Gold prices rose on Monday as the dollar held steady against most major currencies, while speculation over the Federal Reserve’s policy path continued to shape market sentiment.

Federal Reserve Governor Christopher Waller said rates should be cut at the December meeting, although he noted that the January decision could be more difficult due to the backlog of delayed data.

John Williams, President of the New York Fed, said on Friday that the central bank still has room to lower interest rates.

“I see monetary policy as still moderately restrictive, though slightly less so than before our recent actions. Therefore, I still see scope for an additional near-term adjustment to the target range for the federal funds rate, bringing policy closer to neutral and maintaining balance between our two goals,” Williams said.

According to CME FedWatch, traders now assign a 79% probability to a 25-basis-point rate cut in December, up from roughly 42% a week earlier.

Meanwhile, the dollar index stabilized at 100.1 by 20:13 GMT, after touching a high of 100.3 and a low of 100.01.

Later this week, the US will release producer price data, retail sales figures, and initial jobless claims.

In trading, spot gold rose 1% to 4,120.2 dollars an ounce by 20:14 GMT.

Few figures embody the AI frenzy more than Jensen Huang, the CEO of chip giant Nvidia, whose market value has surged by 300% over the past two years.

Amid this feverish momentum, Huang sought in his first remarks during the latest earnings call to calm concerns over an inflating bubble.

“There’s a lot of talk about an AI bubble… but from our perspective, we see something completely different,” he told shareholders.

As the debate over an AI bubble deepens, it’s clear that those with the most to gain from continued AI spending are the ones dismissing fears of excess and speculative overreach.

David Sacks, investor and head of the White House AI Office, said on the All-In podcast: “I don’t think we’re at the start of a collapse cycle… we’re in a boom, in a super-cycle of investment.”

Prominent investor Ben Horowitz said: “The idea that we’ll face a demand problem in five years sounds absurd to me… if you look at demand, supply, and valuations relative to growth, this doesn’t look like a bubble at all.”

And in an interview on CNBC, JPMorgan’s Mary Callahan Erdoes called the characterization of massive AI inflows a “crazy idea,” adding: “We are on the cusp of a major revolution that will transform how companies operate.”

But a closer look reveals fragile foundations

Still, some observers argue that what’s happening in the AI industry today is genuinely worrying.

Investor and MIT Digital Economy researcher Paul Kedrosky says the vast sums flooding into this “revolution” are still fundamentally speculative.

“The technology is extremely useful, but the pace of improvement has slowed dramatically… so the belief that the revolution will continue at the same momentum over the next five years is unfortunately mistaken,” he said.

Massive inflows… and questionable growth

The scale of current spending is staggering even for financial analysts.

OpenAI — the creator of ChatGPT, which ignited the AI race in late 2022 — says it generates $20 billion in annual revenue and plans to spend $1.4 trillion on data centers over the next eight years. This level of investment requires continuous growth in demand for its services.

But doubts are rising: research increasingly shows that most companies are not seeing meaningful financial benefits from chatbots, and that only about 3% of people pay for AI tools.

MIT economist and 2024 Nobel laureate Daron Acemoglu said: “I have no doubt that real value-adding AI technologies will emerge over the next ten years, but much of what we are hearing from the industry right now is exaggerated.”

Even so, Amazon, Google, Meta, and Microsoft together are expected to inject nearly $400 billion into AI this year, mostly to fund data centers. Some of these firms plan to allocate up to 50% of their cash flow to building these facilities.

As Kedrosky put it: “For this level of spending to make sense, every iPhone user in the world would have to pay more than $250… and that’s not going to happen.”

To avoid draining liquidity, companies like Meta and Oracle have started turning to debt and private financing to support the data-center boom.

Risky financing… and the return of special-purpose vehicles

Goldman Sachs analysts found that hyperscalers — companies with massive cloud and computing capacity — added $121 billion in new debt over the past year, an increase of more than 300% versus the sector average.

Analyst Gil Luria at D.A. Davidson says tech giants are using special-purpose vehicles (SPVs) to obscure debt exposure on their balance sheets.

One example: a data center in Louisiana financed by Blue Owl Capital in partnership with Meta. Blue Owl took out a $27 billion loan, while Meta enjoys the capacity without showing the debt. But if demand weakens and the center stalls, Meta will face multibillion-dollar obligations.

Luria said: “The term SPV surfaced 25 years ago with a small company called Enron… today companies are not hiding it, but that doesn’t mean it’s a sustainable model for the future.”

Huge spending built on expectations that may be illusions

Companies are projecting massive AI revenues in the coming years. But Morgan Stanley estimates that big tech will spend around $3 trillion on AI infrastructure by 2028 — and cash flow will cover only half of it.

“If market growth slows even slightly, we’ll be left with excess capacity and overbuilt infrastructure, debts that become worthless, and significant losses for financial institutions,” Luria warned.

The previous bubble in the early 2000s also burst after debt accumulated to build capabilities the market wasn’t ready to use.

Giant circular deals add to the anxiety

Analysts point to circular deal structures that artificially inflate demand.

One example: a $100 billion deal between Nvidia and OpenAI, in which Nvidia funds data centers that will later be filled with Nvidia chips. Kedrosky described the logic: “I want OpenAI to buy more of my chips, so I give them the money to do it.”

CoreWeave — originally a crypto-mining platform — leases data-center capacity to OpenAI in exchange for shares, while Nvidia guarantees the purchase of any unused capacity through 2032.

Acemoglu said: “The risk is that these deals ultimately expose a fragile financial structure like a house of cards.”

Signs of fear that the bubble may burst

Some high-profile investors have already shown anxiety.

Billionaire Peter Thiel sold his entire Nvidia stake worth $100 million, while SoftBank exited a roughly $6 billion position.

Skeptics are increasingly focused on Michael Burry — famous for predicting the 2008 crash — who recently bet against Nvidia and criticized “accounting tricks” and circular financing.

Burry wrote on X: “Real demand is laughably small… almost every customer is funded by the vendors.”

He added: “OpenAI is the lynchpin here… can anyone name its auditor?”

Even top executives acknowledge the hype

OpenAI CEO Sam Altman said last August: “Are we in a phase of investor overexuberance? In my view, yes. Is AI the most important thing happening in a long time? Also yes.”

Google CEO Sundar Pichai told the BBC that “there are elements of irrationality” in today’s AI markets, adding that any bubble burst would hit everyone: “No company will be immune — including us.”

U.S. stocks climbed on Monday, supported by a strong rebound in the technology sector, particularly AI-linked names, alongside rising expectations for a Federal Reserve rate cut at next month’s meeting.

Fed Governor Christopher Waller said he favors a rate cut in December, though he noted that the January decision may be more challenging due to the backlog of delayed economic data.

His remarks followed comments from New York Fed President John Williams on Friday, who signaled that the central bank may have additional room to ease policy.

Williams said that monetary policy “remains moderately restrictive,” though less so than before the Fed’s recent actions, adding that he still sees scope for “another adjustment in the near term” to bring rates closer to neutral and keep the Fed balanced between its dual mandates.

According to CME FedWatch, markets now assign a 79% probability to a 25-basis-point rate cut in December, up sharply from around 42% a week earlier.

In equities, the Dow Jones Industrial Average rose 0.6% (285 points) to 46,530 as of 16:15 GMT.

The S&P 500 gained 1.4% (93 points) to 6,695, while the Nasdaq Composite jumped 2.4% (527 points) to 22,801.

Copper prices slipped during US trading on Monday, weighed by a slightly stronger dollar and growing bets on a Federal Reserve rate cut.

Three-month copper futures on the London Metal Exchange rose 0.2% to 10,780.5 dollars per metric ton as of 4:40 p.m. Mecca time.

Markets now assign a 78% probability of a 25-basis-point Fed rate cut in December, up from roughly 41% a week ago, according to CME FedWatch.

UBS sees structurally tighter supply and higher copper ahead

UBS expects copper prices to move higher next year, citing tightening supply conditions driven by persistent mine disruptions and strong long-term demand from electrification and clean-energy investment, according to a research note published Friday.

In its latest revision, the bank raised its March 2026 copper forecast by 750 dollars to 11,500 dollars per metric ton. Forecasts for June and September 2026 were lifted by 1,000 dollars to 12,000 and 12,500 dollars respectively, while a new December 2026 target was set at 13,000 dollars.

The bank also sharply increased its projected market deficit to 230,000 tons in 2025, up from 53,000 tons previously, and to 407,000 tons in 2026, compared with an earlier estimate of 87,000 tons — pointing to low inventories and ongoing supply risks.

UBS highlighted this year’s mine disruptions — including production issues at Freeport-McMoRan’s Grasberg mine in Indonesia, slower output recovery in Chile, and recurring protests in Peru — as evidence of structural supply constraints likely to persist through 2026.

Freeport-McMoRan (FCX.N) said last week it plans to resume output at Grasberg by July, following a fatal accident that halted operations two months earlier.

The bank cut its refined copper production growth forecasts to 1.2% for 2025 and 2.2% for 2026, citing declining ore grades and operational challenges.

Global copper demand is expected to grow 2.8% in both 2025 and 2026, supported by electric vehicles, renewable energy, grid investment and data-center expansion.

UBS said any short-term weakness in copper prices is likely to be temporary, recommending holding long positions or using volatility-selling strategies.

In Shanghai, the most-active SCFcv1 contract ended daytime trading 0.09% higher at 86,080 yuan (12,112.68 dollars) per metric ton.

During US hours, March copper futures fell 0.5% to 5.06 dollars per pound as of 15:04 GMT.