Good morning. On Fortune’s radar today:
- Markets: Oil down, stocks up.
- EXCLUSIVE: The more hardware AI companies buy, the more money they lose.
- EXCLUSIVE: Jeremy Renner bets on AI tech to make 911 responses faster.
- With the Strait of Hormuz under lockdown, we’re weeks away from systemic global oil shortages.
- Trump lashes out at NATO and the Pope, again.
- Hotel chains will make a killing during the World Cup.
THE MARKETS
Traders ignore closure of Hormuz in bet on war’s end
Oil was at $95 per barrel this morning, down from $99 yesterday, despite the complete closure of the Strait of Hormuz. Traders seem to be betting that the war will be over soon and that impending oil shortages will be shortlived: S&P 500 futures were flat this morning after closing up 1.18% yesterday. The blue-chip index is back within a smidge of its all-time high. The crazy chart of its year-to-date progress (below) shows you what a rollercoaster it has been for U.S. stocks.
Asia followed suit: South Korea’s KOSPI was up 2.07%. India’s Nifty 50 rose 1.69%. Japan’s Nikkei 225 was up 0.44%. But, like American futures, U.K. and European stocks were flat in early trading—suggesting investors were taking a break from the rally while they await further developments from the Gulf region.
ONE BIG THING
EXCLUSIVE: The more hardware AI companies buy, the more money they lose
AI hyperscalers are spending lavishly to pack into their data centers with GPUs that will go obsolete, and become unprofitable, in as little as three years, reports Fortune’s Shawn Tully. The surge in AI capex is set to reach $650 billion this year by some estimates. The problem, Research Associates’ CEO Chris Brightman says, is that hyperscalers are taking losses on their models. The more hardware they buy, the more money they lose. Brightman argues: “The economic life of AI hardware is [a lot] shorter than its accounting life.”
- U.S. utilities are planning a $1.4 trillion spending spree, up 30%, over the next five years amid the AI construction boom - Jordan Blum
IRAN
Trump teases an end to the war …
President Trump said peace talks with Iran could restart in the next two days—and the stock markets leapt on the news despite the fact that the world is just a few weeks away from systemic shortages, especially in Asia and Europe. Israel and Lebanon are also talking, even though the former continues to conduct strikes on Hezbollah, the Iranian proxy group, in south Lebanon.
The U.S. Navy appears to have successfully blockaded the Strait of Hormuz. Admiral Brad Cooper of U.S. Central Command said: "A blockade of Iranian ports has been fully implemented. [And] in less than 36 hours since the blockade was implemented, U.S. forces have completely halted economic trade going into and out of Iran by sea.”
Six tankers that had passed the narrow chokepoint and were heading toward the open Arabian Sea were forced to make U-turns by American forces. The Rich Starry—a Chinese tanker that tried to make a break for it yesterday—did a U-turn and is now back inside the strait. You can follow its progress here on MarineTraffic.com:
… As the oil is about to run out
With the Strait completely shut, the world is now just a few weeks away from serious oil shortages:
- Iran has only about 16 days before it runs out of oil storage space, forcing a halt to production.
- Europe faces a “systemic jet fuel shortage” within the next two or three weeks if the strait is not reopened, according to the Airports Council International industry group.
- The last tankers to escape the Gulf region before the war have already reached Europe.
Trump lashes out at NATO and the Pope, again
“Not good!!!”, Trump said on social media, in reference to a claim that the Pope had deleted tweets criticizing the president once he was elected as leader of the Catholic Church.
“Will someone please tell Pope Leo that Iran has killed at least 42,000 innocent, completely unarmed, protesters in the last two months, and that for Iran to have a Nuclear Bomb is absolutely unacceptable. Thank you for your attention to this matter. AMERICA IS BACK!!!,” he added in a separate post.
“NATO wasn’t there for us, and they won’t be there for us in the future!” the president posted late last night. The context is that NATO is by design a defensive alliance whose purpose is to deter or retaliate if any of its members are attacked. Iran has not attacked a NATO country, and thus its members are reluctant to join the war.
- European military chiefs are already planning a NATO future without the U.S.
- Breaking up NATO is one of Putin’s main ambitions.
SPACE
Amazon goes head-to-head against Musk’s Starlink
Amazon will acquire satellite operator Globalstar for a reported $11.6 billion. “The deal supercharges Amazon's Leo satellite internet efforts, which competes directly with Elon Musk's Starlink,” Fortune’s Alexei Oreskovic tells me. “And the deal comes right before the SpaceX IPO.
EXCLUSIVE
Jeremy Renner bets on AI to make 911 responses faster
Jeremy Renner, who was crushed and nearly killed in 2023 when his 14,000-pound Snowcat rolled over him on his Nevada property, has become an investor in a New York-based public safety AI company, RapidSOS. It’s his first major partnership since the accident, but he told Fortune it’s not a celebrity endorsement. He described it as a personal mission rooted in the debt he can never fully repay to the people who rescued him and the medics who nursed him back to health.
MORE FROM FORTUNE
The billionaire Anthropic cofounder who majored in literature says knowing how to ask the right questions beats knowing how to code - Marco Quiroz-Gutierrez
Another month, another record-high home price: March hits $408,800—the 33rd straight increase - Jake Angelo
Trump’s economy officially passes Biden’s for worst consumer sentiment in recorded history - Nick Lichtenberg
Xi Jinping says the world order is ‘crumbling into disarray.’ Larry Fink and the IMF are worried about a global recession - Nick Lichtenberg
From Molotov cocktails to data center shutdowns, the AI backlash is turning revolutionary - Eva Roytburg
CHART OF THE DAY
A spooky correlation between small firms grumbling about sales and unemployment
When the percentage of small companies surveyed by the National Federation of Independent Business who say sales is their No.1 problem rises, the unemployment rate rises too, this chart from Oxford Economics shows. “If this measure were to rise sharply, it would be a warning sign that the oil shock risks setting off a recessionary feedback loop between unemployment and spending,” Bernard Yaros told clients.
NUMBER OF THE DAY
15
The average number of trading days it takes the S&P 500 to bottom-out before beginning to recover its losses from a global crisis, Iran war included, according to research by Deutsche Bank analysts Parag Thatte and Binky Chadha.
THE FRONT PAGES TODAY
Trump renews criticism of UK, saying it should ‘drill, baby, drill’ for North Sea oil - CNBC
Iran used Chinese spy satellite to target US bases - FT
U.S. suggests Cuba complicit in helping Russia fight Ukraine - Axios
Jeanine Pirro’s Prosecutors Make Surprise Visit to Fed Headquarters - WSJ
Trump’s Blockade Risks Upending an Emerging Détente With China - NYT
ONE MORE THING
Hotel chains will make a killing during the World Cup
Hotel prices rose 350% during the last soccer World Cup in Qatar, in 2022. In fact, over the last nine cups, hotel room prices rose 72% on average. They rose 37% even if you take out Qatar, according to Ohsung Kwon and his team at Wells Fargo.
