Not a 'bubble,' but maybe an 'air pocket': Wall Street says it's time to reset the AI narrative

Economic

Summary:

BlackRock and Bank of America say the AI boom isn’t a bubble but a massive investment cycle. They expect a temporary “air pocket” as spending outpaces revenue, yet still see strong long-term upside for U.S. equities.

Two of Wall Street’s biggest firms say the AI boom is far from a speculative mania.

Instead, BlackRock and Bank of America say this cycle is being driven by real corporate investment, earnings, and productivity gains — not the kind of irrational exuberance that defined the dot-com bubble of the early 2000s.

"We don't think the bubble framing is that useful at this stage for investors," Jean Boivin, head of the BlackRock Investment Institute, said at a media roundtable on Tuesday.

“We want to avoid just putting everything on a backward-looking kind of metric or assessment," he continued, noting it's "incomplete" to describe the AI boom as a bubble given the build-out continues to unfold at an “unprecedented” scale and pace.

Boivin also pointed to the healthy level of skepticism in markets today.

“There is so much talk about the potential of the bubble … people are conscious of the risk,” he said. “It’s when there’s no discussion of that that we should be more worried.”

BlackRock argues the spending boom in AI is so large that it has become the macro story itself, saying the scale of corporate investment could push US GDP growth consistently above the 2% trend that has dominated for decades.

“The capital spending ambitions tied to the AI buildout are so large that the micro is macro,” the firm wrote in its outlook, estimating corporate spending plans between $5 trillion and $8 trillion globally through 2030, most of it in the US.

“The challenge for investors: reconciling huge capital spending plans with the potential AI revenues,” BlackRock added. “Will their orders of magnitude match?”

The firm also flagged the physical limits of the build-out, from compute to the grid, noting AI data centers could consume 15% to 20% of US electricity by the end of the decade. That makes the build-out both transformative and vulnerable: “This frontloading of spending is necessary to realize eventual gains," BlackRock wrote.

BlackRock said those pressures are part of a structural shift, arguing AI is helping propel stocks to record highs and that it “remains pro-risk and sees the AI theme still the main driver of US equities.”

From bubble to 'air pocket'

Bank of America struck a similar tone, but with a more explicit warning about how the next phase of the boom could play out.

“Is this 2000? Are we in a bubble? No,” Savita Subramanian, head of US equity & quantitative strategy, said during BofA's outlook call on Tuesday. "Will AI continue unfettered in leadership? Also no."

Subramanian views the current environment as more of a pause than the start of a collapse, describing a potential “air pocket” where capital spending outpaces revenue growth. That lag between investment and monetization, especially around power and infrastructure bottlenecks, could spook investors in the near term.

Part of that risk has already shown up on balance sheets. Hyperscaler capital expenditures have risen to 60% of operating cash flow over the past year, up from 30% a decade ago, according to BofA, but still far below the 140% peak in the dot-com era.

The firm also forecasts hyperscaler spending from companies like Microsoft (MSFT), Amazon (AMZN), Google (GOOG, GOOGL), Meta (META), and Oracle (ORCL) reaching $400 billion in 2025 and $510 billion in 2026 as the build-out continues.

But that near-term caution doesn’t mean the comparison to 2000 holds. Subramanian acknowledged that breadth and lofty multiples do “rhyme with 2000,” but pointed to several key differences this time around: Stock allocations are much lower than they were during the dot-com era, earnings growth has supported higher valuations, IPOs are smaller, and speculation in unprofitable companies is less extreme than the late 1990s.

Those differences underpin BofA’s bullish long-term view. The firm sees the S&P 500 (^GSPC) ending 2026 at 7,100, a target that sits on the conservative end of Wall Street’s forecast spectrum, well below firmer calls such as RBC’s 7,750 and Deutsche Bank’s 8,000.

Source: finance.yahoo

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Gerik

Economic

Thailand Approves Significant Increase in Airport Departure Tax

On December 4, Thai Deputy Prime Minister and Transport Minister Phiphat Ratchakitprakarn announced that the Civil Aviation Authority of Thailand (CAAT) had approved a notable hike in the Passenger Service Charge (PSC), commonly referred to as the airport tax, for international travelers departing from six airports managed by Airports of Thailand (AOT).

Starting in early 2026, the PSC for international flights will rise from 730 baht (approximately 23 USD) to 1,120 baht (roughly 35 USD) per person. The new fee will apply to passengers flying out of Suvarnabhumi (BKK), Don Mueang (DMK), Chiang Mai (CNX), Mae Fah Luang–Chiang Rai (CEI), Phuket (HKT), and Hat Yai (HDY) airports.

Revenue Growth Linked to Infrastructure Investment

AOT projects that this fee increase, applied to the average 35 million international passengers who pass through these six airports annually, will generate an additional 10 billion baht (approximately 285 million USD) in revenue per year.

This move is not just a fiscal adjustment but reflects a direct causal relationship between funding needs and long-term infrastructure development goals. The additional funds will be earmarked primarily for service improvement and capacity expansion efforts, particularly the construction of the new South Terminal at Suvarnabhumi Airport.

As Thailand positions itself to accommodate growing travel demand in the post-pandemic era, the fee adjustment serves a dual function: it responds to increased operational and infrastructure demands while ensuring service quality keeps pace with international standards.

Implications for Travelers and the Tourism Economy

While the increased charge may raise concerns among travelers and airlines, the government justifies the hike as necessary for maintaining the competitiveness and efficiency of Thailand’s aviation infrastructure. The additional costs for passengers represent a strategic trade-off—slightly higher travel expenses in exchange for enhanced airport services, reduced congestion, and improved overall passenger experience.

Given that Thailand's tourism sector remains a cornerstone of the national economy, and international air travel plays a central role in its recovery trajectory, the balance between fee hikes and infrastructure quality will be critical. The new PSC structure reflects a broader shift in the funding model for public infrastructure, where user contributions are expected to finance major development projects.

User-Funded Modernization in Thai Aviation

Thailand’s decision to raise the airport tax for international flights is a calculated move to channel consistent revenue into critical infrastructure upgrades. With airport traffic expected to continue its upward trend, particularly in gateway cities like Bangkok and Phuket, the additional income will support long-term improvements in capacity and service quality.

This marks a shift toward a user-pays model in Thai aviation policy—where international travelers, rather than taxpayers or government subsidies, will directly fund the next generation of airport infrastructure. Whether this strategy succeeds in boosting capacity without dampening tourism demand will be revealed as implementation begins in 2026.

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Michelle

Political

Economic

Russian President Vladimir Putin arrived in New Delhi on Thursday to start a two-day state visit, and India and Russia both said they want to boost mutual trade and expand the variety of items in transactions.

Indian Prime Minister Narendra Modi received Putin at the airport in Delhi, a rare gesture underlining the warm ties between the two countries and the leaders.

They embraced on the red carpet after Putin walked down from the aircraft and then drove away in the same vehicle.

Modi is hosting Putin for a private dinner on Thursday and the two will hold summit talks on Friday. Senior Russian ministers and a large Russian business delegation are in New Delhi for Putin's visit.

INDIA SEEKS NEW MARKETS AFTER TRUMP TARIFFS

India and Russia aim to raise two-way trade to $100 billion by 2030. Their commerce rose more than five-fold from about $13 billion in 2021 to near $69 billion in 2024–25, almost entirely driven by Indian energy imports.

Bilateral trade eased to $28.25 billion in April–August 2025, reflecting a decline in crude oil imports following punitive tariffs on Indian goods and sanctions imposed by U.S. President Donald Trump's administration.

At the same time, India is looking for new destinations to increase exports of its goods hit by a punishing 50% tariff imposed by Trump, half of that over India buying Russian oil, which Washington says helps finance Moscow's war in Ukraine.

Russia wants to import more Indian goods to balance bilateral trade, which is currently heavily skewed towards energy, Deputy Kremlin Chief of Staff Maxim Oreshkin told a business conference in New Delhi.

"The Russian delegation and business representatives have arrived with a very specific goal ... We have come for Indian goods and services. We want to significantly increase their purchases," Oreshkin said.

"This is not a momentary story, but a strategic choice in developing relations" between the two countries, he said, adding that India's share in Russian imports does not exceed 2%.

DEMAND FOR INDIAN SHRIMP

Indian Trade Minister Piyush Goyal said New Delhi wants to diversify exports to Russia and increase sales of automobiles, electronics goods, data-processing equipment, heavy machinery, industrial components, textiles, and foodstuffs.

"Russia has a huge demand for a wide range of industrial goods, consumer products, presenting multiple untapped opportunities for Indian businesses," Goyal told the conference.

"We need to bring more diversity in our trade basket. We need to make it more balanced between Russia and India. We need to add more variety," he said.

Russian Agriculture Minister Oksana Lut said Russia was prepared to increase imports of shrimp, rice, and tropical fruits from India. She mentioned that Russian firms were also interested in Indian food-processing equipment.

India is the world's largest exporter of shrimp, and Lut noted that it was possible to increase India's share in Russian imports of shrimp, currently at 20%.

India was the biggest supplier of shrimp to the U.S. but Trump's tariffs have badly hit exports, causing a decline in shipments and forcing companies to seek alternative markets.

Source: Reuters

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Adam

Commodity

Light Crude Holds the Line at $59.23 as Traders Test Key Levels

Daily Light Crude Oil Futures

Light crude futures ticked higher Thursday with traders leaning on the 50% retracement at $59.23, the top of the short-term zone that extends down to $58.44. Bids around $59.23 are holding for now, and the market is trying to firm up after several sessions of back-and-forth trade.

At 10:30 GMT, Light Crude Futures are trading $59.19, up $0.24 or +0.41%.

A steady hold above $59.23 keeps a slight upside bias alive and puts the 50-day moving average at $59.86 back in focus. That indicator has stopped every rally since late October, making it the first real test for anyone looking to press the long side. A clean break would shift attention to the 200-day moving average at $61.01, which remains the next major marker on traders’ charts.

On the downside, slipping back under $59.23 would expose the 61.8% retracement at $58.44. Buyers will need to show up there to keep the current upside setup intact. If they don’t, the path opens toward the recent swing low at $57.10—the last area where value buyers stepped in.

Ukraine Strike Adds Fresh Supply Risk in Crude Oil News Today

Geopolitical risk returned to the front end of the curve after Ukraine hit Russia’s Druzhba pipeline in the Tambov region—the fifth strike on that system supplying Hungary and Slovakia. Operators reported flows were still running, but the repeated hits were enough to nudge crude higher in early trade.

Kpler noted that Ukraine’s drone operations on Russian refining assets have shifted into repeated cycles aimed at keeping key facilities offline. Russian refining throughput dropped to about 5 million barrels per day from September through November, down 335,000 bpd year-on-year. Gasoline output has taken the biggest hit, with gasoil also materially softer.

Do Stalled Peace Talks Change the Oil Prices Forecast?

Talks between U.S. representatives and the Kremlin produced no progress, with President Donald Trump saying there’s no clear path forward. Traders previously priced in the possibility that a deal could ease sanctions and push more Russian barrels onto an already heavy market. With no breakthrough, that pressure has faded, helping crude stabilize.

Oil Prices Projections Face a Weigh from Fitch

Fitch Ratings cut its 2025–2027 oil price assumptions, citing continued oversupply and production growth expected to run ahead of demand. The downgrade underscores the broader fundamental drag still hanging over the market.

Market Forecast: Mild Bullish Bias While $59.23 Holds

The short-term view leans bullish as long as futures stay above $59.23. A move through the 50-day moving average would confirm momentum. A break under $58.44 would undo the setup and shift control back to sellers.

Source: fxempire

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Adam

Commodity

As we share below, courtesy of FinViz, natural gas prices have risen by over 50% since late October. Moreover, natural gas prices, approaching $5, are at three-year highs. The primary cause of the recent price surge is increased heating demand driven by colder-than-expected winter weather, which is resulting in greater-than-average inventory draws.

Per the EIA, natural gas stocks are projected to tighten significantly heading into 2026, despite starting the season above five-year averages. Weather is the primary driver of fluctuations in natural gas demand and prices, but increasingly, the buildout of energy-intensive data centers and liquefied natural gas (LNG) facilities is setting a rising floor under natural gas prices.

While demand is amplified by the massive growth of power-intensive data centers, which investors well know, it’s also worth noting the sharp increase in demand from liquefied natural gas exports. According to the Energy Information Administration’s (EIA) November 2025 Short-Term Energy Outlook (STEO), LNG exports are projected to average 14.9 billion cubic feet per day (Bcf/d) in 2025, a 25% increase from 2024 levels.

Furthermore, they expect it to increase further to 16.3 Bcf/d in 2026 (up 10% from 2025). While weather trends remain the predominant short-term driver of natural gas prices, LNG exports and increased data center usage will boost demand, likely keeping a slowly increasing floor under natural gas prices.

Natural Gas Export Growth Raises Demand Expectations for 2026_1

What To Watch Today

Earnings

Economy

The ADP Report Warrants A Fed Cut

The monthly ADP jobs report released yesterday showed continued deterioration in the labor market. ADP reported the economy lost 37k jobs. The Wall Street consensus was for a 10k pickup. The graph below shows that the three-month average for ADP is now negative for the first time since the early days of the Pandemic. BLS jobs data is delayed due to the government shutdown.

Notably, the ADP monthly report shows that the Northeast region lost 100k jobs, and the small-business sector reduced its workforce by 120k. The second graphic below, courtesy of ZeroHedge, highlights other factors impacting the aggregate number of job losses.

The Fed Funds market is now pricing in a 90% chance the Fed cuts at next week’s meeting. Without BLS data and updated inflation data, the weakness seen in the ADP report and other private-sector reports will likely be enough to secure a majority in favor of cutting rates. The jobs data may also warrant a couple of FOMC members to vote for a 50bps rate cut. Currently, the Fed Funds futures market assigns a zero probability of a 50bps cut.

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Natural Gas Export Growth Raises Demand Expectations for 2026_6

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Gerik

Economic

A Strategic Milestone in US-Israel Agricultural Relations

In a significant move reflecting both economic pragmatism and strategic alignment, Israel and the United States have finalized a long-term Agricultural Trade Agreement (ATAP) to replace a temporary mechanism in place since 2004. The agreement establishes a comprehensive framework to facilitate deeper trade integration in the food and agricultural sectors, promoting mutual benefits across pricing, competitiveness, and bilateral ties.

Israel’s Minister of Economy and Industry, Nir Barkat, who signed the agreement alongside US Trade Commissioner Jameson Greer, emphasized that the deal responds to Israel’s twin priorities: alleviating domestic living costs and strengthening ties with its most important political and economic partner. Barkat described the new trade framework as a “balanced system” that not only stimulates price competition and reduces food costs but also enhances the positioning of Israeli exports in the US market.

This development demonstrates a causal link between Israel’s economic pressures particularly the rising cost of living and the government’s push for liberalizing agricultural trade policy, in tandem with securing strategic alliances.

Trade Concessions to Boost Imports and Protect Local Producers

One of the core components of the agreement is Israel’s commitment to reduce or eliminate tariffs on around 300 categories of US food and agricultural products. Some of these tariff eliminations will take effect immediately, while others will be phased in gradually over the next decade. These product categories span a wide range, including beef, poultry, lamb, dairy products, eggs, edible oils, juices, and various fresh or frozen produce.

The phased implementation underscores a deliberate causal policy strategy: stimulating imports and lowering consumer prices, while minimizing shocks to sensitive domestic sectors such as dairy. Government officials acknowledged that abrupt tariff reductions could destabilize entire industries, and the agreement was structured to avoid such outcomes.

At the same time, the Israeli government is investing in domestic agricultural innovation. The use of artificial intelligence and advanced agri-tech tools will be part of a broader national strategy to support local producers. This dual-track approach opening markets while reinforcing internal capacity shows that increased trade openness is being managed in tandem with risk mitigation.

Expanding Agricultural Capacity and Enhancing Food Security

According to Agriculture and Food Security Minister Avi Dichter, the agreement also serves broader national objectives. He noted that expanding high-quality agricultural exports would lead to improvements in domestic agricultural standards and supply consistency. Dichter projected that this agreement could help Israel increase agricultural output by one-third over the next decade.

The broader implications are strategic. By ensuring product availability, maintaining high standards, and protecting border settlements through rural development, the Israeli government views food security not just as an economic issue, but as a national security concern. The structure of the agreement supports this priority by avoiding abrupt market liberalization while incentivizing long-term productivity growth.

Negotiating Reciprocal Benefits in the US Market

While the agreement grants extensive access for US agricultural products, Israel is simultaneously pursuing improved terms for its own exports. Currently, about 70% of Israeli exports to the US are subject to new tariffs. Israeli negotiators are seeking to reverse this situation in the next phase of trade discussions, emphasizing that greater access to the US market is crucial for restoring Israel’s competitive edge.

The trade imbalance and the need for reciprocal market access reflect a causal dynamic: increased import openness must be matched with export opportunities to ensure balanced economic gains and political support for trade liberalization at home.

A Balanced Framework with Geopolitical and Economic Significance

The newly signed US-Israel Agricultural Trade Agreement marks a pivotal shift in both countries’ economic cooperation. It provides a structured and gradual path toward deeper integration, while addressing domestic vulnerabilities and geopolitical imperatives.

For Israel, the deal offers a pathway to address rising food costs, strengthen rural economies, and modernize its agricultural base. For the United States, it solidifies a crucial alliance in a volatile region while opening new market opportunities. The next phase of negotiations focused on Israeli export access will determine the long-term equilibrium of this strategic partnership.

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Adam

Cryptocurrency

It's hard to tell just looking at the price charts if bitcoin (BTC-USD) investors have been naughty or nice.

A bruising November has given way to some relief — and the prospects of a Santa rally. And while the Thanksgiving table chatter might have moved on to prediction markets, more players in the market are taking seriously the idea that crypto is here to stay.

The dramatic swing in sentiment — bitcoin has dropped roughly 30% from its recent highs — has been a painful reminder of crypto's volatility. But even if banks and a pro-crypto government have made it easier for people to accept digital currencies, investors ultimately are the ones who have to risk their money to push prices higher.

And there are now fewer people willing to do that.

For perspective, gold (GC=F) has risen more than 60% so far this year. Investors have reached for a safe haven from political instability, the "debasement" of fiat currencies, and rising debt loads. (Instead, they found those massive gains, figuratively striking gold as they literally struck it.)

The bullish notion that crypto is the new gold, even as a loose metaphor, strained under the relative performance of the two assets. When markets convulsed during key moments this year, investors treated gold like a refuge and crypto like a bad habit. Which looked even less flattering with the S&P 500 (^GSPC) up about 16% year to date, leaving crypto off the risk-on train.

Criticizing bitcoin's propensity to crumble under pressure is hardly new. But the fallback position of acknowledging that crypto is still in its early stages in the financial system is also, at this point, a tired comeback.

There's a middle ground, of course, and the mainstream financial industry is planting its flag. Allocating just a little bit toward crypto gives investors some exposure to the upside while minimizing the downside.

Bank of America said earlier this week that it's endorsing a 1%-4% allocation to digital assets for clients of its Merrill, Bank of America Private Bank, and Merrill Edge platforms. The move follows other big banks and asset managers warming up to crypto, including Morgan Stanley's global investment committee, BlackRock (in a big about-face), and Vanguard.

The industry's push into crypto in moderation does put limits on the to-the-moon winnings that have made crypto millionaires. You don't need to have seen "Ocean's Eleven" to know that sometimes to win big, you have to bet big.

But in a year when a speculative asset started out higher than it is right now, prudence can win too. Or at least help you lose just a little bit less.