The warships in the Strait of Hormuz and the voting divide in Washington sent the market in two directions within the same 24 hours. While oil prices surged to $120, the Federal Reserve saw its largest rift in 34 years.
1｜Iran Blockade Escalation: $150 Billion Military Bill Squeezing AI Budget
The U.S. announced a comprehensive maritime blockade against Iran, causing Brent crude oil to spike to $120, hitting a new high since 2022. The Pentagon revealed the first-month operation budget to be $150 billion. The number itself is not surprising, but what is surprising is its direct conflict with another fund. The U.S. government's 2026 fiscal year AI infrastructure allocation totals $320 billion. The cost of a two-month military operation in the Middle East could consume nearly half of the AI budget.
A deeper contradiction lies in the energy sector. Globally, about 20% of AI data center locations rely on Middle Eastern natural gas supply (EIA data). Restrictions on passage through the Strait of Hormuz directly drive up the operating costs of these facilities. China is simultaneously expanding its rare earth export controls, including scandium and terbium in the restricted list, further tightening the military and semiconductor supply chain. As both energy and rare earth supply lines tighten, the physical constraints of AI computing power expansion are becoming more real than algorithmic bottlenecks.
(Source: Reuters / Bloomberg / U.S. Central Command / EIA)
2｜Fed's Largest Divide in 34 Years: Powell's Exit Strategy Rewrites Power Structure
The Federal Reserve maintained interest rates with an 8:4 vote, the largest divide since 1992. More important than the decision itself is the signal of power transition. Powell confirmed he will not continue as chairman after his term ends but chose to stay on as a governor. This is not a normal retirement but an unprecedented arrangement.
Remaining as a governor means Powell retains voting rights and influence over banking regulation. Kevin Warsh, as the most likely successor, will face a situation where a former chair sits in his own meeting room. George Selgin, an economist at the Cato Institute, pointed out that there has never been a precedent in Fed history where a former chair as a governor balances a new chair. Two of the four objecting votes came from regional Fed presidents who advocated for an immediate 25 basis point rate cut, reflecting that the rift between inflation and growth has shifted from an academic debate to a voting confrontation.
(Source: Wall Street Journal / Financial Times / Cato Institute)
3｜Cloud Giants Earnings Report: AI Demand Meets Capacity Ceiling
Google Cloud's quarterly revenue exceeds $200 billion for the first time, a 35% year-on-year growth. AWS reports $376 billion, with AI services revenue accounting for over 20% for the first time. Both sets of data seem to confirm the narrative of strong AI demand, but Meta's capital expenditure figures tell a different story. Annual Capex has been raised to over $600 billion, leading to a 4% post-market decline.
The market's fear is not that Meta is spending too much money, but that a structural issue has surfaced. The growth rate of AI demand has outstripped the speed of infrastructure development. NVIDIA's Q1 data center revenue has surpassed $40 billion, but the growth rate has slowed not due to insufficient demand, but because capacity cannot keep up. Goldman Sachs estimates in its latest research report that global AI data centers will face a 15%-20% power shortfall by 2027. The gap between the demand curve and the supply curve is causing cloud providers to shift from a "growth race" to a "capacity allocation race."
(Source: Bloomberg / Reuters / Financial Times / Goldman Sachs)
4｜Stablecoin Penetration Accelerates: When Visa and Meta Both Enter
Visa's stablecoin settlement volume surpasses $70 billion, a 40% increase compared to the previous period. On the same day, Meta announced using stablecoins to pay creators' earnings. Securitize receives SEC approval to tokenize US stocks, opening the door to a $70 trillion market. These three pieces of news strung together point to the same signal: stablecoins are transitioning from the crypto-native scene to traditional financial infrastructure.
The key turning point lies in the change of users. Visa's $70 billion in settlements did not come from crypto exchanges but from merchant acquiring and cross-border remittances. Meta's stablecoin payments cover millions of creators worldwide, who are indifferent to blockchain but care about faster settlements and lower fees. Securitize's approval directly brings the largest traditional asset class, stocks, onto the chain. When payment giants use stablecoins as a conduit, tech giants treat stablecoins as a tool, and securities firms see tokenization as a product, the "mass adoption" of cryptocurrency may not happen in the way people imagine.
(Source: Bloomberg / CoinDesk / Financial Times / CNN)
Also Good to Know ↓
SMIC Placed on U.S. Export Control List. The U.S. continues to tighten restrictions on the Chinese semiconductor industry, with SMIC being the latest Chinese chipmaker to be added to the Entity List, mainly affecting mature process capacity. (Source: Financial Times)
SenseTime Unveils Large Model Fully Compatible with Domestic Chips. This is the first publicly announced domestic commercial large model that claims to be completely independent of NVIDIA GPU reliance, utilizing Huawei Ascend and Cambricon chips for training. (Source: South China Morning Post)
Goldman Sachs Hong Kong Office Bans Employees from Using Claude and ChatGPT. Following JPMorgan, another Wall Street institution in the Asia-Pacific region tightens its policy on external AI tool usage, with cross-border data compliance being a major concern. (Source: Financial Times)
Apple Transitions Siri Large Model to In-house Architecture, Ending Partnership with OpenAI. Apple abandons using ChatGPT as the backend for Siri, shifting to a fully proprietary on-device large model. This means OpenAI has lost its biggest distribution channel partner. (Source: Wall Street Journal)
Microsoft Copilot Enterprise Users Surpass 100 Million. Surging from 40 million at the end of last year to 100 million now, Copilot's growth far exceeds expectations. Microsoft is transforming AI from a feature selling point to the default layer of Office. (Source: CNBC)
Residents of Small Canadian Town Tumbler Ridge File Collective Lawsuit Against OpenAI. This may be the world's first community-based AI training data privacy class-action lawsuit, with the plaintiffs claiming that OpenAI's training data includes their personal information and community profiles. (Source: NPR)
Google Signs AI Data Analysis Contract with the Pentagon. Google re-enters the defense AI market after exiting the Maven project in 2018. This contract focuses on non-combat data analysis but still sparks internal controversy. (Source: CNBC)
Welcome to join the official BlockBeats community:
Telegram Subscription Group: https://t.me/theblockbeats
Telegram Discussion Group: https://t.me/BlockBeats_App
Official Twitter Account: https://twitter.com/BlockBeatsAsia
