Weekly Roundup -- 2025 Week #49
AI inputs squeezing, ECB Urges Gold Rethink, and U.S. jobs demand policy's attention
This week Cameron Otsuka and I covered the week’s key headlines that moved the ball forward in the big-cycle shift we’re living through: Micron’s exit from the RAM consumer market and the inputs squeeze it signals on the AI theme; Italy’s gold sovereignty challenge to the ECB; and the softening U.S. jobs market’s implications for further Fed easing.
The RAM Squeeze: AI Prices Out Consumers
First up, Micron Technology announced it will exit its Crucial consumer brand after 29 years and will instead focus these resources on data center demand. DDR5 memory prices have surged nearly 300% (from ~$100 to $400 for a standard 32GB kit) since mid-September, suggesting the AI infrastructure buildout is now bumping right up against the supply side’s production capacity of inputs. Industry analysts warn laptop prices could rise 20% in 2026, which would certainly not be a helpful development for the Fed’s price stability mandate (“inflation”). More on this later.
These RAM market developments exemplify the “winner’s curse” in resource auctions as the business cycle expansion progresses towards its bust. Investment consumes the economy’s resources in anticipation of continued or growing demand, driving up input prices until the last marginal buyer is standing and everyone else is priced out. The last bidder holding their paddle in the air wins the auction for the input resources. We’re already seeing evidence this is happening across AI-related inputs, with observable runups in prices for GPUs, memory, transformers, specialized labor, and — most importantly — capital.
In a bull market prices will tend to rise until demand for the producers’ output has been saturated: past this point, they can no longer deliver their widget to the market profitably. If producers drive the purchase prices for inputs to an excessive level that gets out of hand (as history shows they tend to do in a speculative frenzy around a new technology), they might find themselves in a difficult situation with capacity overbuilds and excess resources and inventory on their balance sheet at high prices that cannot be profitably put to use (at least for some time). With escalating capex commitments tied to multi-year data center buildouts and remaining performance obligations (“RPOs”) for future spending, the AI producers have collectively tied themselves at the waist to the mast of the ship.
The bust is the mechanism for cleansing out overinvestment and excess. Unless this time is different (always the most dangerous words in financial markets), a bottom of the business cycle is somewhere in this sector’s future. Pending how anticipated demand for AI products actually materializes against reality, we’re all TBD on the timelines and severity for what we’re all looking at. What we can say definitively is that there are more nominal dollars (in the trillions) riding on the outcome for this technology than the buildout cycle for any other that came before. We’ve bet it all on red and the roulette wheel is spinning. Good luck, everyone.
Italy’s Gold: Sovereignty vs. Technocracy
In the second topic, we covered the push by Giorgia Meloni’s party to declare Italy’s gold reserves “property of the [Italian] State, in the name of the Italian people”. Expectedly, the ECB responded with an urgent demand for reconsideration.
This actual fight isn’t about repatriating gold or moving the physical location of its custody vault —Italy’s gold is evenly split between Rome and New York, and Meloni’s party has expressed that this existing custody setup fits its needs just fine. The demand is rather about operational authority over Italy’s gold reserves. This encompasses sales, leasing, and derivatives under existing Eurosystem rules, which makes up the actual mechanisms by which monetary policy via gold gets conducted.
With gold’s massive price rally now valuing these reserves at ~€285 billion, Mr. Market is effectively voting that credibility resides on the balance sheets of the national central banks (“NCBs”) of sovereign nation states, not with the ECB or Brussels technocrats. Italy reportedly holds 2,452 tonnes; Germany 3,352; France 2,437. The ECB, in contrast, only reports ~500 tonnes. What this latest headline suggests is that we’ve already crossed into a new age where purely fiat credit monies no longer functionally muster up to the demands of cross-border capital. At the very minimum, the rules in international capital markets have fallen back on operating under the golden rule: he who has the gold makes the rules. With price charts for basically every metal on the board either already broken out or looking primed to do so imminently, it looks like everyone is nodding their heads in agreement.
US Jobs: Fed Pivot Incoming
Last, the November ADP report showed a loss of 32,000 jobs—the largest decline since March 2023—with small businesses shedding 120,000 positions. Since “Liberation Day” in April the level of job creation in the economy has flatlined. Since August it has progressively softened and has now crossed into negative territory.
The effect from the immigration policy shift between the 46th and 47th Administrations has been decisive: essentially zero net immigration now severely constrains U.S. labor force growth. That’s shifted the Fed’s binding constraint from focusing on inflation (which it has never fully satisfied this decade) to full employment, driving rate cuts in September, October, and likely December. If price increases in 2026 hit the American consumer like some analysts have forecasted for laptops in the wake of Micron’s announcement to abandon the consumer market, the new Fed chair may face a challenging monetary policy backdrop to walk into.
The Convergence
This week’s headlines expose supply constraints now bind across the AI capex inputs, labor, and commodities. In governance, power fragments away from technocratic centers toward sovereign actors. And central banks continue to accommodate while hard-asset inflation persists. These aren’t separate stories—they’re symptoms of late-cycle stress in the prior era’s financial, economic, and governance architecture that COVID blew open. For now, the hands are still raising paddles as the auction is running—but we’re inching ever closer to finding that last marginal buyer.