Peter Tchir, Academy Securities — November 15, 2026
Last weekend we went with A Lot To Digest. Not only are markets trying to figure out the economic and market outlook post midterm elections, but we also had software outages, a nationwide ground stop, and the CEO of one of the most important companies in the world resign.
Chinese Compute
Our week was meant to start at 5 a.m. on CNBC on Monday to discuss a variety of macro and geopolitical issues. But, with news breaking that the CEO confirmed a relationship (with someone alleged to be a Chinese spy), we got pushed to later in the show. Though, of course, the first question in our segment was still about Jensen. On Thursday we went on Bloomberg TV knowing full well that we would be talking about the developing situation around Jensen. I think we handled the subject well under the circumstances. Academy continues to be at the forefront of examining the National Security issues surrounding the compute build-out.
We have highlighted the threat (to the economy and market valuations) of Cheap Chinese Compute and China’s willingness to “distill” their models on existing models to reduce time and cost in training. We are comparing the risk to other periods where China grew to dominate industries (from basic manufacturing, to large swaths of global telecom, to the processing and refining of rare earths and critical minerals, and more recently, EV production). In each case China follows a pattern:
- A Persistent, coordinated, and well-planned effort (nothing wrong with that).
- Government support, often to the point of contravening global rules, but since no one tried to enforce the rules, I guess that is on “us” collectively.
- Intellectual Property “accumulation.” Where China was deficient in IP, they would make a great effort to catch up. Once IP is out there, it is easier to replicate, especially if you play loose with rules around patents, etc. There is also evidence that China (directly or indirectly) accumulated IP via theft, presumably both electronically and via human intelligence. This is something the Geopolitical Intelligence Group at Academy is well aware of, and is involved, in many cases, in efforts to protect what “we” collectively have.
- Take advantage of the “edge” they have. In this case an abundance of engineers, no concept of “not in my backyard” to slow growth, and readily available energy, with a relatively up-to-date grid. I am not saying I like that citizens have few rights in China to stop construction, as it is central to our way of life to protect individuals’ rights, but it is an “advantage” when trying to build out industry rapidly.
The allegations that the woman in question was a spy may or may not turn out to be true. While that distinction will be important for those directly involved, it is a good wake-up call to focus on China’s “all-in” efforts to grow their compute capability.
Veterans Day
At Academy, where ~50% of the company served, Veterans Day is always an important day. And after the previous section, which was kind of “heavy,” I wanted to share a few things from this Veterans Day for Academy.
The team in Chicago rang the opening bell at the Cboe.
While that was very cool, I really wanted to highlight two other teammates.
Probably not the first time Phil McConkey has lit up Times Square, but still very cool to see! The big smile on Phil’s face may be because his two teams, the Giants and the Bills, are both atop their divisions.
Rachel Washburn’s story is even more interesting. She is the Philadelphia Eagles’ nominee for the NFL’s Salute to Service Award. This link pulls up Rachel’s bio and gives you the opportunity to vote for her! (Yes, it is a bit painful to vote for anything with the Eagles, but if you are ever going to do it, now is the time, and yes, voting is still open).
Her service in Afghanistan is amazing and her work for the Eagles is pretty cool too. 😊
One other observation, and maybe it is anecdotal, but it seemed that the Commonwealth countries at the very least stepped up their Remembrance Day activities (as did the countries that call it Armistice Day). Maybe recognizing the need to spend and defend has helped increase pride in their military past and future? When discussing this, many people said they noted the same.
Maybe a great reminder of how so many countries pulled together to defeat a common enemy, and a sign of good things to come!
I have to admit, I am kind of unmotivated to finish the report, as anything else I write will be less interesting than what we covered in this section.
ProSec Post Midterms
We will do a longer, more detailed report on the state of ProSec as we enter the holiday season.
In the meantime, if I was asked what is most noticeable about ProSec right now, my answer would be a resounding “It Has Gone Global!”
Maybe it seems counterintuitive to talk about “going global” in a section that hints at analyzing the midterm election’s impact on ProSec™, but I think it is extremely relevant. We have been arguing for months now that there are global investment opportunities as country after country, and region after region, understand the necessity of doing more on their own and harnessing their own resources when it is viable.
U.S. stocks were up this week (though not without some indigestion), but European stock markets outperformed. Looking at a broad set of European indices versus U.S. indices, Europe has now outperformed over a week, a month, 3 months, and 6 months. Which brings me to this chart. Name this ETF:
In black, we have the well-known Nasdaq 100 ETF. In light blue, we have an ETF that outperformed the Nasdaq 100 over 1-year, 3-year, and 5-year periods. What sort of sorcery is this? The ETF in black includes the stocks that have driven the U.S. to its technological height!
I will admit that the total market cap of the stocks in the “mystery” ETF probably doesn’t add up to a fraction of the market cap of any of the Nasdaq 100 leaders, so it would be difficult to have put this trade on in size, but I think it is eye-opening.
If you guessed the ETF is EPOL, I’d be shocked. It is “nichy” even to the ETF “nerds” I follow (yes, that is the name of the Bloomberg Group chat, so I can say the word “nerd”). It is just over $1 billion in AUM and is the iShares MSCI Poland ETF. I’d be challenged to pronounce some of the names in the ETF and I can speak Ukrainian (Powszechna Kasa Oszczędności Bank Polski SA is the largest holding), but I think it is relevant to what we have been discussing.
I see Poland as an emerging force within Europe. We have been talking about the job Poland has done since Russian tanks rolled into Ukraine in February 2022.
When I look at Europe regarding ProSec, I see them moving in the right direction. A bit tentatively, with too many restrictions/reservations so far, but it is early. Many countries are facing the task of altering policies that have been in place for years or even decades to re-industrialize and harness/re-harness their resources. Poland has had a head start and I believe it will play an even bigger role in Europe after any sort of deal is reached between Russia and Ukraine.
So, when I think of ProSec, I think it has made the leap from the U.S. government, to U.S. corporations and investors, to global and will continue to grow, in part because being resilient and secure are such basic concepts that ProSec helps achieve.
Domestically, I am very optimistic that the new Congress will get together and take some positive steps on trade and tariffs. In my vision for ProSec, trade plays a crucial role. Not everything can be done domestically. Trade will still be crucial to the success of nations. While there will be “vertical integration” within nations, there will be plenty of opportunity for trade. Who you trade with will likely change (consideration over shipping lanes and the potential bad behavior of trading partners is now a more realistic part of any relationship). Needing a “core” of domestic production doesn’t exclude working with others. Also, so many of the things we discuss will take years and years to build out domestically (not just in the U.S. but also in other countries).
I have not been a fan of current trade or tariff policy. We won’t rehash what you can read in last weekend’s report.
I am probably a bit optimistic about D.C., but I think we get the left side of the picture rather than the right side of this picture.
Friction is good and can be productive. Fighting isn’t.
When I look at the election results, I see results that tell me “fixing” trade with Canada and Mexico, at the very least, has support. Many of the “flipped” states border on one or the other. The “agricultural-focused states” flipped too. Yes, the war in Iran and the cost of diesel had a lot to do with it, but tariffs on potash, retaliatory tariffs, and policies didn’t help either. I don’t know what can happen, but maybe some sort of veto-proof legislation to extend USMCA (which the President did negotiate and claimed was great, not that long ago) could be the outcome?
Probably too optimistic, but not only is ProSec replacing ESG in how companies, investors, and countries think, it is also going global and I think (hope) that peak trade wars away from China are almost behind us.
Bottom Line
The Fed will hike 25 bps in December unless there is a deal with Iran. While it seemed “civilized” on the surface, many longtime Fed watchers thought the statements this week were more along the lines of something we’d see on the Kardashians (wow, it has been a long time since I mentioned them) than typical Fed speeches. It is clear that some want to provide forward guidance (despite the Chair not wishing to do so) and that maybe the discussions at the last meeting, where the decision was made not to hike, were more contentious than we were led to believe. With 10-year Treasury yields back above 5%, I’d be getting longer duration again. The Big Beautiful Bill did many things, one of which was front-load some of the benefits to boost the economy this year, so we should see some easing on inflation (and the deficit) as we start 2027.
Credit spreads seem almost “boring” again. I guess that is a good thing, though deep down, I like volatility in credit markets.
The compute build will continue post midterms. Some areas will embrace the opportunity to welcome compute while other areas fight it. Even the areas that voted against it are likely to sit down at the table and decide what compute will be built, where it will be built, and the burden sharing (water, electricity, etc.) will likely shift towards the compute side rather than the populace, but I don’t see the elections changing the overall trajectory of the compute build.
If there is a slowdown, it will be because of the industry itself, or because credit markets push back too much, or, in the short term, if the Anthropic IPO doesn’t go according to plan. So far none of those things seems to be occurring. If anything, the amount of compute used to generate AI video memes this week was off the charts! A lot of creativity out there.
I remain wary about the pace of development of Cheap Chinese Compute and think that is the biggest threat to current valuations, though after so much selling pressure in the AI and chip sectors, there is, once again, lots of upside potential. Not sure we are out of the woods yet, but the SOX index finishing up on the week was good, and the Nasdaq 100 is hovering right around the 200-day moving average; if it can get above and stay above, that would be a signal I’d want to follow (again, we are stuck talking about technicals as a guide more than usual, but c’est la vie in chaotic markets).
The opportunity for global growth (outside of China) is looking better and better. U.S. markets will benefit given the global nature of our companies. Any easing on trade “wars” would be a good thing for affordability and the economy!
Vote early and often! For Rachel that is, where the NFL does let you vote once a day.
Looking forward to spending the week in our Del Mar office, assuming flights are operating normally!
