The Era of Kevin Walsh Begins: Which Assets Are Poised for Growth and Which Face Revaluation?

Original authors: @Globalflows, @aleabitoreddit

Original compilation: Peggy, BlockBeats

Editor's note: Kevin Warsh's appointment as the chairman of the Federal Reserve signals more than just a personnel change; it indicates a shift in the very logic of market pricing. Within Warsh's framework, inflation is reinterpreted as a problem of fiscal irresponsibility and government inefficiency, while AI is seen as a key tool for reducing costs, enhancing productivity, and reshaping governance capabilities.

As AI systems like Palantir are being deployed in areas such as federal spending audits, housing finance, and medical reimbursements, this institutional shift is moving from concept to execution, and is beginning to manifest in the market as structural differentiation and repricing.

With AI and fiscal discipline becoming the main policy lines, which assets will gain new pricing premiums, and which business models will face systemic reevaluation, are questions the market must answer. Here is the original text:

Kevin Warsh's appointment as the new chairman of the Federal Reserve sends signals that extend beyond personnel changes; it heralds a profound shift in the global monetary policy paradigm and the AI arms race. The connection between these two is much closer than most realize.

AI is becoming the only asymmetric leverage point that will determine the future landscape, and Warsh's appointment is a systemic arrangement centered around this core goal.

Discussions surrounding him, such as "Will he cut interest rates?", "Is he hawkish or dovish?", "How will he handle the Fed's balance sheet?" are certainly important, but they overlook a crucial fact: a larger institutional transition is already underway.

The key issue is not the short-term policy orientation, but rather why it is Kevin Warsh, and how he fits into this emerging new system. Understanding this will be the most important judgment variable as we approach 2026.

From Personnel Appointment to Institutional Signal: Why Warsh?

Warsh is not a "policy technocrat" in the traditional sense. He has long been viewed as someone with a systematic understanding of global capital flows, financial market structures, and institutional incentives.

More importantly, he is not an isolated individual.

Warsh has maintained close ties with Druckenmiller, Bassett, and Karp, all of whom have deep connections with Palantir. Druckenmiller has publicly praised Warsh's understanding of global capital flows and financial market structures on multiple occasions.

In an interview with Bloomberg, Druckenmiller directly referred to Warsh as his "trusted advisor."

But this connection goes beyond that: Druckenmiller himself is an early investor in Palantir and has a close relationship with its co-founder and CEO, Alex Karp. (Related reading: Interview link)

Why is this important? Because Kevin Warsh himself has a direct connection to Palantir.

In 2022, Alex and Kevin recorded an interview discussing how the world is moving toward greater disorder and higher levels of complexity.

As they stated in the interview: "Tomorrow, complexity will undergo a leap."

This is not a hollow expression of technological optimism, but a forward-looking judgment that changes in national governance, fiscal systems, and macro stability are imminent.

Palantir: The "Execution Layer" of Institutional Transition

To understand Warsh, one cannot avoid Palantir.

Palantir is crucial because it is gradually becoming the "operational hub" of the U.S. federal government's anti-fraud system. Currently, 42% of Palantir's revenue comes from the U.S. government, and its technology is being deployed across multiple government departments to identify and curb large-scale fraud and excessive, inefficient government spending.

Why is this important?

Because Palantir is being used to systematically address excessive waste and various fraud issues in government spending. Its technology is being implemented across several federal agencies, becoming a key tool for identifying abnormal cash flows and eliminating redundant expenditures.

SBA: From Single State to Nationwide "Zero Tolerance" Cleanup

One of the most representative examples comes from the U.S. Small Business Administration (SBA).

While investigating loan programs during the pandemic, the SBA discovered large-scale violations in Minnesota: involving 6,900 borrowers, approximately 7,900 PPP and EIDL loans, totaling around $400 million.

In this context, the SBA introduced Palantir and explicitly stated that the investigation would expand from a single state to nationwide as part of a "zero tolerance" systemic anti-fraud initiative.

Documents show that Palantir, through its Foundry platform, integrates government data scattered across different agencies and systems, tracks the investigation process, and ranks leads by risk level. This means that Palantir is no longer just providing analytical tools but is deeply embedded in the federal government's auditing and anti-fraud workflows.

Fannie Mae: Systematic Pre-Audit of the Housing Finance System

A similar logic is unfolding in the housing finance system.

Fannie Mae has officially established a partnership with Palantir for AI anti-fraud technology, integrating Palantir's AI capabilities into its fraud detection system to identify previously hard-to-detect fraud patterns within millions of data sets, aiming to reduce future losses in the U.S. mortgage market.

The background of this collaboration is particularly critical: Fannie Mae manages over $4.3 trillion in assets and plays a foundational role in the U.S. housing finance system, covering nearly a quarter of single-family home mortgages and 20% of multi-family mortgages. Fannie Mae emphasizes that this move will enhance the safety and soundness of the entire mortgage market; Palantir CEO Alex Karp stated that this collaboration will "change the way America combats mortgage fraud," bringing anti-fraud capabilities directly to the system level.

What is the "connection" between them? The answer lies in the fact that the federal government is increasingly deploying Palantir's anti-fraud capabilities across different fields.

This indicates that Warsh's proposed "fiscal inflation theory" is not merely an academic concept but is being translated into executable, auditable, and accountable government capabilities through AI systems like Palantir.

I find one phenomenon very interesting: Humana, a company with over $100 billion in government contracts, is one of the largest contractors for the government, yet its stock price has been weakening while Palantir's continues to rise.

Whether there is a direct correlation between these two stocks is uncertain, but this relative performance itself is worth noting. Humana's business model largely relies on the high complexity of the government medical reimbursement system—historically difficult to audit on a large scale and systematically. In contrast, Palantir is being deployed more frequently to bring transparency to such projects.

This differentiation may be releasing a more macro signal: the market is repricing two types of companies, one that benefits from opacity and another that provides visibility and transparency. If AI-driven regulation and auditing ultimately become the norm in federal fiscal spending, then this structural change is likely to occur not only in the healthcare sector but across many more industries.

Humana Inc. can be considered the largest publicly traded company exposed to U.S. government medical spending, particularly centered around Medicare Advantage. Compared to its peers, Humana has the highest proportion of revenue and profits directly tied to the Medicare reimbursement formula, making it highly sensitive to CMS rate adjustments, audits, and policy changes, with almost no comparable entities.

When AI Meets Inflation: Why This is a Systemic Shift

Kevin Warsh has been calling for a "regime change" at the Federal Reserve for over a decade. But what does this really mean?

The answer begins with a completely different theory of inflation.

The dominant inflation models within the Federal Reserve are mostly based on the 1970s and have been used to this day. These models suggest that inflation arises from an overheating economy and rapidly rising labor wages.

Warsh completely denies this explanation. In his view, the root of inflation does not lie in wages but in the government itself—when the government prints too much, spends too much, and lives too "comfortably," inflation occurs.

This viewpoint is not a subtle expression but a position he has stated clearly multiple times.

This is the true "regime change." It is not about whether the Federal Reserve is hawkish or dovish, nor whether interest rates are raised or lowered by 25 basis points. The key is to completely rewrite the Federal Reserve's inflation analysis framework, shifting from a theory that attributes inflation to workers and economic growth to a framework that holds government spending itself accountable.

Things start to get interesting from here.

Warsh is also highly optimistic about AI. In the same interview, he pointed out that AI will lower costs for almost everything, and the U.S. is on the brink of a productivity explosion. He believes that the current Federal Reserve does not truly grasp this point and is instead constrained by outdated models, misjudging economic growth as inflation.

Thus, on one hand, Warsh sees AI as a structural deflationary force that will continuously lower costs throughout the economic system; on the other hand, he believes that the true source of inflation is excessive government spending and fraudulent activities—large amounts of money injected into the system without generating corresponding real output.

And these seemingly different judgments ultimately converge at the same point: Palantir.

In fact, this regime change is not just reshaping the Federal Reserve itself but is rearranging the entire framework through which we understand interest rates, the dollar, and global capital flows.

If Warsh's judgment is correct, that inflation primarily stems from fiscal expansion rather than supply-side shocks, then the traditional macroeconomic playbook will become completely ineffective.

In this framework, lowering interest rates no longer signifies a dovish stance but rather indicates that decision-makers are confident that fiscal discipline and AI-driven efficiency improvements are taking on the primary task of suppressing inflation. The Federal Reserve is no longer the opposite of fiscal constraints but its collaborator.

A Federal Reserve that refuses to monetize fiscal deficits while actively supporting the reduction of fraud and the compression of spending will create a monetary system that is entirely different from the environment priced by the market over the past decade.

On a global level, this is also significant. If the U.S. can demonstrate that AI can be deployed at scale to enhance fiscal accountability, including reducing waste, identifying fraud, and streamlining government operations, then this model will either be emulated by other developed economies or become something they must compete against.

The so-called AI arms race is not just about chips or model capabilities; it is about who can first reshape the relationship between government and the economy using AI.

Moreover, there is the deflationary force brought by AI itself. Warsh's position is very clear: he believes AI will lower costs throughout the economy, and we are on the eve of a productivity explosion, just that the current Federal Reserve has not yet truly realized this.

If his judgment holds, we will enter an unprecedented phase: structural forces are deflationary (productivity gains from AI), while the sources of inflation are directly targeted and suppressed (government waste and fraud). This will create an investment environment that has not been seen since the 1990s.

The old frameworks of thinking, hawkish vs. dovish, rate hikes vs. cuts, risk appetite opening vs. closing, are insufficient to explain the changes that are occurring.

The real question in 2026 is not what level the federal funds rate will land at, but whether this alliance truly has the capability to execute its grand vision.

How Will the Market Be Repriced After Institutional Implementation?

Kevin Warsh will become the next chairman of the Federal Reserve. The market may instinctively categorize him as a "hawk," but this understanding is not accurate. As we move into 2026, Warsh's policy stance will present more complex and structural characteristics.

Here are the main policy directions he may promote, along with the potential impacts of these changes on different asset classes:

• AI / Semiconductors ($NVDA, $MU): Extremely bullish
• Metals (Silver, Gold): Extremely bearish
• Crypto Assets ($BTC, $CRCL): Superficially contradictory, but actually bullish
• Banking and Financial Sector ($JPM, $BOA): Bullish
• Housing and Real Estate: Differentiated / Uncertain
• Renewable Energy: Bearish
• Small Caps ($RUT): Bullish
• Overseas Stocks:
• Japan, South Korea: Relatively resilient
• Emerging Markets (EM): Extremely pressured
• China and Hong Kong: Bearish
• Europe ($VGK, $EZU): Cautiously viewed

AI / Semiconductors (From NVIDIA to Micron): Extremely Bullish

Warsh is clear and consistent in being bullish on AI.

At the end of 2025, he publicly stated that AI is a strong structural "de-inflation" force. In his view, the productivity leap brought by AI can allow the economy to maintain high growth without necessarily pushing up inflation.

It is this judgment of "productivity prosperity" that provides a solid theoretical basis for him to support interest rate cuts while the economy has not yet significantly cooled.

("The Fed's Leadership Failure," The Wall Street Journal, November 16, 2025)

This sharply contrasts with the market's previous stereotype of him—previously, Warsh was often seen as a rigid, anti-inflation hawk emphasizing high interest rates.

Now, he not only supports interest rate cuts but also explicitly hopes to accelerate the implementation and expansion of AI.

Metals (Silver, Gold): Extremely Bearish

Gold has long been viewed as a hedge against a weakening dollar and excessive money printing. However, under Warsh's policy framework, this logic is being weakened.

He advocates for shrinking the Fed's balance sheet and ending "money-printing-style easing," which directly undermines the core rationale for holding gold. At the same time, a strong dollar further raises the cost of metals for international buyers.

It should be noted that the 33% intraday drop in silver was primarily driven by technical factors such as margin adjustments and chain liquidations; the influence of the new Fed chairman may only be a secondary driver.

Crypto Assets ($BTC, $CRCL): Superficially Contradictory, but Actually Bullish

Warsh has stated, "If you're under 40, Bitcoin is your new gold." In his view, Bitcoin is a legitimate value storage tool representing a generational shift from physical precious metals to digital assets.

He also highly praises blockchain, calling it "the latest and most disruptive foundational software," and believes that the U.S. must maintain a leading position in this field to sustain long-term competitiveness.

But the question is: if his stance is bullish, why are prices under pressure? The reason lies in the market's gradual realization that while Warsh supports lower policy rates, he simultaneously insists on balance sheet reduction and monetary discipline.

This has raised a new concern—perhaps we are entering an era of "rate cuts without accompanying QE." Loan costs may decrease, but the "liquidity flood" that has pushed Bitcoin to historical highs multiple times may not reappear.

Thus, a tension has formed: Warsh is optimistic about crypto assets in terms of technology and long-term trends, but his monetary constraints may suppress liquidity premiums in the short term.

Banking and Financial Sector: Bullish

With his background at Morgan Stanley and long-standing criticism of the "functional expansion" of regulation, Warsh has always been a preferred policy choice for the banking system. The market generally expects him to roll back some complex capital regulatory requirements (such as Basel III).

Analysts believe this will significantly benefit regional and small banks, as more capital will be released for real credit expansion.

Housing and Real Estate: Differentiated

Warsh advocates for significantly lowering the federal funds rate, which will directly reduce adjustable-rate mortgages (ARMs) and construction financing costs.

However, the risk lies in his clear opposition to the Fed holding about $2 trillion in mortgage-backed securities (MBS). Many economists warn that even if other rates decline, the 30-year fixed mortgage rate may still be pushed up to the 7%-8% range.

Renewable Energy: Bearish

Warsh plans to have the Fed withdraw from global climate-related organizations (such as the "Green Finance Network") and terminate climate stress tests imposed on banks.

Under Powell's tenure, the Fed encouraged banks to incorporate climate considerations into credit through regulatory guidance. Warsh aims to end this mechanism, effectively removing the "policy tailwind" that green projects previously enjoyed.

Small Caps: Bullish

Warsh has repeatedly emphasized that the Fed should refocus on the true drivers of the economy—small businesses and entrepreneurs, rather than "the overly protected large institutions on Wall Street."

He expects to push for a systematic rollback of banking regulations, which will directly benefit small caps. By alleviating the regulatory burden on small and medium-sized banks, the channels for small businesses to obtain financing will be significantly widened.

Overseas Stocks: Differentiated

Warsh's policy mix may create significant differentiation globally: one type of economy will benefit from U.S. growth and AI investment; another will be more easily suppressed by a strong dollar and tightening global liquidity.

Japan / South Korea (such as Samsung, SK Hynix): Relatively resilient, as they hold key physical bottlenecks in the AI and robotics industries, which are the productivity engines Warsh values.

In this context, a strong dollar becomes a competitive tool for them:

Export effect: Contracts are often denominated in dollars, significantly amplifying profits after currency conversion;

From the U.S. perspective, it appears "cheaper": A stronger dollar makes Japanese robots and Korean chips more price-attractive to U.S. companies, accelerating productivity gains while enhancing the profitability of these companies.

China:

A strong dollar will continue to exert pressure on the renminbi, limiting the operational space for monetary policy.

Emerging Markets:

The appreciation of the dollar significantly increases the burden of dollar-denominated debt, exacerbating risk exposure.

Europe:

A weaker euro benefits exports, but rising energy import costs pose structural constraints.

Last Friday, silver and gold plummeted, triggering hedging and de-risking behaviors, leading to a temporary tightening of liquidity.

The market may still simplistically categorize Warsh as a "traditional hawk," but from his recent statements, he appears closer to a "dove premised on AI" in the short term.

The current market is digesting a new combination scenario: interest rate cuts occurring alongside balance sheet reduction.

In this framework, trading logics from AI as a main line to small-cap growth are still considered to have continuity.