Blain’s Morning Porridge Feb 5th, 2026 – Navigating the stormy seas of Tech
“The worst thing you can do is nothing.”
Where are the Tech markets and AI heading? Are we due a meltdown or melt-up? Will the bubble bust, or do the current ructions reflect growing uncertainty on which directions upside lies? There is plenty to consider when trying to predict where AI and Tech eventually go.
What we do know is AI will change the world, and technology is constantly evolving. To play markets, we need to take a view. Doing nothing is not an option.
It’s been a funny old market in tech these last few days – as volatile as broken glass is sharp, as unpredictable as Brownian Motion in a teacup. Strip away the noise and fear around the potential quietus for Oracle on its unsustainable debt burden, how few chips Nvidia might now sell, how much infrastructure OpenAI may never build, or how far down the wrong roads Microsoft has travelled, or how Google will own us all, and try figure out exactly how much the AI revolution will change the world.
Because it will.
There are broadly three things to think about:
- Winners and losers
Predicting winners and losers depends on multiple tangible and intangible factors.
- The trading approach is to read the market’s sentiment, what its weighted belief is. There is a consensus Google is best placed to win the infrastructure/compute war. But just how big will it be? And sentiment is all over the place – Palantir is up 10% one day on government contracts by down 11% the next as buyers figure it’s not actually that difficult. There is no clear narrative – which is a sign of a market that is about to go do a new direction. Be ready for it.
- The investment approach is about trying to work out the future. There is a theme that AI (represented best by Anthropic this week) will negatively impact the value of coders, data miners and software-based firms. (That was already happening – I decided my subscription to Pitchbook was a waste of money compared to using AI to uncover the right buying windows at key accounts to pitch Alternative equity and credit deals to.) Broadly, AI is proving better to search, compile and automate. (Personally… I still run my deals on Excel and contact lists!)
Get ready for the next direction and narrative to emerge in how AI and Tech develop.
2) What will the AI future look like….
Fed Chairman elect Kevin Warsh tells us he’ll be able to slash US rates because AI is going to unleash a massive deflationary productivity boost across the whole US, and by default, the Western Economy. Lots of people fear he means firms are going see revenues increase as they replace expensive professional workers with cheaper AI agents and robots. It’s easy to slash rates in a market where workers are cheap and plentiful.
If this was 1825, literate workers would be sabotaging Anthropic’s Claude Cowork product by sticking their wooden clogs into the datacentre cooling units, mobs of accounting and legal luddites would be sinking barges transporting chips and computing gear, bankers dressed up in Rebecca dresses would be burning down the windmills providing the power, while the Printing and Underwriting City Guilds would be demanding the King slings AI billionaires into bottomless dungeons – and the King would agree, fearful of the power of the mob, remembering well what happened in France just 36 years before.
Today, middle class workers will probably vote for it…. Happy the value of their Alphabet Stock is rising even as their jobs come under threat. While the President tells American voters AI will make America rich, he knows that means it will make his billionaire chums trillionaires. There are vague mutterings about how the weaker dollar will enable the return of American manufacturing… really?
(Here in Blighty, we’ve less to worry about.. over the last 2 decades of government as a game of Competitive Incompetence, and multiple haverings about the importance of AI, the UK has become an AI powerhouse equivalent to the Austrian Navy’s dominance of the North Atlantic… or something like that.)
On the other hand….. while guilds and luddites predicted the worst from new technology, and Malthus predicted we’d all starve if we got rich and healthy… it didn’t happen. AI will change the way we work, and the jobs we do, but we’ll still have to work. It’s how it happens, and how violent or smooth the transition period is, and how society adjusts to what could further widen income and opportunity differentials.
Democratic societies can’t stay unfair for long without rising social tensions (MAGA is a good example), but Trump has now become the poster boy for the billionaire set who want more of the pie. Social tensions and wealth inequality is going to get really interesting in coming months.
3) Hegemonic Change
The third thing to think about is the history of hegemonic change. Every 100-120 years we have a K2 event – where the previous global hegemon finds its strength is waning, and new competitors arise. Typically, the incumbent hegemon will have become so through its dominance of economic change, production and technology.
In the case of the UK the rapid industrialisation, rollout of railways and steamships, and naval ascendency characterised the Empire. But towards the end, Germany became the threat, out producing Britain leading to the Dreadnaught race and WW1, which left the UK exhausted, and the USA as the strongest economy.
It wasn’t till WW2 the US demonstrated its true strength as the arsenal of democracy and then its ability to shift to a consumer economy as the boomer generation outcompeted the world. Today, the USA is the largest single economy and leader in technology evolution, but China is the global manufacturer.
Periods of hegemonic change also see Technology shifts. By 1916 the Germans were building battleships better than the Royal Navy’s. Today China is building tech that competes directly with America. DeepSeek might be built on nicked technology, but China is pioneering different routes to AI through open-weight, SLMs and identified the power requirements earlier. Paths diverge, and markets follow the one that looks more attractive in terms of size and returns.
Whether China ever does become the new hegemonic state, and we all shift to Chinese tech is debatable given the increasingly fraxious state of geopolitics. 50 years ago, Japanese cars were seen as cheap and shoddy. Today my new Lexus come with a 10-year warranty and feels really well put together – in contrast Land Rover offer a 2-year warranty, and salesmen will quietly urge you to sell it before it expires! Just saying….
Out of time, and back to the day job
(No Porridge tomorrow – so have a great weekend and enjoy the Rugby, which starts tonight!)
Bill Blain
Author of the Morning Porridge
Advisor – Spitfire Strategic Capital
