As we discussed earlier this month, it’s reasonable to think that some companies will be disrupted by AI.  For some, AI will be existential.  And AI will outright transform other companies — turning the old into new.

The latter is happening in the data storage business.

The earnings we heard from Western Digital and Sandisk this afternoon (we own both in our Billionaires Portfolio), suggest we may be witnessing the “Nvidia moment” for storage.

Remember, back in May of 2023, Nvidia shocked the world with a huge quarter, and then told us the data center demand was so steep, that the next quarter revenues would jump by more than 50% (from $7 billion to $11 billion).  And they said the hyper-growth would continue for the foreseeable future.

So, May 2023 was the moment the world realized that AI was about to reinvent computing, and it would be powered by Nvidia’s GPUs.  Similarly, January 2026 looks like the moment the world is realizing it needs endless data storage to feed the AI.

With that, today Sandisk delivered guidance that looked a lot like Nvidia’s famous Q2 2023 guide for a $7 to $11 billion quarterly revenue jump.

For the most recent quarter, Sandisk reported $3 billion in revenue (up 31% from the prior quarter) and then guided for $4.4-$4.8 billion next quarter(!).  That’s a 50% sequential leap in just 90 days.

And margins are exploding.  Gross margins were up 21 percentage points from the prior quarter, and they are guiding another 15 percentage points of margin expansion for next quarter.

What’s this all about?

Remember, as Jensen Huang said earlier this month at CES in Las Vegas, the data that AI produces is growing at a rate of 5x per year.

The AI models are running non-stop, creating oceans of data.  Demand for data storage is “meaningfully” exceeding supply.  And the data storage companies have been effectively sold out now for two quarters.  This means pricing power – prices up, margins up.

And like Nvidia, Sandisk is now choosing its customers rather than chasing, and planning production against a committed backlog.

The Fed held rates steady today, as expected. 

Let’s talk about what Jerome Powell said about the Fed’s new asset purchase program.

Remember last month, the Fed started buying Treasuries again to address a liquidity problem that was bubbling up. 

Like 2019, it was “strains in the money markets” again, that prompted the return of Fed action.

Not only did they start with $40 billion worth of short-term Treasuries (what Powell himself described as ‘big’), but he said the situation would require ongoing $20-$25 billion a month (a perpetual liquidity injection — up to $300 billion a year, indefinitely).

As we’ve discussed along the way, this pro-liquidity pivot equals pro-asset prices.

One of the clearest reactions has been in gold:  it’s up 34% in the 35 days since this December Fed meeting.

Let’s take a look at the other moments in the past 50+ years of history, when gold had a run of this magnitude.   

As you can see, these comparables come with significant monetary, fiscal and/or geopolitical crises.

So, back to the initial question: What did Powell say today about this “not QE” liquidity injection program?

Nothing. 

How many questions did the room full of financial journalists ask about it in the press conference?

Zero. 

Meanwhile, gold was pricing in the permanent feature of Fed money printing. 

Trump showed up today at the World Economic Forum and cited the economic successes of his American First agenda.

And he called out the failures of the climate and social agenda that Canada and Europe have pursued.

Remember, yesterday Macron and Carney tried to get in front of this by framing this economic performance divergence with the U.S. as a regime change in the world order — brought about by the greed and immorality of hegemonies (China and America), not by their own failures.

That framing effort doesn’t seem to have worked.

It doesn’t help their case that Mario Draghi, the former Prime Minister of Italy and President of the ECB, wrote a paper a little over a year ago that highlighted the exact failures and vulnerabilities of the European economy that have been exposed over the past year.

On that note, we’ve talked the economic fragility of Europe that was exposed once Trump’s “burden sharing” strategy was rolled out.

Remember, this “burden sharing” is from (now Fed governor) Stephen Miran’s blueprint on restructuring global trade.  It’s about requiring allies and trading partners to pay for access to safety (U.S. security guarantees), stability (the dollar and U.S. capital markets), and markets (U.S. consumers).

Europe’s response has been big spending promises (on defense, and AI investment).

The question then, and the quesion now:  Where will the money come from?

More deficit spending.  More debt.

But as we’ve also discussed along the way, for any large scale fiscal spending plan to work in Europe, without triggering another sovereign debt crisis, the ECB will be forced back into action — with more central bank backstops to tame the bond yields of the fiscally vulnerable countries.

And that ECB backstop works only if its major global central bank peers support it (namely the Fed).  We should expect Trump to use that as leverage when his hand selected Fed Chair takes office.

We’ve talked about the “wartime behavior” of metals prices, more specifically the historical signal of the gold/silver ratio.

That signal is being articulated (put to words) at the World Economic Forum (WEF) this week.

Here’s the developing story that’s fitting the price.

It started with Macron (France).

Macron said there’s a shift towards a “world without rules,” a “world without effective governance,” and where cooperation is giving way to “relentless competition.”

His answer was strategic mobilization:  more economic  sovereignty, protection (not “naïve openness”), and heavy investment in AI, defense, and critical inputs.

Then came Carney (Canada), and he made the same case, but more explicit.

Carney told Davos we’re “in the middle of a rupture, not a transition.”

He said for decades, countries pretended the rules-based order worked as advertised.  Now it’s breaking, because economic integration itself has become a weapon (and has led to Canadian subordination).

He said “we live in an era of great power rivalry.”  And he referenced a phrase from Thucydides’ History of the Peloponnesian War, that suggests the world has returned to the “natural logic of international relations is reasserting itself.”  That logic: “the strong do what they can, and the weak suffer what they must.”

In this new era, if you aren’t strong enough to defend yourself or part of a powerful group, as Carney says, you will be “on the menu.”

So, for the better part of the past decade, we’ve heard the incessant call for “cooperation and coordination” from the global leadership at the World Economic Forum, all designed around a multi-trillion dollar climate agenda (“decarbonizing”).

Now, it’s about fragmentation, sovereignty and self-reliance.  And it’s about a world that needs to pursue all energy sources to power AI.

This is clear regime change: re-arming, re-building, re-shoring.  Resilience over reliance.  Sovereignty over dependence.  Energy abundance over energy purity.

Since Jerome Powell signaled the end of the tightening cycle in October of 2023, we’ve talked about the long-awaited narrowing of the performance gap between mega-cap tech and the rest of the market (particularly small caps).

It hasn’t happened.  It’s been a series of headfakes.

Why?

Because the Fed has been tapping the brakes all along (through real rates and messaging), countering an economy with fiscal and industrial policy tailwinds.

But as we entered 2026, we’re finally seeing monetary and fiscal policy moving in the same direction.  And as we discussed last week, the “diffusion” (the spread/distribution) of AI and the productivity gains are beginning to show up in the data.  That’s a setup for capital to spread across the market.

And we’re seeing it in the new year.  Small caps are finally outperforming.

Now, here’s the other chart we’ve been watching — the one that tends to signal regime change … 

Over time in these notes, we’ve tracked this gold/silver ratio as a signal of extreme moments of safe-haven demand.

Importantly, in the chart, the extreme peaks line up with big events (WW2, the Gulf War, the pandemic). 

And the sequence is consistent:  Gold leads as global capital flows to the relative safe-haven asset.  Silver later follows (higher) partly as a cheaper “safe haven,” but also because it’s an industrial metal. 

And in the prior peaks, as we’ve discussed along the way, it’s the outsized rise in silver that pushes the ratio back down. 

That’s exactly what we’ve seen.  Since we revisited this ratio in the fall, silver has ripped, and the ratio has now “puked” lower from an extreme reading.

So what is it communicating? 

Historically, this represents a new phase where fear of war turns into wartime behavior: military buildup, reshoring, supply chain hardening.

That’s happening. 

On that note, let’s talk about the National Security Strategy document the White House posted in November (you can see it here). 

This document explains many of the events that have taken place in the first couple of weeks of 2026, including this about the Western Hemisphere:  “we will assert and enforce a ‘Trump Corollary’ to the Monroe Doctrine.”

And there are two other key assertions in what Trump called this “roadmap.”

First, on China, the document says deterring a conflict over Taiwan is priority, mostly because of the threat to global shipping through the South China Sea.  It says it requires a vigilant posture, a renewed defense industrial base, greater military investment, and winning the economic and technological competition. 

And it’s blunt on Europe.  It calls out the European Union and “other transnational bodies” for undermining political liberty and sovereignty through migration policies, censorship, and loss of national identities and self-confidence. It explicitly questions whether or not they will be strong enough “to remain reliable allies.”

Expect this to create some fireworks next week when Trump gives a speech at the World Economic Forum (to a room full of the parties he is calling out).    

We’ve talked about the formula for an early 40s-like boom time economy.

We got some data today that supports it.

As we’ve discussed over the past three years in these notes (since the May 2023 “Nvidia moment”), we are (still) in the early days of the what should be the most productivity enhancing technological advancement of our lifetime — generative AI.

On that note, Q3 productivity data was reported this morning.  And it was big, 4.9%.  For perspective, we averaged less than 1% productivity growth for the decade prior to the pandemic.

Remember, hot productivity growth does two things: 1) creates the opportunity for the continuation of much needed real wage growth (to restore living standards, which were eroded by inflation), and 2) increases the long-term potential growth rate of the economy.

With that, if we look at the four engines of GDP — consumption, investment, government spending, and net exports — they are all firing.

The Fed is backstopping liquidity and cutting rates (more this year), which makes borrowing cheaper, makes saving less attractive and creates the confidence necessary to promote hiring.  That will keep consumption going.

We know the investment story.  It’s “build it here” policy incentives, which includes full expensing in year one.

The One Big Beautiful Bill is driving government spending tailwinds.

And tariff policies are aggressively narrowing the deep trade deficit — which lessens its drag on growth.

With all of this, we had a hot net exports number today.  And, related, we had a hot Q4 GDP estimate from the Atlanta Fed model (now running 5.4%).

This is the kind of growth you’d expect (nominal growth around 8%), or better, after blowing up the money supply — 10 years worth of money supply growth over just a two year period in response to the pandemic.

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