When Will the Fed Move on Rates?

Andrew here. Consider this: The biggest tech companies will spend around $800 billion on A.I. infrastructure this year. The consensus forecast for next year is more than $1 trillion — a larger share of G.D.P., according to Goldman Sachs, than in any investment cycle since the railroads.

Washington has decided that A.I. is a national priority. But almost nobody is asking a simple question: Why are we paying so much for it, and could it be done for less? Nvidia’s gross margin last quarter was 75 percent. Micron, which sells memory chips — a commodity it was losing money on three years ago — just reported a margin of nearly 87 percent.

I’m not accusing anyone of gouging. Shortages set prices, and this is a shortage. But a 75 percent gross margin is usually a flashing sign that summons competitors, who compete the margin away. In the A.I. build-out, that light has been flashing since 2023.

The rebuttal, of course, is that the market is already fixing this. We’re watching the rise of AMD, custom silicon from Amazon and Chinese open-weight models. But that will all take time to affect costs. The trillion dollars is being spent now, some of it with tax credits.

Article source: https://www.nytimes.com/2026/10/16/business/dealbook/fed-rates-warsh-inflation.html