a move for the electorate.

That was more than a decade ago. Things change. And on health care, the data are clear.

1. Health care costs are exploding: Spending on health care has grown astronomically under a corporatized system, from $452 billion in 1970 to $4.9 trillion in 2023. As the chart below shows, even major reforms have not changed this trajectory. Out-of-pocket costs have steadily risen too.

2. Americans say the government is responsible for health care: In 2015, Americans were split on what role the government should play in health care. 51% said yes, the federal government should make sure that all Americans have health care coverage, 47% said no. Today, two-thirds say it’s the government’s responsibility.

The idea isn’t that controversial anymore. The latest version of Sen. Bernie Sanders’ Medicare for All bill has 16 cosponsors in the Senate and 104 in the House, where it was introduced by bipartisan pragmatist Rep. Debbie Dingell alongside Rep. Pramila Jayapal. Among the cosponsors: Dan Goldman, Sara Jacobs and Ritchie Torres.

Medicare for All is the litmus test of Democratic politics, and more members of the party than ever before have decided it’s time to make health care a human right.

Expanding the Court

The Supreme Court still isn’t as partisan as the rest of our politics, but it’s been getting pretty damn close. We’ve already talked about the court’s decision to weaken the Voting Rights Act, which will ultimately eliminate Black representation in huge parts of the South. It’s just the latest in a long line of right-wing rulings impacting everything from regulatory oversight to racial diversity.

Democrats are still reeling from two decisions, in particular, that have already done untold damage: Dobbs v. Jackson, of course, which ended a woman’s constitutional right to an abortion, and Trump v. US, where the court decided to give presidents broad immunity from criminal prosecution.

You can believe, as many elected Democrats do, that the Supreme Court is an important institution while also being clear that its decisions are out-of-touch and its members have little oversight. On average, the current justices are 65 years old and have each served for 14 years on average. It’s even worse at the extremes: Clarence Thomas is 77 and has sat on the court since 1991. The president who appointed him passed away nearly a decade ago.

Some moderates are going all the way. James Carville said earlier this year that Democrats should expand the court to 13: “Don’t run on it, don’t talk about it, just do it.” Others are getting a lot louder about strict retirement ages and term limits. Whatever it is, “win elections and restore balance” doesn’t cut it anymore.

A New Approach to the Filibuster

For institutionalist Democrats, the filibuster remains the ultimate check on power; a tool that forces compromise. Again, things have changed. Of course there is still compromise in the Senate, but it’s come at the expense of productivity: last year, both the House and Senate set a modern record for the lowest legislative output in the first year of a presidency.

It has let the minority party block voting rights bills, abortion access, climate legislation, and anything else that can’t be squeezed into a reconciliation bill. It’s getting more and more difficult for Democrats to explain that an archaic legislative procedure is more important than a woman’s right to choose.

It’s especially hard to make the case when, as Brookings’ Molly Reynolds documented years ago, Congress has created more than 160 exceptions to the filibuster’s supermajority requirement since 1969.

Kamala Harris backed a filibuster carve-out to protect abortion rights in 2024, and moderates like the retiring Sen. Tina Smith are saying they feel stymied by the Senate rules, and would like to reform the filibuster at least to the point where you have to stand and talk to prevent the passage of a bill, instead of just saying “I don’t like this, so I’m gonna object and then go out for dinner.”

(Fairly) Taxing the Rich

Finally, while Democrats still believe in the spirit of entrepreneurship that drives this country, the rhetoric is shifting on taxing high earners.

It’s no longer enough just to say you’ll raise corporate taxes and close a few loopholes. For many members of the party, it’s a lot more direct: if you’re earning a lot of money, you should pay what you owe.

Analysis from the Yale Budget Lab shows why the argument has legs: it found that among the top 1% of earners, effective tax rates can vary as widely as 45% to a paltry 3%. The analysis argued that eliminating complex tax provisions that contribute to these gaps would raise another $560 billion in 2026, or exactly 400 times what Politico said were the total savings of DOGE last August.

Many Democrats are going a step further and calling for higher taxes on the wealthy. Biden and Harris called for a minimum tax on households worth more than $100 million; billionaire Tom Steyer is igniting real excitement in his campaign for California governor by supporting a billionaire tax and ending a major corporate tax break.

This is the new Democratic moderation: calling out systems that don’t work and focusing on getting them to work for the American people. It starts with making health care a human right, but it’s also about good governance, a Supreme Court you can rely on, and a tax system that doesn’t let the ultra-rich off the hook.

$109 billion

That’s how much Americans spent on lottery tickets last year, which is more than they spent on movies, books, concerts, and sports tickets combined.

1. Trump’s inflation problem is now worse than Biden’s

2. Is Cerebras the Pets.com of the AI boom?

3. Is dating too expensive — or has AI just made it too easy to quit?

This Wednesday, May 20, at 12:30 p.m. ET, Ed debuts a new presentation exclusively for Prof G+ subscribers. He’ll cover how loneliness is producing the next generation of billion-dollar businesses, how the “inheritocracy” is rewriting the rules of economic mobility, and the erosion of “brand America.” Subscribe here for access.

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Could Inflation Be What Finally Bursts the AI Bubble?

For the first time in three years, American wages are not keeping pace with inflation. Two new inflation reports last week painted a discouraging picture: Consumer prices rose 3.8% in April from a year ago, marking the highest inflation reading in three years, and producer prices, which measure wholesale inflation, climbed 6% year over year. That was not only hotter than expected, but the biggest increase since 2022.

The conflict in Iran is partly to blame. Higher energy prices accounted for over 40% of the total increase in inflation last month. Nationally, gas costs more than $4.50 per gallon, up more than 40% from a year ago.

Despite increasing prices, overall consumer spending stayed resilient; however, the most recent University of Michigan consumer survey showed sentiment has plunged to the lowest level on record going back to 1952. Why?

According to Federal Reserve economists, consumers put more weight on higher prices than on higher incomes when assessing their current economic conditions.

Inflation is also influencing how Americans view the president. President Trump won reelection in 2024 in large part because of his promise to reduce prices, but now his approval on how he’s handling the economy is worse than President Biden’s ever was

We are underestimating the impact that lower consumer spending could have on the stock market.

This is what happened in 2022. Consumer spending growth fell 70%, and suddenly because consumers didn’t have as much money to spend, advertisers decided to stop spending too.

This was what really killed the tech sector in 2022, which by the way, fell around 30% that year — a bigger drop than the S&P, which fell around 20%. These companies are still very dependent on advertising as a business. Advertising makes up 97% of Meta’s revenues; for Google, it’s about 75%. These companies still need regular people to spend money such that advertisers go out there and buy ad inventory.

To summarize, inflation had a material impact on consumer spending, which had a material impact on advertising budgets, which had a material impact on the businesses of Big Tech.

This feels very much like what could happen this year. The entire market is dependent on the capex guidance of a few tech companies that happen to get their cash from digital advertising.

The narrative Ed outlines is a logical one, but there are two reasons why I disagree.

First, the AI companies are gonna spend tens of billions of dollars on marketing, and that’s money that didn’t exist three years ago.

OpenAI and Anthropic are in a celebrity death match, and in the next 12 or 24 months, I think some marketing executives will talk Dario and Sam into spending $10 billion on branding.

In addition, we’re about to see the most obnoxious, unhealthy, antidemocratic tsunami of money going to the midterm elections. For example, two or three years ago, Andreessen Horowitz spent $0 on elections. This year, they’re gonna spend $115 million.

All this spending is going to flow through podcasts, print ads, direct mail, and local news stations. So I’m actually less bearish on the ad market than Ed is.

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Cerebras Keeps the Chip Rally Going With the Biggest IPO of the Year

AI chipmaker Cerebras pulled off the biggest IPO of the year so far. Shares were priced at $185, but opened at $350 – an 89% pop. That’s the biggest since 2000 for a listing raising more than $2 billion. On Friday, the day after the IPO, Cerebras shares declined 10%.

Cerebras’ market cap is now more than $60 billion. On just $510 million in revenues, it’s trading at a price-to-sales multiple far above its competition.

It’s hard to imagine a better time to IPO as a small, unprofitable chip company. The Philadelphia Semiconductor Index (PHLX) is up more than 150% over the past year, and now, semiconductor stocks account for more than 15% of the S&P 500.

• That kind of concentration has only happened to a few sectors in history — tech hardware during the dot-com bubble, energy companies around the financial crisis, and software firms in the late 2010s.

Still, Cerebras doesn’t have it easy. Breaking into the highly competitive chip market means taking on Nvidia, which still dominates with 85% market share. In fact, Nvidia’s AI chip business is more than 400x larger than Cerebras’ and is growing almost as quickly.

However, Cerebras products are meaningfully different: Unlike most postage-stamp-sized semiconductor chips, Cerebras’ are about the size of dinner plates. For context: 57 H100s (Nvidia’s premium GPUs) can fit onto each one. Their size, in addition to other, more complex factors, makes them more powerful than traditional GPUs.

Most AI workloads are powered by groups of chips strapped together. Some chips handle memory, while others handle processing. With Cerebras, all of that happens on the same chip, making them, reportedly, 15x faster than other GPUs for standard tasks.

Last year, Scott and I discussed this company and we pointed out that they were getting 85% of their revenue from G42, which is this UAE state-backed AI firm. Investors agreed that this was risky, and there was scrutiny from CFIUS, The Committee on Foreign Investment in the United States.

They ultimately got cleared, and this year, they said, don’t worry, we’ve reduced our G42 revenue exposure to 24%. But 62% of revenue now comes from Mohamed bin Zayed University of AI — another UAE state-backed entity, which means 86% of their revenue is still coming from one customer, which is the sovereign wealth fund of the UAE. So they didn’t fix the problem, and the part that really bugs me is that they’re lying about it.

The finances aren’t great either. Revenue doubled, but in AI, that’s not that impressive.

The exciting part, supposedly, is OpenAI. They have a deal where OpenAI deploys 750 megawatts of Cerebras chips — at full capacity, that’s roughly $7 billion in annual revenue, more than 13x their 2025 total. However, they have an exclusivity agreement in there, which says that you can’t sell your chips to these other competitors.

The real issue is who Cerebras is asking investors to trust. The stock only makes sense if OpenAI pays. And if Altman is who they say he is (a serial liar), that’s not a bet I’d make.

I f*cking hate this company. And it’s not just revenue mix; it’s the quality and incentives of the customer base.

Both customers are UAE government entities. When I sold L2 and Prophet, the reason we got extra turns on revenue was customer quality. We had Nike, P&G, Toyota — quality companies as clients. That’s what institutional buyers want to see. This is the opposite. This is Pets.com out of the UAE.

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The $200 Date and the Free AI Girlfriend: Why Young People Are Opting Out

The romantic recession isn’t letting up. Recent earnings from Match Group and Bumble showed continued weakness in dating apps, with paying users declining across the board. Match Group’s total paying users fell 5%, while Bumble’s dropped 21%.

Young people just aren’t dating. Only 31% of young adults — a quarter of women (26%) and 36% of men — regularly go on dates. Even more troubling, only about half of young, single adults are interested in starting a relationship.

One problem? Romance has gotten expensive. According to a survey from BMO’s Real Financial Progress Index, the average cost of a date in the U.S. has climbed nearly 13% year over year, to $189.

Nearly half of single Americans say dating is no longer financially worth it.

But the romantic recession starts even before the financial challenges of adulthood. In 2024, only 46% of high school seniors said they ever went on dates, down from nearly 90% in the 1980s. Now, only 56% of Gen Z enter adulthood having engaged in a romantic relationship, compared with 75% of members of older generations.

The elephant in the room is AI. Specifically, young men being slowly sequestered from real relationships into frictionless ones with Character AI and porn.

When they’re speaking to an AI girlfriend or absorbing porn, they never feel rejected, they never feel insecure.

I mean, we’ve all had those feelings. We’ve all texted people and not heard back and wondered, what did I do wrong? We’ve had our hearts trampled on. It sucks, and now AI tells you that you can have a reasonable facsimile of life without any friction. And it is such a hollow, empty promise.

The most rewarding things in life are relationships, but you have to endure rejection, persevere, figure out what a woman wants … Frankly, it’s just very difficult. And that’s why it’s so wonderful.

On the economics of dates, I think men should pay. When a woman who is of childbearing age is spending time with you, quite frankly, her time is more valuable than yours. In addition, she spent $400 on her appearance before she even showed up.

But it’s not just paying for everything; it’s demonstrating excellence and effort.

Unfortunately, impressing a woman in a capitalist age with Instagram has become all about money. What I would offer to men is: You can replace money with effort. Think of something cool to do, and even if it’s cheap, you come across as cultured, like you know what’s going on.

I saw this clip recently go viral in which this YouTuber Mike Majlak was asked how much he spends on his dates. And obviously this isn’t representative of everyone, but he said $700 to $800.

That isn’t normal. It also isn’t cool. But the trouble is when you see more and more of these clips, which go viral because they’re so absurd, I think it’s starting to make people think that it is normal to spend thousands of dollars on a date.

People want to be like these famous influencers, and it affects both men and women. Women start to expect it: He didn’t spend enough money on this date. I saw this clip of this guy spending thousands of dollars. Clearly this guy isn’t a baller; clearly he doesn’t respect me enough. And then the same thing goes for men: They start thinking I need to spend thousands of dollars on this date because real men do, so I’m a loser if I don’t.

Cerebras will be below $50/share in 12 months.

1. Trump’s and Xi’s Body Language at the Summit Mirrored Their Styles

2. What AI Did to My College Class

3. Typing Is Being Replaced by Whispering