Slow Down
Summary: Not much changed in the economic story last week. The economy remains strong. The AI supply chain is bottlenecked and could remain so through 2030. Editor’s Note: We have made this week’s newsletter available to all subscribers. If you’re not already a premium subscriber, please consider subscribing. Share The Transcript Macro Consumer spending remains strong “The overall macro environment remains very supportive of both consumer spend and business spend. I continue to be impressed by how resilient consumers are. I mean, in the U.S., that resilience like continues to shine through. People are spending their money on travel. Americans are going to box office movies like Spider-Man and Odyssey. They’re spending money on experiences such as dining.” - Mastercard ( ) CFO Ling Hai “...if you actually look at our business and how they’re spending, it’s strong and stable. In the U.S. for the last 6, 8, 10, 12, 18 quarters, months, I should say, the last 1.5 years, let’s call it, our business in the U.S. has been growing about 6% to 8% roughly....In the last quarter, our U.S. business grew 10%. If you look at quarter-to-date through the end of August, it’s been growing about 9%.” - Visa ( ) CEO Ryan McInerney “But from a macro perspective, right, employment remains strong, wages are going up. Yes, there’s inflationary pressures. They’ve been there for some time now. What we see is an incredibly resilient and very healthy consumer. We’re seeing no price resistance.” - Urban Outfitters ( ) COO Francis Conforti It’s honestly a little bit boring “It’s -- honestly, it’s a little bit boring, which is more of the same for us...Growth for lower-income consumer cohorts is just as strong as growth for us in higher-consumer income cohorts. And mobility business in the U.S. has accelerated since late last year. So at this point, the consumer for us remains robust, and we don’t see any signal of that changing.” - Uber Technologies ( ) CEO Dara Khosrowshahi There is pressure on the consumer, though “Customers remained under pressure, and that has affected the industry broadly. Unit growth has slowed since the start of the year. Reductions in SNAP benefits, higher fuel prices, and softer consumer confidence are all putting pressure on household budgets. Customers are buying more on need.” - The Kroger ( ) CEO Greg Foran Labor markets are stable but slow “Everything was going fantastically well until the last 3.5 years, when a macro downturn hit the United States economy, hiring effectively went backwards every month for 3.5 years. That’s bad if you’re a recruiting business. Fortunately, hiring has stabilized in 2026, albeit at levels we haven’t seen for over a decade.” - ZipRecruiter ( ) CEO Ian Siegel “...we’re starting to see a lot more confidence in hiring decisions being made. Each business is a little bit different, executive search.” - Korn Ferry ( ) CFO Robert Rozek Inflation is extending beyond oil “We are going to be in a higher-cost world for probably at least the next six to 12 months. Even if tomorrow they end the war, there is too much inflation in the pipeline. All the raw materials are going up everywhere, on everything. Everything is impacted by oil. That is why you are seeing crazy things. We are trying to manipulate currencies, buying back things. It is a crazy time.” - RH ( ) CEO Gary Friedman “I think the pressure on pricing will increase with some of the cost pressures sustaining. And again, the longer oil stays at above $100, the harder it will get, I think, for everyone to manage, and I think the higher the combined pressure on pricing will be.” - The Procter & Gamble ( ) CFO Andre Schulten International Travel patterns have shifted in 2026 “And the other thing that I’m seeing in travel is people continuing to travel, but they’re just shifting their traveling -- travel routes a little bit. So for example, your northern neighbor here, the Canadians, are not coming to the U.S. as much now, but they’re going to Europe, right? During UEFA, the Europeans are coming to the U.S. But then, off-season, the Europeans are traveling to Asia. So they’re avoiding the Middle East, but they’re coming to Asia. So even though you see some puts and takes, but overall, I think it’s more of a shift in terms of cross-border travel.” - Mastercard ( ) CFO Ling Hai European macro conditions appear softer than the U.S “Just speaking to the Urban Outfitters brand in Europe, we continue to honestly exceed our expectations...I don’t think the macro there is necessarily as strong as what we’re seeing here in the U.S.” - Urban Outfitters ( ) COO Francis Conforti Financials OpenAI rules out a 2026 IPO “I actually think that, given everything happening with safety, right now would be an ill-advised moment to go public, and we don’t feel pressure on that,...I would say not 2026. Yeah, we got a lot of stuff to do, like meeting this moment of what is going to be required for safety and alignment, and how the industry and governments can work together.” - OpenAI CEO Sam Altman Prediction markets are growing fast on Coinbase “I want to start off with prediction markets. Prediction markets crossed the $100 million annualized level just with a couple of months of launch and then grew another 106% quarter-over-quarter in Q2. That’s an extraordinary curve.” - Coinbase Global ( ) Director of Digital Assets and Fintech Services Equity Research at Citi Research Peter Christiansen Small businesses are stable “The SMB macro, SMB, means -- yes. The macro remains quite stable. The 2 metrics that are my favorite to look at are the cash reserve that these customers have and the hours worked. Both the cash reserves and the hours worked are up for the small businesses and even more so for the mid-market businesses. So they continue to be stable.” - Intuit ( ) CFO Sandeep Aujla Consumer Travel demand remains strong “Despite oil prices, despite the fact that air ticket prices are up, people are still prioritizing travel. And it’s probably one of the few good things that has stuck around after our experience in COVID, which was sort of this human need to want to travel. Certainly, we’re seeing more strength at the high end than on the low end. There was more strength in domestic travel. Still, U.S. outbound is strong, but my interpretation is that with gas prices up, maybe people are choosing to stay a bit more local.” - Expedia Group ( ) CEO Ariane Gorin “So what we saw was, of course, at the onset of the conflict in the Middle East, March, April, May, consumers, travelers were very careful to get their bookings in. But then actually from June onwards, we saw that travelers were saying, I’m not going to give up on my summer holiday. I still want to make that trip. And we saw actually the demand picking up in a very strong way.” - Booking Holdings ( ) CFO Ewout Steenbergen Live sports is on fire “On the other hand, live sports is just on fire. People just can’t get enough of it, and our advertisers can’t get enough of it. Overall, the ad environment is healthy for us. It’s just that different channels are reacting differently at this point.” - Disney ( ) CFO Hugh Johnston Housing is in an unprecedented 5-year downturn “I keep thinking, gosh, it is like my entire career, and I have been doing this a long time, I never saw a housing market that was down longer than 18 months. It looks like we are going to go into year five.” - RH ( ) CEO Gary Friedman “...we’re talking about 4 million home sales. So we are nowhere close to normal. And that 4 million home sales has been pretty consistent over the last 4 years at this point. I think 2023, ‘24, ‘25 and ‘26 will all be about 4 million home sales. So we’re in a particularly depressed time in a cyclical market.” - Zillow Group ( ) CFO Jeremy Hofmann Consumer PC demand will be down 18-20% this year “...the PC market, particularly in consumer, was going to get squeezed a little bit. It’s projected to be minus 18% to minus 20% on units.” - Dell Technologies ( ) CFO David Kennedy LLMs are changing the way e-commerce companies acquire traffic “...the single fastest-growing and new source of traffic for ZipRecruiter for job seekers is LLMs. So whether it’s Claude or whether it’s ChatGPT, we see an influx of job seeker traffic from these two sources. And not only do we see that influx, and not only is it growing rapidly, but these are the most engaged job seekers we’ve ever received,” - ZipRecruiter ( ) CEO Ian Siegel LLM-driven commerce traffic is higher intent “But when you start with an LLM, and you do your searching there, you’re 2.5x more likely to end up right on the product page rather than starting somewhere in a general spot on the merchant’s website, you’re going straight to the product you want. And then that leads to an uplift in conversion. We’ve seen roughly an 80% uplift in conversion.” - Shopify ( ) CFO Jeff Hoffmeister Two-thirds of Booking.com traffic now comes direct “We are now having 2/3 of the traffic coming directly to our marketplace. Yes, we are still paying for 1/3 of the traffic. We like that because it’s, of course, bringing new customers to us, but 2/3 is coming direct. We are facilitating the payments at a low 70% of all those transactions.” - Booking Holdings ( ) CFO Ewout Steenbergen AI marketing slop doesn’t convert customers “Look, what is happening is that if you use an LLM to generate a generic e-mail and send it to the set of contacts you have, the click rates and the open rates are just going down. There is no room for just AI that is generating e-mail that is not personalized.” - HubSpot ( ) CEO Yamini Rangan “Employers are beleaguered with resumes that look perfect because AI is very good at helping people write resumes that look perfect.” - ZipRecruiter ( ) CEO Ian Siegel Aging demographics could be a bigger labor market shock than AI “...for the next 5 years...the impact of aging workforce is much bigger than AI impact. We are losing experienced, skilled baby boomers every day....So we’re going to lose 6 million workers in the next 5 years, 6 million workers. That’s almost 4% of the U.S. labor force...AI replacement is too slow to catch up this -- the aging workforce change. Aging workforce is for sure happening. That’s why employers are struggling to fill positions.” - Recruit (RCRUY) CEO Hisayuki Deko Apple launched a foldable phone “So that is iPhone Duo, the most transformational iPhone experience since the original. It features the largest display ever on iPhone, along with a beautiful outer display and a reimagined iOS experience that makes the familiar feel entirely new. With pro performance, unique camera experiences, amazing durability, and unparalleled versatility, it is an iPhone like no other iPhone. iPhone Duo starts at $1,999, with storage capacities ranging from 256GB to 2TB” - Apple ( ) Engineering Director Josh Shaffer Technology There’s not enough compute “We still feel really short...if we had more compute, there are more things we could do.” - OpenAI CFO Sarah Friar “And so I think given the need for everyone’s short compute and the need for more compute and the supply being deployed to meet the demand that’s out there” - KLA ( ) CFO Bren Higgins “...the hardest thing to find right now is compute. Even if you get yourself an open-source model, you want to run it for $1 billion a year, you have to go buy $1 billion of compute. So it still costs you.” - Palo Alto Networks ( ) CEO Nikesh Arora The demand has only gone up “One invariant that has been true so far is that the demand for server-side computing in data centers has only gone up. And it turns out so far that everything we see about the AI use case is the same way, but only more so, right? The fact that when we go out, and we have capacity up for renewal, that we actually can achieve higher prices to the order of 20%, all of those are very positive signs for the -- both the continued demand, the growth, and then the profitability of this business.... GPU utilization remains extremely high at 97.9% in Q1. GPU longevity and value continue to impress” - Oracle ( ) Clay Magouyrk Supply chains are stretched “Upstream, the supply chain is very challenging. And the reason for that is because, obviously, we’re growing super fast. So packaging is a challenge. DRAM is a challenge. LPDDR, DRAM is a challenge. Connectors are challenging. Everything is challenging, okay? Voltage regulators are challenging. Everything is challenging. Wafers are obviously challenging. All kinds of different challenges upstream.” - NVIDIA ( ) CEO Jensen Huang “...when you look at the macro supply environment today, whether it’s for PCBs or components, you’re often in environments where larger players are sucking up big chunks of capacity from the supply chain.” - Keysight Technologies ( ) CEO Satish Dhanasekaran “Demand is extremely strong. It’s grown quite quickly. And honestly, customers want things sooner than we can get it for them. Things are relatively tight.” - Lam Research ( ) CFO Douglas Bettinger “Obviously, dominated DRAM and NAND is by far the big brother in that equation. Given the growth in CPUs, obviously, that now comes into the equation also. But look, ultimately, any part associated within an AI box is short to some degree. So optical, transceivers, T-glass, any component that’s in there is constrained to some degree.” - Dell Technologies ( ) CFO David Kennedy “...demand is above supply in every segment today. So we give priority to our big customers, I would say, and the data center because it’s 80% of our business.” - Seagate Technology ( ) CFO Gianluca Romano Memory is the biggest bottleneck “...when I talk to our customers, they told me that none of the memory supplier can even give them a commitment about allocation for November, right? They don’t even know how many memory or what’s the price they’re going to get in November, how can they commit to us. So that’s the biggest variable in my opinion, the biggest uncertainty that I think everybody is dealing with and not just us.” - Ambarella ( ) CEO Fermi Wang The semiconductor equipment industry is effectively sold out “Maybe let me describe a little bit of how things are working with customers and then how that shows up relative to how we’re managing the company. I think that will provide color for everybody that hopefully will be illustrative. Listen, things are sold out, right? The industry just fundamentally sold out. The industry is constrained right now by clean room availability.” - Lam Research ( ) CFO Douglas Bettinger Electricians and construction workers are making $200k “...what’s happening is, for example, like electricians, you can find electrician jobs, which are paying more than $200,000. It’s so important for everybody who builds a data center to hire electricians. And that’s why also like the construction workers, if you want to hire skilled workers, it’s very -- I think it’s happening even today.” - Recruit (RCRUY) CEO Hisayuki Deko The supply shortage is getting worse, not better “Demand is still faster than supply, though, for traditional server and AI server. So those two buckets continue to have demand that was really robust. As we look into next year, we see the supply differential only getting worse, not getting better. We see -- yes, there is a small bit of supply growth, but it’s pretty minimal on the basis of the demand signals that we’re seeing. So it’s actually tighter next year than it is this year in relation to that as we look out. And then we’ll see as we go beyond from that perspective.” - Dell Technologies ( ) CFO David Kennedy Demand is expected to persist into the 2030s “And we even have discussions with customers all the way through 2030. My view is AI compute demand is going to remain very strong for many years going forward into the future.” - Applied Materials ( ) CEO Gary Dickerson Hyperscalers are more focused on speed than efficiency in spend “...you are looking at your demand signal, and it is pretty healthy. So, you can probably get more out of every dollar you spend...Right now, I would say the focus is far more on how quickly we can get supply revenue-ready than it is trying to figure out if I have USD 1 billion of CapEx here or there to move. It is much more how quickly can we get it into the system.” - Alphabet ( ) CFO Amy Hood They are generating strong ROI “...our payback period on AI servers in aggregate is less than 2 years and on our own silicon is half that. So we have a strong payback period. And the majority of our infrastructure contracts, the total contract value of the infrastructure, is long-term committed 5-year contracts.” - Alphabet ( ) CFO Amy Hood Pricing of older GPUs is going up, not down “Pricing has increased. But just like the older generations of either H100, H200 pricing is going up, not down. So we’re very optimistic about our ability to continually drive that yield higher.” - DigitalOcean ( ) CFO Matt Steinfort “Of all the GPUs that came up for renewal in Q1, that capacity was renewed or resold at a 20% premium to prior contracts. The majority of those GPUs are 4 years or older. We see a long useful life with increasing value for the AI capacity we’re deploying.” - Oracle ( ) CEO Clay Magouyrk Semiconductor companies are generating huge profits “I will comment at our level, and certainly, our customers and our customers’ customers is there is -- their profitability levels are unprecedented. There’s a ton of profitability in the system. It contributes to the outlook I just talked about...At least as it relates to our outlook and the profitability to fund that outlook, never seen anything like it, and I think we’re pretty compelled about our ability to deliver to it.” - KLA ( ) CFO Bren Higgins Companies are spending more on tokens than they expected “...we’re seeing, like others, we’re spending more on tokens than we thought we would spend. And so that’s a factor in the business, but we’re starting to see some efficiency in there” - KLA ( ) CFO Bren Higgins Users are getting more focused on spending efficiency “I think that conversation’s already happening more and more with customers as they’re focused on the outcome. If the outcome can be and have a positive ROI to them, then it’s worth continuing to do that work. If it doesn’t, then it’s probably not.” - Microsoft ( ) CFO Amy Hood “Not every small business has an endless token budget, if you will. And so really making sure that the economics work to drive the productivity and the performance of this offering is probably that second community of customers that now needs a little bit more knowledge and know-how to make it work and make it work right.” - Salesforce ( ) CCO Bill Patterson Lower cost models could take share “The ability to be able to use frontier models for frontier problems, but really also to be able to use a mix of models to deliver the best value has been really where we’ve focused. I think actually that’s not going to be unusual. I think many people and enterprises, at least that I talk to, are focused on how to make sure they’re getting a high ROI, a high return on the outcome that they’re looking to achieve. I think that sophistication continues to grow.” - Microsoft ( ) CFO Amy Hood Frontier models are advancing faster and faster “My first concern is that, since roughly this summer, AI has been advancing drastically faster, driven primarily by AI’s growing ability to build the next generation of AI. This dynamic is called recursive self-improvement, and it is starting to happen across the industry, including at Anthropic, as we and others have described. Left unchecked, it could outrun our ability to understand and control these systems, and so must be pursued very carefully, if at all.” - Anthropic CEO Dario Amodei AI leaders are calling for slowing frontier progress “I believe that if slowing down bought us even an extra year or two before models reach critical levels of capability, and we used that time to advance alignment, we could greatly reduce the risk that something goes seriously wrong. A coordinated pacing strategy would give frontier AI developers the time to do this vital work without sacrificing commercial advantage or the United States’ lead in AI. More generally, society must have a say in how this technology is used, and more time for the necessary public deliberations — which pacing the frontier would bring us — is surely a good thing.” - Anthropic CEO Dario Amodei “I agree with Dario that we need to pace the frontier. This has been a primary topic of discussions we’ve had at OpenAI in recent weeks. Committing to having independent evaluators with employee-like access is a great idea, and we will do the same. We’ll have more to share soon.” - OpenAI CEO Sam Altman Cybersecurity is becoming a CEO and board-level concern “We’re getting calls from folks that you all would know in this room, CEOs of very prominent companies that are calling us directly and saying, “What do we need to be worried about? And how can you help protect us?” This is not the CIO” - CrowdStrike ( ) CFO Burt Podbere “I think you were alluding to the Mythos moment, and how is that impacting our pipeline and our deal cycles and conversion rates? So we see a really strong demand environment, and that is very, very clear in our pipeline.” - SentinelOne ( ) CFO Sonalee Parekh Security will probably be a major business for the big labs “And so it’s not a complicated concept. And -- but the fact of the matter is cybersecurity will likely be the next major use case of AI, and it’s going to run continuously. And so -- it will be a great new business opportunity for the labs.” - NVIDIA ( ) CEO Jensen Huang Frontier models won’t be able to police traffic at the endpoint cost-effectively “If you put a frontier LLM to inspect 160 megabytes a day at the edge of your laptop, I suspect it’s going to cost you more than $40 a year. Now if the customer wants to pay $4,000 a year to predict an endpoint, hallelujah, go for it, I’d like to be in that business too. But if it’s $40, you want a cheap alternative. So you have to build a replacement product that only -- not only is better than the product that is currently in the market, but has to be cheaper than $40.” - Palo Alto Networks ( ) CEO Nikesh Arora Apple enters the foldable phone market “So that is iPhone Duo, the most transformational iPhone experience since the original. It features the largest display ever on iPhone, along with a beautiful outer display and a reimagined iOS experience that makes the familiar feel entirely new. With pro performance, unique camera experiences, amazing durability, and unparalleled versatility, it is an iPhone like no other iPhone. iPhone Duo starts at $1,999, with storage capacities ranging from 256GB to 2TB” - Apple ( ) Engineering Director Josh Shaffer Industrials and Transport Industrial demand is recovering, led by North America and China “So I think with some of the just kind of inherent macro recovery you’re seeing, you’re seeing, obviously, not surprisingly, North America and Asia, particularly China, starting to see better traction. And that’s exactly like we said we saw in Q2 with the short- to medium-cycle being up mid-single digits with -- but North America being the leader of the pack there at up high single digit on the orders front.” - Ingersoll Rand ( ) CFO Vikram Kini Freight trends have improved modestly “DAT, I think we’ve mentioned that we’ve seen a freight recession. We had a freight recession for 3 or 4 years. It’s been positive in the first half of this year. And so we hope that continues. It’s more of a supply-driven rally. And so we’re a little cautious, right? We’re not seeing constructive demand, but it is certainly -- we like the trends in that business.” - Roper Technologies ( ) CEO Neil Hunn Copper demand remains structurally tight “I’m just saying that today, on a relative basis, when you look at the value of the business, we’re driving a lot of value in our U.S. business, particularly with where prices are and where they could be going as we look forward as the world needs more copper and you’ve got this demand driving ahead of where supply can respond to.” - Freeport-McMoRan ( ) CEO Kathleen Quirk China is largely self-sufficient in aluminum, leaving ex-China markets structurally undersupplied “We do see in aluminum a divergence in the market, because China is largely self-sufficient. They have been exporting a small amount yet, but that’s not material to the global market. So ex-China, the markets are again, overall, in deficit, with North America and Europe at the greatest levels of deficit.” - Alcoa ( ) CFO Molly Beerman Materials & Energy Power generation demand remains strong “Yesterday, I stopped to visit them. We’re not seeing customers slow down right now in their need for power generation. I think -- we’ll see how this all shakes out over time, but there’s a lot more of bring your own power, which I think favors us actually in the industry from equipment supply at large. So from a demand standpoint, we’re not really seeing customers change their behaviors right now.” - Caterpillar ( ) CEO Joseph Creed SpaceX sees orbital compute as the obvious solution to power bottlenecks “I think everybody is seeing it, right? And you’re seeing it across the industry now. And it’s pretty magical that orbital compute is clearly the solution here on the power and cooling and permitting side. But we wouldn’t give that range for next year unless we had line of sight to power specifically, but power and facilities and permitting needed.” - SpaceX ( ) CFO Bret Johnsen Nuggets of Wisdom Thought leadership compounds when leaders publish consistently “I went to do this podcast, and I told this guy, he’s building his own brand on the back of interviewing all of us and getting us to speak for an hour, and he does 20 a month or whatever he does, and he’s becoming more popular. I’m like, “Dude, this isn’t fair.” He’s like, “Well, you’re stupid, I’m not.” And I say, “Why am I stupid?” He says, “Well, you could build your own brand by tweeting once a day.” And then, of course, I started tweeting once a day, and then Allie, our Head of Comms, said, “That’s too much. Don’t do so much. You put your foot in your mouth.” I said, that is -- it doesn’t matter. I can do that once a week, and I can still put my foot in my mouth. So I’m trying to balance putting my foot in the mouth once or twice a week.” - Palo Alto Networks ( ) CEO Nikesh Arora