Last April, I wrote my first Chaikin PowerFeed essay about gas prices, inflation, and the Federal Reserve. And today, things certainly look different.

The Federal Reserve Could Make AI More Expensive  By Ethan Goldman, analyst, Chaikin Analytics Last April, I wrote my first Chaikin PowerFeed essay about gas prices, inflation, and the Federal Reserve. And today, things certainly look different. As I discussed back then, the Consumer Price Index ("CPI") sat at 2.4%. At the time, inflation in the energy category had slowed down – and reversed. Take a look at this chart from my essay last year... Of course, we've seen some major changes since then... As you'll likely remember, President Donald Trump pushed the Fed to cut the federal-funds rate. And later in 2025, the central bank did just that – three times. Today, the target federal-funds rate is 75 basis points lower than it was in March 2025. Of course, a lower rate means it costs less to borrow money. And cheap money is critical to building the data centers at the heart of the AI boom. The lower rate allowed data-center debt issuance to balloon to around $182 billion in 2025 – almost double the amount in 2024. Now, $182 billion of debt seems massive without more context. You see, during the COVID-19 pandemic, the Fed held rates at about 0.25%. Amid such low rates, data-center companies issued about $160 billion of debt in both 2020 and 2021. As you can imagine, there's an inverse correlation between interest rates and the amount of money borrowed. Take a look... As you can see, roughly $182 billion isn't a huge amount compared with the levels earlier in the decade... But it's massive when you consider that current interest rates are much higher. I would've expected this number to grow if rates kept falling. And until the start of the Iran war, it seemed like the Fed had room to cut rates even further... But now, that doesn't seem to be the case. And what the Fed decides to do next about interest rates could be a big deal for the AI megatrend... Recommended Links: A Quiet Shift Is Starting in Small Caps – Here's the No. 1 Move to Make Wall Street legend Marc Chaikin's award-winning system just uncovered what may be the clearest path to profits in today's market. A group of undervalued "hidden gems" – stocks Wall Street is only just noticing – is poised to outperform mega-caps like Nvidia, Apple, and Microsoft. And he's found one undervalued company that has suddenly found itself at the center of this massive shift. Click here to get its name and ticker before May 20. 'AI Is Distorting Everything' Stocks... employment... even electricity demand is becoming warped by the AI arms race. Now, an adviser to the world's top money managers says the biggest distortions are showing up inside corporate earnings – and quietly revealing the next winners and losers of the AI boom before the rest of the market catches on. Click here to see the companies on his radar. Surging Inflation Could Hinder Data-Center Build-Outs As I mentioned, the inflation picture is a lot different today than back when I wrote my first PowerFeed essay... This past April, the CPI grew by 0.6%. That pushed it up 3.8% year over year. That's much higher than March 2025. You can see the category breakdown below... The effective closure of the Strait of Hormuz sent total energy costs up almost 18% year over year. The other categories didn't skyrocket. But they still felt some effects.  Food got 3.2% more expensive year over year. And all items other than food and energy rose 2.8% over the same time frame. As I'm sure longtime readers are aware, the Fed's dual mandate is to control inflation and aid the job market. When inflation spikes like it is now, this becomes more difficult. Put simply, the central bank increases interest rates to discourage spending. And interest-rate increases could be a problem for the AI megatrend, folks. Continued data-center build-outs will likely require cheaper debt. So a raise in interest rates could slow progress until inflation cools again. Looking ahead, we can turn to the CME Group's FedWatch tool to see what federal-funds futures traders think will happen with rate changes...  Based on the tool's reading earlier this morning, traders see a roughly 99% chance that the Fed holds interest rates steady at its next meeting on June 17.  The likelihood of a rate increase during the July meeting is only about 4%. The number ticks higher by the time of the Fed's September meeting. But even then, the likelihood of a 25-basis-point raise is around 17%. By the Fed's last meeting of the year in December, that likelihood grows to about 38%. Of course, a lot could change before then. The conflict in the Middle East could end. And inflation could cool off. For now, most traders aren't expecting interest-rate increases anytime soon. The Fed doesn't look poised to cut interest rates, either. And data-center builders seem largely unphased by the current rate. So, if we don't see a big spike in rates, financing the AI megatrend looks set continue at full speed. But keep a close eye on the Fed... The Fed may step in with higher rates if inflation continues to rise. This could make it harder for companies to keep building out AI infrastructure.  Good investing, Ethan Goldman Market View Major Indexes and Notable Sectors     # Hld:     Bullish     Neutral       Bearish Dow 30 -1.08% 8 13 9 S&P 500 -1.20% 122 241 135 NASDAQ -1.51% 27 46 28 Small Caps -2.41% 480 1020 358 Bonds -1.48%   Energy +2.36% 16 5 0 — According to the Chaikin Power Bar, Small Cap stocks are somewhat more Bullish than Large Cap stocks. Major indexes are all bearish. *  *  *  * Sector Tracker Sector movement over the last 5 days Energy +6.71% Health Care +1.12% Staples +0.55% Information Technology +0.42% Financial -0.27% Communication -0.74% Industrials -1.04% Utilities -1.90% Materials -2.50% Real Estate -2.66% Discretionary -3.05% *  *  *  * Industry Focus Insurance 16 25 13 Over the past 6 months, the Insurance subsector (KIE) has underperformed the S&P 500 by 14.08%. However, its Power Bar ratio which measures future potential is Strong, with more Bullish than Bearish stocks. It is currently ranked #14 of 21 subsectors and has moved up 2 slots over the past week. Top Stocks AIZ Assurant, Inc. ALL The Allstate Corporation EG Everest Group, Ltd. *  *  *  * Top Movers Gainers DXCM +6.59% FDS +6.36% WDAY +5.27% NOW +5.05% APA +5.04% Losers GLW -7.91% COIN -7.82% F -7.46% MU -6.62% SW -6.35% *  *  *  * Earnings report Earnings Surprises RBC RBC Bearings Incorporated Q4 $3.62 Beat by $0.30 *  *  *  * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, click here. You're receiving this e-mail at punjabsvera@gmail.com. For questions about your account or to speak with customer service, call +1 (877) 697-6783 (U.S.), 9 a.m. - 5 p.m. Eastern time or e-mail info@chaikinanalytics.com. Please note: The law prohibits us from giving personalized financial advice. © 2026 Chaikin Analytics, LLC. All rights reserved. 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