The Most Important Commodity Of The 21st Century Needs A Forward Curve!
Highlights & thoughts from an outstanding post by Dave Friedman
No One Knows What the Future of AI Holds
Prompted by two recent interviews of AI-heavyweights Tyler Cowen and Dario Amodei, Dave Friedman offers up a compelling argument WHY it is so hard to value AI. I love it because it exactly captures why traditional finance (read: bond market) does not know how to price the AGI technology that is expected to transform our market & economy - because their is no forward curve by which to measure it yet!
Select highlights below illustrate why it is very difficult to assign probabilities.
“If Amodei is right—if we’re genuinely 1-2 years from a “country of geniuses in a data center” and on track for trillions in new annual revenue before 2030—the implications for economic growth, productivity, and inflation would be staggering. An event of that magnitude would be the single largest positive productivity shock in the history of industrial civilization.
Forward interest rates should reflect that.
They do not.
This is a bond market pricing in a boring, normal economy.
Not a world about to experience AGI.
Exponential growth mania & fears are relegated to equities so far. Bond market is still not sure how to price any of it in.
The information that would move the bond market isn’t a podcast interview. It’s downstream evidence that macro traders can evaluate natively: labor market disruption from AI displacement, sharp acceleration in corporate earnings attributable to AI productivity, changes in the velocity of money, visible GDP effects. These are the signals fixed-income desks are trained to read. And none of them have arrived yet. …
In a nutshell:
There’s no standardized forward curve for GPU compute. No mechanism for the people who can evaluate whether RL scaling laws imply AGI in 24 months to express that view as a price. No way for that price signal to propagate to the macro markets that would need to reprice everything else. ..
Commodities markets have measures of supply-demand curves:
If such a market existed and showed sustained contango—forward compute prices rising above spot, implying that participants with domain expertise expect scarcity to intensify—that would be a signal bond traders could read.
Price discovery mechanism is needed:
The Cowen-Amodei debate may be unresolvable, and the bond market may remain uninformed about the most important economic variable of the next decade, until we build a price discovery mechanism that connects the people who know what the compute scaling curves look like to the people who price the economy.
Pie-in-sky predictions are hard to trust for bond traders:
What Amodei says: 50/50 odds of AGI-level capabilities in one to two years. 90% within a decade.
What the GPU market says: Blackwell sold out 18 months forward. Capex estimates revised from $600B to $750B, though some of that increase is memory-price inflation, not real capacity expansion.
Debt investors getting nervous; Oracle’s 5-year CDS has more than tripled since September.
Here’s what the bond market sees:
Predicitions of 2% GDP growth; normal economy; nothing to see here.
Prove-it:
Two of the world’s most important markets are staring at the same phenomenon and reaching incompatible conclusions.
The GPU market is pricing in fast capability progress. The bond market is pricing in a world where that progress doesn’t matter yet.”
Read the whole article. You will get the details that support the main theme that the most important commodity of the 21st century needs a forward curve before bond markets can start to price in AI future returns into the market and economy!
Maybe AI can build that?!!