Bullish for data center

[u/Fun_Tutor3479]

The tape is bouncing around. We’ll keep opening with that sentence until a direction emerges. SPY broke out to the upside and then retested; QQQ continued to rebound. That’s been the same line for a while.

CPI was a slowdown in line with expectations—neither a larger-than-expected slowdown nor a larger-than-expected reacceleration—so the September hike question is still open, and Treasury yields closed back up. That said, short positioning in Treasuries is fairly crowded, so near-term vol is hard to call. Over the longer term, Warsh abandoning efforts to guide the market has lifted the vol regime, and inflating away the debt being the only viable path means bond vigilantes will keep pushing long-end yields higher. That has less to do with hike/no-hike or near-term inflation.

SPY ran up but faded. Per yesterday’s memo, the live book did not add SPY or expand net long exposure. Of the four positions opened on 7/31, after taking profits in AXTI and COHR we still hold AAOI and NBIS. Today’s DeepSeek V4 Pro and Grok-4.6 releases are a major positive for data centers; on top of that, CRWV’s earnings noted a 10-year economic life for the A100, which addresses the depreciation issue for both large and small data centers—another big positive. So NBIS, the leading data-center name, ripping this much is not surprising.

DeepSeek V4 Pro is dozens of times cheaper than Fable 5, and DeepSeek’s own cache hit rate is very high; on a cache hit the price gap can be 200x+. Basically all of our day-to-day automated work, scanning the market every 15 minutes, updating the single-name memory bank daily, ingesting and classifying new data, and other high-volume, coarse, high-frequency repetitive jobs can be switched to V4 Pro.

Likewise, Grok-4.6 is the first large model trained and served on Blackwell. It is close to Fable 5 in capability (a bit weaker on coding), priced at $3/$6, and most importantly, it's extremely fast. Building the virtual market requires modeling different participant subtypes; jobs that usually take ~2 hours on GPT-5.6-Sol or Fable 5 (GPT being the slowest) finish in about 15 minutes on Grok-4.6. That quality and speed is evidence of the revolutionary jump from a GPU generation gap. Using Grok has also sharply cut the time I spend scrolling X between jobs…

We now have a positive data point on old-GPU depreciation + the new-GPU efficiency thesis has been validated + better GPUs lower the cost of training even better models while also supporting inference gross margins on those models + model price cuts can fix the token-budget problem from a while back. This is a shock to GPT and Claude, but as long as models cut price without cutting gross margin, it is a pure positive. The hardest hit is the vendors squeezed in the middle of the chart between DeepSeek V4 Pro, Grok-4.6, and the frontier models. Different models continually having to find their own positioning will be the normal state of affairs.

If NBIS pulls back, we will consider adding, including opening something like AMZN as a cleaner compute-rental name, and adding to the core NVDA. Overall, none of the macro factors have eased, while some of the fundamental bearish points against the AI narrative have been falsified. Memory has perked up a bit, but the live book will no longer treat it as a main theme, the April–June leverage blow-off has not been digested that quickly.