WSJ Opinion: Potomac Watch The Market, the Fed, and the Financial Future of AI
Dec 4, 2025
In this insightful discussion, Andy Kessler, a renowned columnist and former hedge-fund manager, delves into the complexities of today's economy. He examines whether the stock market is bubble-prone, particularly in the context of AI's remarkable yet risky valuations. Kessler highlights the cautious adoption of AI in companies, attributing it to productivity concerns and supply limitations. The conversation also tackles potential candidates to succeed Jerome Powell at the Fed and the influence of foreign capital flows on market dynamics.
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Episode notes
Mixed Economy: AI Growth Versus Weak Main Street
- The economy is a mixed bag: strong AI-driven data-center growth but weak manufacturing and soft hiring.
- Uncertainty (tariffs, AI adoption hesitation) keeps firms from hiring and may damp future growth.
AI Is Powerful But Still Error-Prone
- AI is a powerful long-term productivity force but still hallucinates and makes mistakes today.
- Enterprises remain reluctant to deploy AI broadly until reliability improves over several years.
Valuations Fueled By Future AI Demand And Financing
- Tech giants' valuations are driven by expectations of wholesale AI adoption and massive data-center buildouts.
- Overbuilding and circular finance deals raise the risk that current equity valuations exceed real demand.