The Flip Side

Artificial intelligence has become the defining investment theme of the current market cycle, with capital expenditure on AI infrastructure reaching unprecedented levels. Hyperscalers have announced nearly $400 billion in capex for this year alone, and forecasts suggest annual increases of 30% in the years ahead. As investors weigh the promise of this transformative technology against the risks of overbuilding, the debate intensifies: will markets continue to run efficiently or are we repeating the excesses of past tech booms that led to busts?In Episode 76 of The Flip Side podcast, Brad Rogoff, Global Head of Research, and Venu Krishna, Head of US Equity Strategy, examine the forces behind the AI investment surge and consider the bull and bear cases that surge presents. They explore whether current spending is justified by demand, how power and infrastructure constraints could shape the outlook, and what lessons can be drawn from previous cycles of rapid tech expansion.With AI capex now central to both equity valuations and broader economic growth, this episode unpacks the critical questions facing portfolio managers as they navigate one of the most consequential debates in today’s markets.For deeper insight, clients can access related Barclays Research on Barclays Live:Equity Strategy: Lost My Chain-of-Thought: Could the AI narrative stumble?Food for Thought: Generative AI vs. cash generationEpisode 69 'Is there too much hype for AI and the hyperscalers?'Important Content Disclosures

In June, US banking regulators, led by the Federal Reserve, proposed changes to the supplementary leverage ratio (SLR), a regulatory measure used to ensure financial stability by limiting excessive leverage.Despite expectations that easing the SLR rules will unlock lending and liquidity in the US economy, concerns remain over potential risks to financial stability. While large US banks tend to maintain capital buffers well above regulatory minimums, critics believe the Fed’s proposal could shift capital away from the intended outcomes and toward shareholders or proprietary trading.In Episode 75 of The Flip Side podcast, Global Head of Research Brad Rogoff and US Large-Cap Bank Analyst Jason Goldberg debate whether the SLR changes will strengthen or strain the US banking system.Clients of Barclays Investment Bank can read more on bank capital in several recent publications:Large-Cap Bank Capital Outlook: SCB improvement near-term, more meaningful changes looking outFed issues proposal to reduce SLR minimum, the first of several capital changes expectedSLR relief - Why we think it helps

Despite widespread expectations of weakening demand for oil, market fundamentals are showing signs of tightening. A slowdown in US shale production and resilient demand across emerging economies could point to a potential shift in the price of oil.When it comes to demand, elevated refining margins and unexpectedly low inventory levels suggest that actual demand may be outpacing modelled projections.On the supply side, extended development timelines for new projects and the lingering effects of pandemic-era underinvestment have left the market increasingly exposed to potential shortfalls.In Episode 74 of The Flip Side podcast, Global Head of Research Brad Rogoff and lead equity analyst for European energy Lydia Rainforth consider the evolving dynamics of the oil market.

Commercial & Industrial loans from banks are on the decline, and lending to Main Street and consumers from non-bank financial institutions (NBFIs) is on the rise. But here’s the paradox: traditional banks are fuelling this rise of NBFIs by lending capital to what were once their competitors. While this systemic shift plays out among lenders, there are questions about whether post-global financial crash regulations – such as stress testing and liquidity requirements – are keeping pace with this market as it grows. Could further growth in this $1 trillion market threaten the stability of the wider banking system?In Episode 73 of The Flip Side podcast, our Global Head of Research Brad Rogoff and Senior High Grade Financials Analyst Pete Troisi debate whether the risks outweigh the opportunities in this evolving market. 

Global investors are losing interest in long-term U.S. Treasury bonds amid rising interest rates and economic uncertainty. The discussion highlights concerns about the surging bond yields and the implications of increasing U.S. debt levels. Legislative challenges around tax cuts and tariffs also come into play, emphasizing their potential impact on the budget deficit. As bond markets react to shifts in inflation and foreign demand, experts debate whether these high rates are a temporary phenomenon or a long-term trend, hinting at a possible rebellion in the bond market.

Themos Fiotakis, Head of FX Research at Barclays, discusses the uncertain future of the U.S. dollar amidst shifting trade policies and market sentiments. He delves into how trade wars and tariffs are impacting the dollar’s global status and investor confidence. The conversation highlights concerns over the long-term de-dollarisation of reserves and the challenges posed by U.S. trade deficits. Fiotakis also touches on geopolitical factors influencing the dollar's dominance and explores light-hearted topics like travel plans related to currency strength.

Tariffs have stirred up discussions on the potential for a recession by 2025. Experts analyze how immigration policy impacts job creation and overall economic growth. There’s a deep dive into how tariffs influence consumer prices and inflation. The complexities of consumer behavior amid trade tensions reveal economic resilience. The ongoing trade war's implications on market fluctuations and proposed tax cuts are also examined as strategies to counter recession risks. Buckle up for an insightful exploration of today’s economic landscape!

AI has been a major focal point for investors as tech companies compete for an edge in the race to deliver on its promises.The hyperscalers – tech giants like Microsoft, Amazon, Alphabet and Meta – have invested heavily in developing massive data centres, spending billions to stay ahead. But could DeepSeek, the Chinese startup, force a fundamental rethink of what’s required for AI to advance? In episode 69 of The Flip Side, Brad Rogoff, our Global Head of Research, and Ross Sandler, Head of Consumer Internet Equity Research, dive into the potential long-term effects of DeepSeek’s breakthrough. They explore whether hyperscalers still live up to the hype and how future AI innovations could alter the competitive landscape.

European equities are currently outperforming, but will this trend last? The discussion highlights the historical underperformance relative to U.S. markets and dives into macroeconomic and geopolitical factors shaping both regions. Challenges from U.S. tech dominance and trade policies are explored, along with the bullish potential for European stocks due to favorable valuations. The contrasting equity risk premiums and possible catalysts for growth offer intriguing insights for investors watching the evolving landscape.

Inflation has been a critical focus for investors in recent years. US headline PCE and CPI peaked at 7.2% and 9.1% in mid-2022, but with levels coming down toward the 2% Federal Reserve target rate, is it still worth the attention? Or can investors go back to more or less ignoring inflation, as they did pre-pandemic?In Episode 67 of The Flip Side, Brad Rogoff, Global Head of Research, and Mike Pond, Head of Global Inflation-Linked Research, dive into these pressing questions, examining the lingering risks of inflation being stuck at levels just high enough to influence Fed policy, as well as potential shifts in the labour market and tariffs, which could drive inflation risk.