A.I. To Cause Even Higher Inflation & Interest Rates? | Jim Bianco

CoreWeave

Across the shows: 23 speakers in other episodes, 6 bullish and 17 bearish calls, past 30 days

• Jim Bianco · Bianco Research, L.L.C.Uncertain

  CoreWeave's roughly $30 billion debt is a small-company risk, not a canary for broader credit problems.

  Jim says CoreWeave is a small company with about $30 billion in debt, and Wall Street is focused on whether it can pay that debt. He argues that a failure would not necessarily signal broader credit trouble. He points to the 2025 failures of Tricolor and First Brands, which were expected to sink private credit. Private credit wobbled in the first quarter but survived, and credit markets are functioning fine. He says he doesn't think CoreWeave is a canary in the coal mine, but he acknowledges the risk exists. His bigger worry is that AI delivers.

  “Core Weave isn't a canary in the coal mine of bigger credit problems. I personally don't think it is.”at 19:15

Planet Fitness

Across the shows: 1 speaker in other episodes, 0 bullish and 1 bearish calls, past 30 days

• Jim Bianco · Bianco Research, L.L.C.Bearish

  AI agents that cancel subscriptions on command are eroding Planet Fitness's friction-based model; the stock is suffering.

  Jim gives an example: a user asks an AI agent how often they visited Planet Fitness over the past few months, learns the answer is none, and has the agent cancel the membership with a single yes. No need to log into several websites. He says many 2026 business models rely on customers being too lazy to cancel or sweep money, and AI agents remove that intentional friction. He notes Planet Fitness is one of the stocks suffering under this dynamic, and that businesses like it will have to change how they operate.

  “look at the stocks like Planet Fitness and the New York Times. They're also suffering under something similar.”at 23:07

The New York Times Company

• Jim Bianco · Bianco Research, L.L.C.Bearish

  AI agents can cancel New York Times subscriptions for low-usage readers, hurting its subscriber model; the stock is suffering.

  Jim describes asking an AI agent how often the user accessed the New York Times, using web-browser history, which shows one story read in four months. The agent then cancels the subscription and saves the user money. He says this is the same dynamic hitting Planet Fitness, where business models rely on customer inertia, and that AI agents can overcome that friction. He says the New York Times stock is suffering under this pressure.

  “Same thing with the New York Times. How many times have I accessed the New York Times? ... Okay, why don't you cancel my subscription and save me money?”at 23:19

US Treasuries & yields

• Jim Bianco · Bianco Research, L.L.C.

  Long-term Treasury yields should match nominal growth, so 7-8% if AI drives 7-8% nominal growth.

  Jim argues that the long-term interest rate for an economy should be roughly its nominal growth rate. If AI lifts real growth to 4-5% with about 3% inflation, nominal growth is about 7-8%, implying Treasury yields of 7-8%, mortgage rates near 9-10%, and corporate borrowing near 8-9%. He says the economy could absorb those levels, since they would match growth. The problem is that businesses growing 2-4% could not justify borrowing at those rates, and a two-tier system would invert the normal risk premium, where riskier borrowers pay more. These figures are a scenario conditional on AI delivering, not a prediction.

  “I've argued that the long term interest rate for an economy should be about where your nominal growth is. That would mean we'd have to have bond yields, treasury yields at seven or 8%.”at 4:55

• Jim Bianco · Bianco Research, L.L.C.

  5% Treasury yields are normal; the near-zero rates of the 2010s were the abnormal period.

  Jim draws on a history of interest rates going back about five thousand years, which contains no negative or zero-rate episodes like those in Europe and Japan from 2010 to 2020. He calls that period arguably the most abnormal in the history of finance. He says 5% rates, which many fear will break the market, are very normal. He argues the market has anchored to an abnormal decade. He says the president and Treasury secretary want rates back at zero or near it, which assumes the last decade was normal, and he thinks that assumption is wrong.

  “You know the current level of 5% interest rates that everybody's wondering if it's going to break the back of the market? That's very normal, is what that is.”at 35:59

• Jim Bianco · Bianco Research, L.L.C.

  3-year to 30-year yields of 5-6% are the right level for nominal growth of 5-6%.

  Bianco's framework is that nominal interest rates should match nominal growth, which equals inflation plus real growth. He sees inflation near 3% and real growth near 2.5%, so nominal growth should run 5-6%, and yields should sit in that band. He says the 3-year to 30-year range was 5-6% in early October, which is the level he'd been waiting for: no longer too low, though not cheap. He argues that rates reflect real growth as well as inflation, and that low cost of capital encourages malinvestment. Using an AI-driven 20% growth example, he says a 3% loan would let people buy businesses and fund projects that earn 20%. He views the current rates as normal, not punishing. At 7% he would argue rates were too punishing for the economy.

  “They're now at the appropriate level for this economy, that five to 6% range.”at 44:31

• Jim Bianco · Bianco Research, L.L.C.

  Bonds yielding about 5% offer income with little loss risk; prices likely stay near current levels.

  Bianco says he has bought bonds, for the first time in six years, because yields are now normal. He says a multi-year bond boom would need either growth to disappoint badly or inflation to fall sharply. He doesn't see either happening now, though he doesn't rule them out. Oil might ease if the wars settle, but that helps only at the margin, and he doesn't see real growth slowing. The more likely outcome is that prices stay where they are, so he captures the full ~5% yield. A rise in yields to 6-8% is possible but low probability. He compares this with 2025, when a 4% yield with a price drop gave a near-zero total return, and says the current setup avoids that by locking in income with little risk of loss.

  “I can grab a five ish percent yield and have little risk of loss ... The more realistic probability is prices kind of stay here and I get to capture that whole 5% yield.”at 58:30

AI: overall outlook

• Jim Bianco · Bianco Research, L.L.C.

  AI bubble is still expanding and may take years to peak; the bigger risk is the technology delivering.

  Jim says all technologies end in a bubble, and AI will be no different, but this bubble is still expanding and the peak may be years away. His main concern is therefore not that the companies fail or the technology disappoints, but that it delivers on some or most of its promise. He cites the internet: the NASDAQ fell 83% between 2000 and 2002, then rose nearly 20x over the following twenty years, so a bubble can pop and the technology can still deliver. He says people should consider both sides, since positioning for disaster could mean missing a sustained rise.

  “all technologies do end in a bubble, and this one I don't think is gonna be any different. The difference is, though, I think this bubble is expanding, and it might be years before we eventually see that peak in the bubble.”at 3:19

• Jim Bianco · Bianco Research, L.L.C.

  If AI delivers, the economy could boom with higher inflation and rates, forcing business model restructuring.

  Jim argues that if AI delivers, growth could be much faster, inflation much higher, and interest rates much higher, a complete revamp of the economy. He says the economy is currently structured for low single-digit returns and low inflation, so an AI-driven boom would require restructuring rather than simply lifting stocks. Many businesses growing 2-4% would not be able to justify higher financing costs, and models built on cheap money would need to change. He says the odds of a 20% growth economy went from zero two years ago to 'off zero but very small' today. He says the concern is sustained gangbusters growth, not one or two strong quarters.

  “Our economy is structured for a low single digit return and low inflation. If AI delivers on that promise and changes the economy, our economy has to be restructured for that higher interest rate.”at 5:55

US stock market outlook

• Jim Bianco · Bianco Research, L.L.C.

  US stocks should return about 6%, perhaps 7%, not the 15-20% investors expect.

  Bianco frames the investment environment as a 4-5-6 world: about 4% cash, 5% bonds and about 6% stocks. He says stocks might have better or worse years, but investors should not expect 20-30% a year. He reacts to a survey in which most people would not swap their stock portfolio for a 7% real return, and he argues that many investors think they are owed outsized returns. He would concede stocks might come closer to 7% but not 15-20%. The 15% returns so far this year came from a narrow AI-led rally, so he treats them as the exception, not the baseline.

  “We are in a four five six world 4% cash, 5% bonds, six ish percent stocks.”at 59:58

• Jim Bianco · Bianco Research, L.L.C.

  Two US stock markets: about 41 AI stocks are half the S&P, while the other 459 return about 6.5%.

  Bianco uses a JPMorgan list of about 41 AI-related stocks. They make up about 49% of the S&P 500's market cap, the highest concentration by theme he knows of, last seen with 19th-century railroads. The correlation between the S&P AI index and the rest of the market has turned negative, so he says there are effectively two markets. The non-AI 459 companies are returning about 6.5% this year. The index's 15% gain is driven by AI and semiconductors. Last week the AI stocks rose while the rest fell, which explains the index's decline and shows the broader economy is not weakening. He adds that if AI works, the other 459 companies will have to change, so they will not simply ride along, and that diversification is not the answer if the AI stocks keep leading.

  “there's effectively two stock markets right now. There is the AI stock market and there's the non AI stock market. ... That is returning about 6.5% this year.”at 1:05:32

AI & jobs

• Jim Bianco · Bianco Research, L.L.C.

  AI and automation will displace driving jobs, creating a serious social cohesion risk.

  Jim says driver is the most common low-skilled job in the US, and companies will automate taxi, truck, forklift and bus driving as far as they can. He says this will create major social cohesion problems. He compares it with the railroad boom, where the transition took forty or fifty years and eventually produced the Industrial Revolution. The disruption then led to Marx and communism, which took two generations to play out. He argues the AI transition is being compressed into years or a decade, though he expects workers to be pushed up the stack over time.

  “The most common low skilled job in The United States is driver... They're going to automate all of those jobs as best they can. So yes, that is going to create a big social cohesion”at 16:31

Private credit

• Jim Bianco · Bianco Research, L.L.C.

  Tricolor and First Brands failures did not break private credit; the sector and credit markets are surviving.

  Jim recalls that last year many people said the Tricolor and First Brands failures showed private credit was on the ropes and would be in trouble. Private credit wobbled in the first quarter of this year but has survived, and credit markets are functioning fine. He says the failures are now a footnote that people forgot. His point is that those early warnings were overstated and the sector has held up.

  “we all said last year that that was a sign that private credit was on the ropes and private credit was gonna be in trouble... but it's surviving and the credit markets are surviving just fine.”at 18:51

Banks

• Jim Bianco · Bianco Research, L.L.C.

  AI agents sweeping idle deposits could threaten banks' zero-interest deposit business model.

  Jim says about $4 trillion sits in non-interest-bearing checking accounts, and banks earn over $120 billion a year by sweeping that idle cash into T-bills. AI agents can now automate the daily sweep into money market funds, which removes the inertia banks rely on. Bank stocks have fallen six consecutive weeks, the first such run since 2008, and the KBW Bank index is down 15% over that period. Jim says banks are seeing the writing on the wall, and that the banks' announced ban on agents moving money suggests they see a threat. He calls this possibly the beginning of an agentic AI bank run, though no bank has yet reported lost deposits.

  “So they said it's trivial, but then you can't do it at the same time. So we might be seeing the beginning of an agentic AI bank run”at 22:41

US deficit & government debt

• Jim Bianco · Bianco Research, L.L.C.

  Peacetime deficits near 6% of GDP are inflationary; the Fed shouldn't cut rates to finance them.

  Bianco says almost every economist agrees government spending is inflationary. The US is running a deficit near 6% of GDP, one of the highest non-crisis deficits in US history, and federal spending is about 23% of GDP. Historically, spending that high has only occurred in existential crises such as COVID, World War II or the Civil War, so this is peacetime spending. He argues the Fed should not subsidise the deficit by forcing rates down, because that would make inflation worse. He says Powell is right that the Fed does not concern itself with the deficit, and that fixing it is a job for the president and Congress. Higher rates are therefore the reaction to the debt problem, not a reason for lower rates.

  “So what causes inflation is massive government spending.”at 40:46

US housing

• Jim Bianco · Bianco Research, L.L.C.

  Home prices are fine near all-time highs; lower mortgage rates would lift prices, so supply is the fix.

  Bianco cites Redfin's price per square foot, which is within half a percent of its all-time high. With about 40% of Americans renting and about 60% owning, renters want lower prices while owners want higher ones. He says the 7.5% mortgage rate is appropriate, and that a cut of 200 basis points would not make homes more affordable: owners would raise prices until the monthly payment of about $3,400 (including mortgage, insurance, upkeep and taxes on a $420,000 home) was back where it was. Affordability therefore requires more supply, which homeowners resist through zoning and land-use rules. Adam Taggart raises the lock-in effect, but Bianco says only 30-40% of low-rate owners have moved so far, and that rate cuts would risk repeating the mortgage excesses of 20 years ago.

  “as long as home prices are near all time highs, ... Home prices are fine.”at 47:30

US inflation

• Jim Bianco · Bianco Research, L.L.C.

  US inflation is stuck near 3% because goods deflation from China won't return.

  Bianco argues that from 2001 to 2020, after China joined the WTO, core goods prices were negative (deflationary) and dragged down core PCE, which is about one third goods. Services inflation still averaged 2.5% and never reached the Fed's target, so the low inflation was an export of deflation rather than a solved problem. The political cost is visible: manufacturing towns saw rises in alcohol, drug and suicide deaths, and politicians on both sides now accept a price for globalisation. Neither party wants to return to cheap imports. Without goods deflation, inflation cannot be brought back to 2%, so the economy is stuck at about 3%.

  “So we're stuck at three ish percent inflation.”at 58:02