operating assumptions july 16 2026
Base-level operating assumptions:
- AI will continue to drive down software development costs and improve developer productivity.
- AI kinks are getting ironed out in terms of cost, routing, and application under specific scenarios.
- Semiconductors are likely to remain in shortage going into 2027, but DRAM supply might start to ramp up and normalize prices in the second half of 2027 and into 2028.
- China and the US are in a friendly post-divorce relationship: no escalating tensions, just a peaceful and quiet decoupling of supply chains and AI tech stacks.
- Macro demand continues to be K-shaped. China was K-shaped for a while before 2022 and then just sank. The US might be different, but it’s unclear two years out.
- Inflation stays benign and manageable, and Kevin Warsh is set to deliver low inflation.
- Hyperscalers’ capex is on a slowed upside trend — not a dramatic increase, but not a decrease either.
- The EU industrial complex needs more restructuring given its uncompetitive cost base versus China and not enough value-add versus the US.
- Marginal speculative stocks are already deep in a downtrend.
Things not so sure right now:
- Strait of Hormuz is Schrödinger’s cat.
- China might try to boost its economy — but in what shape or form?
- KR market crash might continue even though earnings are safe or even upward revised.
- Will the KR crash spill over to the US?
- Can the market hold off from a big selloff after Anthropic and OpenAI IPOs?