Finimize - 🤝 A new AI alliance

What’s going on here?

BlackRock, Microsoft, and Abu Dhabi’s MGX created a fund to invest in critical AI infrastructure, set on proving that teamwork does make the high-tech dream work.

What does this mean?

Data centers whir away every time an AI system “thinks”, so they’re essential infrastructure in a world that’s becoming increasingly reliant on the super-smart technology. And eager to cash in on the trend, BlackRock, Microsoft, and MGX have formed the “Global AI Infrastructure Investment Partnership” to invest in AI data centers and energy infrastructure. They’re hoping to raise $30 billion from private equity investors with the fund – and by borrowing on top of that cash, funnel up to $100 billion into target projects.

Why should I care?

For markets: Time for a trust fall.

AI might be able to do more tricks than traditional tech, but it uses far more power in the process – and existing energy systems are already feeling the strain. So with the International Energy Agency predicting that data centers alone could force US power demand up 8% by 2030, energy infrastructure clearly needs an upgrade. But that’s expensive work, and investors have already grown skeptical of AI’s ability to justify its colossal costs with cold, hard profit. So if the fund does attract investors, that’ll prove they still believe the tech has the potential to produce serious cash.

The bigger picture: Welcome the reigning champ.

The exponential rise of AI is putting US gas plants to work. And, charmed by the old-school fuel, the country’s utility companies are tossing their green intentions aside, writing plans for new gas-powered plants at the fastest pace in years. So despite predictions that natural gas would fall out of fashion, it’s currently still the top method of electricity generation in the US – and it could stay that way if cleaner energy alternatives fail to scale.

What’s going on here?

UK inflation held steady in August, although higher-than-expected services inflation may have tested the Bank of England’s (BoE’s) nerves.

What does this mean?

Just as economists had predicted, British consumer prices picked up by 2.2% in August from the same time last year, matching July’s pace. Down on the ground, a few prices were headed in the right direction: folk paid less at hotels, restaurants, and the gas pump. But the same can’t be said for the skies. The price of plane tickets – ahem – took off, wiping out those small wins. In fact, the air travel industry’s runaway costs were enough to push services inflation up to a higher-than-expected 5.6%.

Why should I care?

For markets: Time to start the rates race.

With the headline inflation figure landing just above the BoE’s 2% target, the central bank should be able to follow up August’s interest rate cut – its first since 2020 – with a series of trims. But traders don’t expect the next one to come out of Thursday’s meeting: they’re betting on a 0.25 percentage point cut in November instead, with a high chance of another in December. Those chops can’t come fast enough, with borrowing costs still high enough to drag the country down. Case in point: data out last week showed that the UK economy stalled for the second consecutive month in July, disappointing analysts who had forecast a 0.2% uptick.

The bigger picture: The UK has money issues.

The British pound has been the best-performing major currency against the US dollar this year. But, as always, there are two sides to the coin. On one hand, the strong pound could help ease inflation by making it cheaper to import commodities, which are priced in dollars. But on the other, it makes the UK’s exports more expensive for international buyers – and if they’re lured away by cheaper currencies, the country’s economy could feel the hit.