Here’s a preview of what we’ll cover this week: 

Macro: The Bottom Half Is on a Tear; Inflation's Third Wave Is Already Breaking

Markets: The June Swoon; The Rotation Is Underway; Bull Markets Are Born On Pessimism; What Happens If Data Center Buildouts Are Delayed; Micron Is Cheap?; Should You Fund The AI Buildout?; The Cheapest Token Is a Chinese One

Lumida Curations: Jeremy Grantham On Musk’s Ambition For SpaceX; Steve Cohen On AI’s Real Value For His Fund; Demis Hassabis On Deepmind’s Defense Against Deepfakes

We will be hosting our monthly social get together on this Tuesday 30th June. 

The vibes are great. We’ll share more about Lumida’s vision with the app and our plans with the community round that we’re wrapping up this next two weeks.

We have capped the seats at 70, so if you’d like to attend, register here to save your spot.

Second

For over a year, markets have feared economic stress for consumers at the bottom half with higher inflation, gas prices, and tariffs. 

However, the data says the opposite.

That’s one reason we’ve picked up a number of consumer finance lenders focused on this segment. 

The low end consumers aren’t cracking. They are accelerating.

Look at lower-income card spend. 

Lower-income consumers are now spending over 4% more than they were spending a year ago.

And, this 4% strips out any impact from higher gas prices. 

The inflection started in early 2026. And, It's still building. 

You don’t spend when you are afraid of not having enough – higher spending signals confidence.

The jaws of the K are closing.

Here's the same story from the other side.

The spending gap between the top and the bottom of consumers is shrinking. It has narrowed by the most in June since its low in 2023.

But the direction is what’s more important.

We are seeing lower income consumers increasing their spend at a higher rate than higher income groups, which means the latter has higher confidence in the economy. 

The obvious bear rebuttal would be that the bottom half is increasing their spend by tapping into their savings. 

But, data shows that’s not the case. 

The chart above measures buffer days –  how long a household could keep spending if the paychecks stopped tomorrow.

The median buffer days sit around 30 days. It has been in the same range since 2023, and still above pre-pandemic levels.

This shows the surge in spending isn’t a drain in the savings.

So what's funding the higher spend?

Three things. None of them are credit-card desperation.

What does this mean for positioning?

The bottom half is resilient.

And, it seems markets are beginning to realize it.

Names, like Synchrony (SYF), Bread Financial (BFH), Dave (DAVE), Enova (ENVA), were trading near all time low valuations a few weeks back.

We own all of these names. (They each occupy different niches we like and have differing but productive factor exposures.)

But, now, they are showing signs of momentum. 

Look at Synchrony, a leader in private-label cards, below. They are growing their elective health financing business and other verticals. Elective health includes financing for services such as dental implants, orthodontics, LASIK, hearing aids, cosmetic procedures, fertility treatments, weight-loss care, and veterinary services — categories where consumers often face large out-of-pocket costs and use point-of-sale credit to spread payments over time.

(The name could very well pull back to the EMAs in the next few days.)

Or, Bread Financial.

Interestingly, despite the gains in the last few weeks, these names trade at single digit forward earnings multiple, with free cashflow yields north of 40%. 

We discussed the bull case of these consumer finance names in our last issue. Read here.

Inflation has been a “hot” topic in markets all year.

We were early to flagging this several months ago here.

And, the near-term revisions just got hotter.

The Cleveland Fed's Nowcast has June headline inflation at 3.9%. Core is stuck at 3.4%. Falling energy is helping the headline, but the core won't budge.

The next 6 months will be crucial - especially the behavior of the Fed.

So what's holding the core PCE up? A new driver. AI.

AI build-out is the third wave of inflation.

The five hyperscalers will spend roughly $741B this year. That's up about 75% from 2025.

Columbia's Van Nieuwerburgh puts total build-out spend through 2032 near $8T — about 5x the total value of every property in New York City.

That much capital doesn't disappear into a spreadsheet. It shows up in higher demand, driving up prices.

You can already see it.

Apple raised hardware prices this week. So did Nintendo, Sony, and Microsoft. Tim Cook said the cost jump beats anything he's seen in 40 years.

Computer software and accessories inflation ran +15% y/y in May. Wholesale electronic components ran +27%. 

With the massive buildout underway, this seems to be only the beginning.

Then there's power. 

Goldman sees data centers driving almost half of all US power-demand growth through 2030. Retail electricity is set to climb ~6% a year in 2026 and 2027.

The build-out spends on chips. It spends on electricity. Both show up in the consumer's bill.

No surprise 81% of NABE economists expect the build-out to add to inflation this year.

So the near-term story is real. Inflation is going higher before it goes lower.

But the market is already looking past it.

Inflation expectations are rolling over.

One-year inflation swaps have cratered. They sit at ~2.2% today, dipping from their high of ~3.5% during peak Iran war.

Similarly, the 10-year breakeven inflation is back to 2.20%, the lowest it has been since Apr 2025.

In our last issue, “Inflation is a choice” ,we noted Warsh is focusing on building credibility by being relentless about price stability.

My view is Warsh is jawboning to bring long-term rates down, but has no intention of lowering short rates.

Incidentally - We looked at the hyperscalers free cashflow over the next three years.

There is virtually no growth — they are growing revenues, and taking free cashflow and handing it to semiconductor companies.

Then, around year 3, analysts expect a massive surge in hyperscalar freecashflow.

We must speculate on how long board rooms of hyperscalars will tolerate languishing share prices vs the race for AI dominance.

After ripping higher in 11 of the prior 12 weeks, the market finally closed at a weekly red on Friday.

The Nasdaq 100 led the drop, dipping 4%. The S&P 500 fell 2%.

And none of this should be a surprise given June’s historical performance.

June is the weakest month of the year in midterm years, averaging a dip of 2.3%.

We're getting a more intense sequel this time. 

The S&P is down 3.4% month-to-date, with the Russell 1000 off 2.9%.

The swoon arrived right on schedule. 

The only question that matters is whether it signals something deeper. 

It doesn't.

The Bull Market Is Intact

This bull market is built on earnings, and the earnings keep showing up.

S&P 500 forward earnings per share is up 31.0% y/y through June. 

Operating margins are also sitting near 16%, close to record highs. Historically, when margins run this fat, forward two-year returns have been strong. 

Profitable companies getting more profitable is not the setup that kills a bull market.

So we'll say it again: buying the panic in a bull market with accelerating earnings has been the right call far more often than not.

The swoon isn't the end of the market’s rally. It’s the beginning of the rotation.

Start with how stretched the semis high beta trade had gotten.

This is the ratio of the S&P's 100 highest-beta names against its 100 most defensive ones. It hit an all-time high on Monday, with a one-year rate of change near +67%. 

Investors have spent the better part of a year aggressively paying up for the most volatile, highest-risk names while dumping the safe ones.

The only two other times the rate of change (ROC) surged to these heights were 2010 and 2021, and both times high-beta leadership reversed with the gap going back to 0% in each of the instances.  

A reading this extreme doesn't mean the bull is done. It means chasing high beta from here is a worse and worse bet.

The reversal is already in the tape.

Semis took the beating this week. SMH fell 7.31% — the biggest winner falling the most, exactly as it does in a pullback. 

Now look at where the capital went. 

Biotech (IBB) gained 7.90%. Airlines (JETS) up 7.35%. Homebuilders (ITB), Insurance (KIE), and Regional banks (KRE) were all up ~5%. 

That first one is ‘animal spirits’ — AI meets healthcare. These last four fit into the ‘quality compounder’ bucket.

One red semis line, green almost everywhere else. 

It is the exact opposite of the trade we had seen for the last few weeks. 

The money that led the surge in semis, is now moving back to where it came from. 

Insurance is the clearest example.

KIE just put up one of the best weeks in the market, and the names inside it still trade like nobody wants them. And, yet, All State is up 25% in one year and still has a 9X PE. Manulife is up 30% in one year and has a 30% free cashflow yield.

Let’s take a closer look at the Insurance index

The ETF is trading at a P/E NTM of 11.1x, almost a 50% discount to the S&P 500 valuation.

Meanwhile, the cash generation is evidenced by an FCF yield greater than 13%. For perspective, SPY has a FCF yield of 2.74% - almost 5 times lower than KIE. 

Few names within insurance stand out more than the rest.

Allstate (ALL) is an example. 

Earnings are temporarily depressed as the insurance cycle resets, but you're paid to wait through with a 1.9% dividend and a 2.8% buyback yield. 

The market is already coming around, with the stock up ~16% over three months.

We have been discussing how quality has been wrecked YTD. Now we are seeing signs of life and real vigor in distinct industry groups.

Progressive (PGR) is another name in insurance we like. It was also part of Lumida’s 2026 picks. 

PGR is a higher-quality compounder. It trades at 13.3x forward earnings with a 12.5% FCF yield and a 6.2% dividend yield, one of the best payouts in quality. 

Revenue has been compounding near 14%, and it is gaining momentum as well now. The name is up ~11% over three months. Cheap growth with a real yield stapled on.

The bargains aren’t only limited to insurance. They are everywhere. 

Nu Holdings (NU) is another name we like. It kept getting sold off at all averages, but this week, the character changed. 

The stock moved up 5.7% on Friday, when SMH was down almost the same.  

The technicals still look terrible here, so be mindful of your entries.

We have discussed NU before. You can read our detailed thesis here. 

Revenue is compounding at 42% and EPS at 37%. The stock sits near the low end of its valuation range despite rapid growth.

We also like Biotech.

The semis trade made several names within Biotech absolute bargains.

The sector has discounted valuations, and a midterm backdrop that turns friendlier for the group as the odds of a Democratic House keep climbing.

The rotation is already visible. IBB (Biotech ETF) was the single best-performing sector this week, up 7.90%.

Here are our best biotech picks. 

Incyte (INCY)

Incyte is a biopharma built around Jakafi, its blood-cancer drug, with a dermatology cream (Opzelura) and an oncology pipeline behind it. 

It trades at 14.2x forward earnings with a ~6.5% FCF yield. 

Revenue grew 21.5% over the last year with double digit earnings growth.

Market’s long-standing concern is Jakafi's patent cliff later this decade, which is one reason why this stock keeps getting discounted. 

However, INCY is pivoting nicely from Jakafi. Opzelura continues to scale, and the pipeline is being built to offset the cliff rather than be sunk by it. 

This has been our biotech pick for multiple years now. 

Halozyme (HALO)

Halozyme operates more like a royalty business than a drug developer. 

Its ENHANZE platform converts partners' intravenous drugs into subcutaneous injections, and Halo earns a royalty whenever a partner such as J&J or Roche uses it. 

Revenue grew 39% over the last year and EPS is compounding at over 90%.

Yet, the stock trades at 8.5x forward earnings with a 7.5% FCF yield and a 3.6% buyback yield. The dislocation is clear here. 

Exelixis (EXEL)

Exelixis is another one of our picks, and has more momentum than the other two. 

EXEL is an oncology company anchored by Cabometyx (cabozantinib), used across kidney, liver, and neuroendocrine cancers, with the label still expanding into new tumor types. 

The franchise generates massive cash to fund an ~8.5% buyback yield — among the highest in biotech.  It trades at 15.2x forward earnings with 7% FCF yield. 

Revenue is also growing double digits at 12% with EPS growth higher at 15%. 

The obvious risk for EXEL is concentration in a single drug, which the company is addressing with a next-generation successor in the pipeline meant to extend the runway beyond Cabometyx.

Overall, it’s so easy to find discounts in the market right now. Your focus should now be to avoid the waning momentum, and get in sectors that the capital is rotating into. 

John Templeton famously said "Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria."

What does Euphoria look like?

Take a look at the following chart. 

This measures the 'Net Breadth'.

Positive Breadth = Stocks in uptrends

Negative Breadth = Stocks in downtrend

Notice in 2021, nearly all sectors exhibited extreme positive breadth.

Similarly, in 2022, nearly all sectors exhibited extreme negative breadth.

Where are we today?

A significant amount of capital has flown into semis.

What we are seeing is natural and healthy rotations across sectors.

We have not had the Euphoria that marked the 2021 top.

We have had 'mini-euphorias' in select themes and quiet bear markets in other themes.

But, overall, investors have stayed skeptic. Here’s CNN fear and greed index sitting at extreme fear.

The valuations in a number of sectors and earnings growth is attractive, so the show goes on…

The ‘Most Important Question’ in the market can be boiled down to one sentence: 

Will Datacenter cancel rates increase this year, or is it a nothing burger?

The appetite to spend on capex is there. 

The primary risk to the story is one variable: political and NIMBY backlash against datacenters

(which would be unfortunate for human progress).  

That’s going to be a topic discussed in the midterm elections in a few months, on the other side of the Bicentennial.

I talked about the datacenter delay in the latest bits and bips podcast. Watch the curation here. 

Voters are starting to notice their power bills climbing — and they are seeing data centers as the reason.

Politicians notice voters especially with midterms ahead. "Your bill is up because of an AI warehouse" is exactly the kind of clean grievance a candidate runs on.

So the backlash is coming.

This might lead to permitting fights, interconnection slow-walks, and moratoriums in the metros where data centers are pressuring retail power prices the hardest. 

Grid-tethered projects in those cities might get delayed.

Every delayed project makes the compute that's already running more valuable.

If half the planned capacity can't get energized, demand doesn't disappear. 

It concentrates onto whatever compute exists. 

Scarcity has a price, and the price goes up.

And it routes straight to the one provider the backlash can't touch: off-grid. 

A data center that makes its own power — using cheap, almost-free natural gas, sitting off the public grid entirely — doesn't pressure anyone's electricity bill, doesn't show up on a voter's statement, and doesn't wait in a 4-to-7-year interconnection queue.

Off-grid compute providers runs the same compute today, at fatter margins, while grid-tied rivals are stuck in front of a zoning board.

This is exactly the theme we've been building toward in private markets.

We're actively working on a private investment in an off grid compute provider — producing data center compute from almost-free, off-grid natural gas. We know the team. And, We've invested alongside them before. I’ll personally be taking part in the raise.

If you're an accredited investor or qualified purchaser and want the details on this one, email [email protected] and he'll walk you through it. 

Alternatively, you can get on the distribution list for this and every future private deal at lumidadeals.com.

Congressman Josh Gottheimer (D-NJ) is one of the best politician traders - giving Nancy Pelosi a run for her money. 

Notice how when he sells, the stocks dump. 

We have also added a Leaderboard to the Feed, so you can see who in Congress is best advancing the Public Interest. 

If you want the best insight oriented investing app out there, you won’t do better than the Lumida Invest app.

Guess what his last purchase was?

Micron (MU)

Micron reported Wednesday night, and the print was a blowout on every line.

Revenue hit a record $41.5 billion — up 74% sequentially and 346% YoY. Gross margin came in at 85%, a company record.

EPS was $25.11, more than double last quarter. 

Management guided Q4 higher: a record $50 billion in revenue (+450% YoY), ~86% gross margin, and $31 in EPS (+900% YoY).

On demand, Sanjay Mehrotra (CEO): "DRAM and NAND industry demand continues to significantly exceed the industry supply." 

"We expect tight conditions to persist beyond calendar 2027."

"We currently do not have line of sight as to when memory supply will be able to catch up with increasing demand."

The reframe underneath it all: "The memory industry has been structurally transformed by the proliferation of AI," with memory now elevated to "a strategic asset."

Micron is locking in the future demand. It has signed 16 strategic customer agreements — take-or-pay, generally five-year deals running through 2030. 

As Mehrotra put it, these are "binding commitments to purchase specific volumes over this multiyear term." 

The largest contracts carry a price floor and a ceiling, with the ceiling set at current quarter market prices.

At the contractual floor, Mehrotra said the "floor price enables a very robust gross margin for Micron, well above our peak quarterly margins in any past cycle." 

Micron's prior peak gross margin in any up-cycle was around the low 60s. The worst-case contracted price from here still beats the best margin Micron ever printed.

The caveat. The price momentum is cooling — CFO Mark Murphy flagged "a meaningful moderation in the rate of price increases." 

But moderation off record margins, locked into multiyear contracts, is a very different animal from the old cliff. 

The down-cycle that used to gut this business has been contracted away.

Now come back to a chart we've shown you before.

We've used this exact picture to argue Micron's run was against earnings — the stock is chasing fundamentals rather than the other way around.

Look where it sits now. 

The forward EPS line has pulled ahead of the price. The earnings are now outrunning the stock that's already up 800%. Crazy times.

Fiscal AI shared profit projections for memory companies last week, and that shows the scale these companies can reach. 

The operating-income forecast for the memory players has gone near-vertical since the AI race began. 

Fiscal AI projects roughly $945 billion combined by 2029, with Micron's slice around $160 billion. 

That’s around 2x Micron’s 2026 earnings.

Funny enough, FactSet’s analysts project Micron will reach $160B in earnings by 2028.

At XLK’s current multiple of 23x, that would mean a market cap of $3.7T.

We continue to own MU, DRAM, and SNDK. 

The momentum is strong, and the AI capex makes the earnings far more durable than a single-digit multiple assumes in case of MU. 

However, we might trim our exposure in near term, as markets rotate away from semis into other sectors. 

I talked about the AI buildout, hyperscaler’s free cash flows, and the impact it has on shareholders value in Wednesday’s FSD.

Watch “Not In My Backyard”.

Hyperscale capex was $380 billion in FY25. Analysts estimate it jumping to roughly $760 billion in FY26, up 75%. 

The projections are estimating it at $904 billion in FY27, and past $1 trillion in FY28. 

If you think the $1T is massive, Jensen is projecting the capex would increase 3x from the $1 trillion to $4 trillion by 2030.

And, Jensen isn’t Trump, so you can expect him to have evidence backing his claims. 

This is the most capital ever committed to a single theme. 

The question: who pays for it, and when does it show up?

It's showing up now. In hyperscalers’s cash flows.

Hyperscalers’ free cash flow is cratering.

The FCF for hyperscalers has fallen off a cliff in 2026. It is headed toward zero in the latest projections, even as the S&P’s FCF keeps grinding higher.

Meta’s free cash flow is projected to decline by 97% in next 1 year - the worst decline amongst SPY constituents. Google is also in the worst 10, with FCF decline estimated at 70%. 

But that cash isn't vanishing. 

It's changing hands. 

Every dollar the hyperscalers pull out of their own FCF gets spent into the AI flywheel, and it lands on the income statements of the companies selling the picks and shovels. 

Micron is projected to post the highest free-cash-flow growth (+2800%) of any SPY constituent over the next year. 

This FCF crunch is why the Mag 7 is under pressure.

They are spending massively on an AI buildout in a market that questions the returns on these investments. 

Markets rarely reward companies pouring an outsized share of free cash flow into capex during a build phase. 

Multiple expansion typically occurs during the harvesting phase, while the hyperscalers are deep in construction.

This AI buildout has also taken over the cash available for buybacks that provided support to these names. 

Goldman estimates the group has cut buybacks by nearly two-thirds. Spending growth is on pace to consume 100% of operating cash flows.

This brings us to the red alarm in sight. 

If the spenders keep underperforming while their suppliers rally, boardrooms start asking whether the next dollar of AI capex is really creating shareholder value. And, the moment one peer blinks, the market turns to the rest and asks why they haven't.

A couple of weeks ago in "The War for Capital," we flagged that enterprises had started reining in their AI spend as the bills came above plan.

It turns out they found a better way to manage the bill than rationing.

They stopped buying American.

On OpenRouter, the share of tokens running on US models — Google, OpenAI, Anthropic — has collapsed from roughly 72% in June 2025 to about 33% a year later. 

Chinese open-weight models like DeepSeek picked up the slack, vaulting toward half the market.

The logic isn't complicated. 

When a frontier model and a "good enough" open-weight model both clear the bar for your workload, and one of them is a fraction of the cost, the CFO doesn't agonize over the decision. 

This is the enterprise equivalent of reaching past the brand name for the store-brand box that has the identical ingredient list.

In the current context, I am curious how OpenAI would justify its revenue projections when it signs up for an IPO. 

They have modeled a 100% revenue CAGR when they are losing to substitutes despite their price reduction. 

While you might think we are Sam’s bullies with a soft heart for Dario, we are not, and things aren’t looking good for Anthropic as well. 

They also have $1T in obligations, and an upcoming IPO. The reduction in OpenAI prices would pressure them as well. 

That's an awkward two-line story to hand a public-market investor. Falling prices, falling share, and a roadmap that needs both to go the other way.

The big winner here, as always, is the customer. Capitalism works.

Steve Cohen says AI’s real value inside investing may come less from hype and more from helping analysts do higher-value judgment work with less manual processing.

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Demis Hassabis believes watermarking tools like SynthID could become essential infrastructure for proving what is AI-generated as synthetic media becomes harder to detect.

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