Hello Capitalists,

Here is everything you should be following today:

• IBM throws cold water on AI profitability dreams

• Bank of America preps to launch Crypto for elite customers

• “Buy Now, Pay Later” firms under the microscope by State AG’s

• California tries to solve its wildfire ravaged home insurance problem

• Zuckerburg goes Grim Reaper on loss making “Metaverse”

• Wall Street looks for an exit on AI debts

Today’s markets + assets:

• ✅ DOW: 48044.56 (⬆️ 0.40%)

• ✅ S&P: 6878.16 (⬆️ 0.30%)

• ✅ NASDAQ: 23589.19 (⬆️ 0.35%)

• ⚠️🔴CBOE VIX Volatility Index: 15.47 (⬇️ 1.96%)

• ✅ Gold: $4244.70 (⬆️ 0.04%)

• 🔴 Silver: $59.13 (⬇️ 2.85%)

• 🔴 Bitcoin: $89,400 (⬇️ 3.17%)

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IBM CEO slams trillion-dollar AI bubble investments

In a stark warning at the Reuters Next conference, IBM CEO Arvind Krishna declared there’s “no way” the tech industry’s projected $8 trillion splurge on AI data centers will yield returns amid skyrocketing infrastructure costs and rapid chip depreciation, urging a hard rethink on the AGI arms race.

• Trillion-Dollar CapEx Crunch: Krishna calculates $8 trillion in global AI infrastructure commitments—equivalent to 100 gigawatts—demanding $800 billion in annual profits just to service interest at current rates.

• Rapid Chip Depreciation Trap: AI hardware must be fully utilized within five years before obsolescence forces costly replacements, inflating expenses beyond sustainable levels for most firms.

• Gigawatt-Scale Skepticism: A single company’s 20-30 gigawatt pledge equates to $1.5 trillion upfront, with Krishna questioning viability as energy demands strain worldwide grids.

• AGI Hype Reality Check: IBM chief pegs artificial general intelligence odds at 0-1%, dismissing trillion-dollar chases as speculative amid calls for massive policy-driven energy expansions.

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Bank of America unleashes crypto for elite clients

In a bold leap into digital assets, Bank of America on Thursday announced it will empower wealth advisors to recommend cryptocurrency exchange-traded products to clients starting January 5, 2026, amid surging institutional demand and regulatory tailwinds from President Trump.

• Advisors Gain Recommendation Power: Merrill and Private Bank advisors can now suggest crypto ETPs without asset minimums, evolving from order executors to proactive guides for client portfolios.

• Modest Allocations Urged: CIO Chris Hyzy advises 1%-4% crypto exposure for volatility-tolerant investors, positioning digital assets as a thematic hedge against inflation and traditional markets.

• ETFs Accessible Since 2024: High-asset clients gained ETF entry early last year, but new rules democratize access, favoring liquid ETPs for enhanced security and compliance over direct holdings.

• Volatility Warnings Issued: Despite adoption boom, Merrill cautions on speculative excesses distorting prices, as Bitcoin’s November 2025 plunge highlights risks in this nascent asset class.

Buy Now, Pay Later firms probed by State AGs over “Shadow Debt” time bomb

State attorneys general launched probes into buy-now-pay-later services this week, warning of mounting “shadow debt” risks as holiday shoppers—especially young adults—splurge over $10 billion, experts say.

• Holiday Spending Surges Dramatically: Adobe forecasts $10 billion in BNPL holiday purchases, a 9% jump from last year, with half of shoppers planning to use it amid rising prices and economic pressures.

• Youth Demographics Drive Adoption: Gen Z and millennials lead usage, with 1 in 4 relying regularly on BNPL’s low-barrier credit, appealing even to those with damaged scores via affordable rates.

• Shadow Debt Evades Oversight: Multiple micro-loans across providers create untrackable obligations, risking overdrafts and bounced payments like rent, as experts warn of overspending surprises.

• Regulatory Scrutiny Intensifies Urgently: California’s Rob Bonta and six other states demanded details from Affirm, Klarna, and PayPal on fees and underwriting gaps, highlighting potential for fees to spiral into serious debt.

California homes can get insured again—at a premium price

In a bold pivot amid California’s wildfire-ravaged insurance crisis, Farmers Insurance has scrapped its 9,500-policy monthly cap on new homeowners coverage, vowing to expand access statewide starting early next year—but only after regulators greenlight a 6.99% average rate hike.

• Cap Elimination Boosts Access: Farmers ends its restrictive 9,500 new policy limit per month, first imposed at 7,000 in 2023, to revive offerings in fire-prone, underserved “distressed” zones like Montecito and Santa Barbara County.

• Rate Hike Funds Expansion: The insurer’s requested 6.99% premium increase adjusts pricing formulas, potentially raising costs for most customers while boosting home-auto bundle discounts from 15% to 22% for savings.

• New Products Target Renters: Launching Farmers Smart Plan Home, Condo, and Renters policies under the state’s Sustainable Insurance Strategy to broaden coverage options beyond traditional homeowners.

• Outreach Targets 300,000: From early 2026, direct marketing and enhanced agent tools will reach about 300,000 Californians in high-risk areas, resuming applications for industries and manufactured homes previously paused.

Metaverse massacre: 30% slash shocks Wall Street, shares surge

Meta Platforms’ stock surged 4% Thursday after reports emerged of CEO Mark Zuckerberg proposing up to 30% budget cuts to the money-losing metaverse division, including potential layoffs, as part of 2026 planning to stem billions in red ink.

• Zuckerberg’s Bold Pivot Backlash: Meta’s 2021 Metaverse bet, hailed by CEO Mark Zuckerberg as the “next frontier,” now faces 30% budget reductions amid persistent underperformance.

• Reality Labs’ Staggering Losses: The VR-focused unit posted a $4.4 billion third-quarter deficit, contributing to over $70 billion in cumulative losses since late 2020.

• Layoff Fears Grip Employees: Proposed cuts target the virtual reality group, likely triggering widespread job reductions as executives finalize 2026 allocations.

• Investor Relief Fuels Rally: Shares climbed to $668.38, up 4.5%, signaling market approval for reining in the division’s unchecked spending spree.

Wall Street heads for the exit on AI debt time bomb

Wall Street firms are scrambling to slash exposure to the artificial intelligence sector’s skyrocketing debt after a massive borrowing spree fueled explosive growth, with banks like JPMorgan and Goldman Sachs leading the charge to avert potential defaults amid stubbornly high interest rates and regulatory scrutiny.

• AI Firms Borrow Billions Rapidly: Tech giants including Oracle, Meta, and Alphabet have amassed over $100 billion in low-cost loans since 2023 to fund data centers and chip expansions, accelerating AI infrastructure buildout.

• Banks Tighten Lending Standards Now: Major lenders are capping new AI-related credit lines at $50 million per deal and demanding stricter collateral, fearing overleveraged startups could collapse like past dot-com busts.

• Interest Rates Spark Alarm: The Federal Reserve’s reticence to cut rates have increased borrowing costs for AI ventures, prompting analysts to warn of a “debt reckoning” that could slash sector valuations by up to 30% in 2026.

• Regulatory Probes Intensify Quickly: SEC investigations into opaque AI financing practices are underway, with experts predicting tougher disclosure rules that may slow venture capital inflows and reshape Silicon Valley’s funding landscape.

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