Rate Cuts + AI Mania = Uncomfortable Mix for the Bulls

Corporate Overview

I’ve stopped being surprised when the headline numbers look good but the under-currents warn otherwise. This week (Sept 22-26, 2025), the U.S. markets hit more record highs — driven chiefly by AI, expectations of more Fed rate cuts, and a broadening of the market beyond just a handful of mega-caps. But look closer: labor market softness, downward revisions in job creation, widening valuation gaps, and cautious Fed commentary are piling up. It feels less like a “Goldilocks soft landing” and more like a finely balanced house of cards.

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Stock of the Week: Lithium Americas (LAC)

Sector: Materials / Lithium Mining | Market Cap: ≈ $1.4B

Why Now:

• Lithium Americas controls a 62% stake in Thacker Pass, potentially the largest high-grade lithium deposit in the world. Once fully ramped, the mine could produce 160,000 tonnes of lithium carbonate annually — a scale that would make it the nation’s leading supplier.

• General Motors’ $625M investment and 38% joint venture significantly de-risk development, securing capital and offtake. Add in a $2.3B DOE loan commitment, and the project has institutional-grade backers.

• The breaking news this week: the U.S. government is reportedly seeking 5–10% of LAC in warrants as part of a broader push to secure domestic critical minerals. Shares surged nearly 100% after hours on the announcement. This move signals not only financial support but national-security level interest in ensuring Thacker Pass succeeds.

• Lithium demand is tied to EV adoption. By 2030, the supply gap is expected to widen sharply, with potential for prices to go parabolic, much like the spike in 2022. Exposure now is a long-duration bet on that structural shortage.

• Internal estimates project average annual EBITDA of $2.2B and NPV of $5.9B. On conservative spot price assumptions, the stock could compound at ~36.9% annually through 2033 if execution stays on track.

Risks to Watch:

• Lithium Americas is pre-revenue. Any delays in Thacker Pass construction (Phase 1 production targeted for 2027) would push earnings further out and invite market discounts.

• Lithium prices are notoriously volatile; if the expected supply gap doesn’t materialize, margins compress quickly.

• Mining CAPEX is enormous ($2.9B for Phase 1, $9.4B for subsequent phases). Execution risk remains, though the GM JV and now U.S. government involvement mitigate some of it.

Verdict: We’re long because this is no longer just a speculative lithium play — it’s becoming a U.S. strategic asset. With GM, DOE, and now Washington itself in the mix, Thacker Pass isn’t just about EV demand — it’s about national energy security. That combination of structural demand + government backing is rare, and worth owning.

📉 Market Snapshot (Week of Sept 22-26, 2025)

*Approximate weekly closes.

Major indices are getting lift from AI/tech, small-caps are waking up, yields remain elevated, and gold is rallying on inflation + Fed cut expectations. Flows favor AI infra and value hedges.

📊 Market Commentary

U.S. Macro: Soft Where It Matters, Sticky Where It Hurts

The jobs market is weaker than headlines admit. The BLS benchmark revision revealed the U.S. added 911,000 fewer jobs over the past year. Jobless claims eased slightly to ~231,000 but remain elevated. Wage growth is slowing. Meanwhile, inflation in services refuses to cool. Growth is fading while costs linger.

Structural Themes: AI Explosion Meets Valuation Friction

AI is no longer fringe — it’s the macro driver. Nvidia’s megadeal with OpenAI highlights how infrastructure is now the bottleneck. But valuations are climbing into bubble territory. Even Bank of America admits AI stocks may be running ahead of fundamentals.

Geopolitics & Commodities: Risk Premiums Rising

The OECD cut U.S. growth forecasts to ~1.8% for 2025 and weaker still in 2026. Gold surged on safe-haven demand. Oil stays tight thanks to geopolitics and supply discipline. China’s AI and chip resurgence poses both opportunity and competitive threat to U.S. leaders.

Institutional Flows + Volatility Shifts

Post-cut, flows are barbelled: long AI + commodities, light on consumer cyclicals. Volatility creeping into stretched sectors. Curve inversion still a risk factor if growth buckles faster than markets expect.

Equity Rotations: Tech vs. Value, Defense vs. Consumer

AI infra, semis, and testing equipment are leaders. Energy and materials keep steady bids. Consumer discretionary weakens under higher credit costs. Defensive basics quietly accumulating institutional interest.

🧭 Tactical Map: Where to Lean In

• Overweight AI infrastructure & semis (Micron, Teradyne, suppliers).

• Add gold & commodity hedges for inflation volatility.

• Underweight consumer discretionary — demand softens, margins compress.

• Selectively overweight small caps with domestic tailwinds.

• Defensively position in fixed income — TIPS and mid-curve Treasuries.

🔍 Theme to Watch: The AI Infrastructure Supply Chain Bottleneck

This is where the real alpha is. Winners will be those executing on memory, wafers, testing, power, and cooling. Losers will be priced to perfection and unable to deliver. Over the next 3-5 years, this supply chain bottleneck will decide who captures real AI returns.

📅 Forward View: Sept 29-Oct 3, 2025

💬 Final Words

The Fed’s first cut and AI mania are fueling record highs, but under the surface, growth is slipping and valuations are stretched.

Daly AM leans only where fundamentals align with macro reality — not hype.
If you’re done paying hidden fees for glossy forecasts, join us and think differently.

Disclosures: This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Always conduct your own due diligence or consult with a financial advisor before making investment decisions.