Chips ahoy.

When last week began (and Jensen Huang had only two affairs known) the odds of a December rate hike in Canada were 40%. By week’s end, the little wonker had three, and the chances of a Bank of Canada increase were 66%.

No, they’re not related. But, yes, they are.

Nvidia reports earnings this week. Anthropic’s blockbuster IPO will also happen. Tech bazillionaires are pleading that Huang get his job back as CEO of the chip maker, partly because $100 billion or so in AI startup funding came through his hands. And he’s a Trump-whisperer. Jensen was The Guy who got the White House to back off regulating artificial intelligence, in selling chips to China, and enthusing over data centres.

Well, lately AI = inflation, as well as uncertainty over our fate as a species.

This week we get new inflation data, and economists figure it will be stuck over the 3% mark. Again. This is 50% higher than the central bank’s target, and like the Fed in the US, higher rates are about the only tool these guys have to cool things off and whack it lower.

The AI buildout seems to be as much a culprit as higher energy prices flowing from the dumb Iran war. Companies like Anthropic, OpenAI, Meta. Google, Microsoft and Amazon are spending almost $1 trillion to build this out. Some of that is from cash flow. Some from issuing new stock. Some borrowed. Some financed with bonds. Some from Jensen.

It’s bigger than the railway boom of the late 19th Century and comes at a time when nations and citizens have never owed more money. It’s an indebted world now. So every tick higher in interest charges is consequential.

The next rate setting here is December 9th. As stated above, Mr. Market is betting 66% that the CB rate will rise a quarter point for the second time this year. Mortgages are headed for 5%. More realtors will have to overwinter in their Audis.

But, you cry, how can the Bank of Canada raise the cost of borrowing when the economy is barely growing, when we’ve shed jobs for the last three months, when the housing market’s in deep funk and car plants are being sold?

“Inflation, inflation, inflation” says our fav cowboy Bay Street economist, Derek Holt. The central bank has missed its target by too much and for too many months. Prices are outpacing wage gains. Oil is going to stay higher for longer than anyone anticipated a few months ago. US rates will be steadily increasing, affecting out dollar (if we don’t follow suit). Ottawa is pumping the gas with its new mega-deduction for business and billions poured into national infrastructure. And the AI investment/spending boom/bubble will just feed inflation in Canada as data centres go into crazy places like urban Saskatchewan and rural NS.

And more. There could be a trade deal with the Americans soon. Seriously. A lowering of tariffs in any meaningful way would be a shot of adrenalin for the Canadian economy. Good. More jobs. More exports. More business activity. More inflation.

Well, it appears likely next month will bring the increase. Bond yields have been signalling this for a while, with the benchmark Canada five-year issue up more than 20 beeps in a week. The expectation is for the cost of borrowing to rise by about half a point in the next six months – making home loans cost more just in time for the spring market.

But, lots could change in that time.

Democrats will take over the US Congress. Trump and his evil prince, Stephen Miller, will declare war on the enemy turning America into an even larger dumpster fire. There may be a trade deal with Canada as the Dems fight back on tariffs. But maybe not. The US president is mercurial, unpredictable and utterly unreliable.

All we know for sure is that the AI boom will continue. The spending will flow as data centres mushroom here, in America and globally. The technology threatens to overwhelm us, and unknown is what will happen to the company that furnishes 90% of the chips needed to power it.

The best advice is the most boring. Stay invested. Stay diversified. Stay out of debt. This may have just started.

About the picture: “If you feel like a change from dog pics for one day, here’s a pic if a sifaka lemur,” writes Robin, of Vancouver Island. “The entire family was chillin’ in a tree when I hiked the Kirindy forest earlier today, here in Madagascar.   I’m still reading your blog daily, regardless of where I am traveling in the world.  Keep up the great blog, it’s much appreciated.”

To be in touch, or to send a picture of your primate, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/11/15/chips-ahoy/