GS Privorotsky Basics Navier Stokes Breakthrough Bessents Yen Warning Treasury Buybacks 9 Sep 2026

GS Privorotsky - Basics Navier Stokes Breakthrough Bessents Yen Warning Treasury Buybacks 9 Sep 2026 Rich Privorotsky · Goldman Sachs · Basics / Equity Sales Wed 9 Sep 2026, 3:18am ET

Markets: Right way momentum tape yesterday. TMT conferences delivered a stream of bullish AI-demand commentary. China inflation was hotter at the producer level… August PPI +3.8% YoY versus +3.6% expected, while core CPI was +1% vs .9%. Energy was a meaningful contributor to both. On its own, not a big China story, but another indication that the global energy shock is increasingly bleeding into inflation. Asia mixed this morning… Japan struggling with the stronger yen, while Korea/AI remain well bid.

AI Bull Case: AI keeps breaking barriers. We are now seeing frontier models make real progress on previously unsolved mathematics and science problems, including OpenAI’s proposed solution to Navier- Stokes (see below). The pace is staggering. Astra was trained across more than 100,000 GPUs (at peak utilization required roughly 70 to 100 megawatts of power..as much as a small city) and is already pushing materially beyond prior models on math, coding and scientific reasoning. I don’t think we should call this fully self recursive learning yet, but AI is increasingly accelerating the research process that builds the next generation of AI. Unless we have some terrible accident (cyber etc), it feels incredibly foolish to fade the broader vertical. The conference tape reinforces the demand side. Google Cloud said $100m+ deals are growing more than 2x both QoQ and YoY, while AI-server payback is less than two years, and roughly half that on proprietary silicon. Broadcom was similarly direct… demand exceeds its $115bn FY27 AI revenue outlook, with power, site readiness and supply increasingly the binding constraints. Compute demand rollover feels very difficult to argue. The bear case is more about who ultimately captures the economics… margins, financing costs and how much cash operators/software vendors retain after the investment cycle. Those are legitimate questions, but I think topline going up too fast to matter.

Yen: Bessent was unusually explicit overnight: “I am the house now … and you can bet against me if you want.” He argued that Treasury has an informational advantage because of its visibility into Japanese policymakers and the BOJ. (The Japan Times) Whatever you think of the rhetoric..the yen objectively continues to appreciate as the market leans into BOJ tightening/repatriation. The secondary implication matters more for equities… what happens as yen funded carry trades unwind back into Japanese bonds/equities? The S&P and mega cap complex have felt strangely heavy without a great fundamental reason. Worth keeping in the back of the mind that some leverage/carry may simply be diffusing out of the system.

Oil: Well that was the opposite of de-escalation. The US destroyed five Iranian crude carriers; Iran responded with missiles at a US base in Jordan and attacks on shipping around Hormuz. Yday saw further Houthi incursions into Saudi refining capacity. If there is a limit or an off ramp here, I’m not seeing it yet. US policy increasingly looks aimed at choking off Iran’s ability to finance the war by restricting crude exports, while Iran’s response is to attack US assets and shipping. Status quo feels unsustainable. It

remains very difficult to get a durable risk rally while this persists… we desperately need some sort of diplomatic off ramp (especially for Europe risk/Gas problem)..so far there is little evidence of one but with Brent approaching $100 I am reminded that it is always darkest before the dawn.

Treasury buybacks: We should get the size of the first enlarged long end operation today, ahead of tomorrow’s 10–20yr buyback. Treasury has already committed to at least $4bn, double the prior maximum. The debate is whether they stop at four or go meaningfully larger… It is well flagged now, so the reaction probably depends on whether Bessent can actually exceed expectations rather than simply deliver the minimum.

Risk: I remain constructive. The AI narrative is shifting again toward rapid development of actual capability, while the…