He says that Apple might have an AI trick up its sleeve.

Investors were relieved to hear that Scott Bessent will be President-elect Donald Trump’s choice for Treasury secretary. They hope that the hedge fund manager will make the new president’s policies less controversial.

But the stock market’s great performance this year has less to do with Trump and more to do with hopes for AI. Lux Capital invests in AI-focused companies like Together AI and Hugging Face. In its most recent letter to shareholders, the New York venture capital firm talked about how AI is hungry for power.

“The biggest AI clusters today have about 100,000 Nvidia H100 chips and use about 100 megawatts of power.” “By next year, clusters will have between 300,000 and 500,000 chips, which will use about a gigawatt of power, or the same amount as a small city,” the company said. Because of this, “the tech giants who built empires on weightless bits and bytes are now grappling with atoms—steel, copper, water rights, and most importantly, natural gas,” the company says.

Some deals have been made to use nuclear power for AI, but Lux said that “abundant natural gas from the Texas Permian seems a wiser bet” to meet the needs of AI.

Businesses need to do more with less, the company said. Along with talking about the company’s book, Together AI makes software to make generative AI tasks run more quickly. Lux also talked about Apple Inc. AAPL 1.10%. “Apple has quietly put out research that shows how to run big language models directly on devices with little memory.” The company can cut memory needs by half while keeping speed the same by using new storage methods and the fact that AI models are naturally sparse. The company said that these kinds of advances could make it possible for future iPhones and Macs to run complex AI models locally and privately. This could completely change the way AI technology works.

As for the market as a whole, it said that stocks, gold, and bitcoin are all trading near record highs, banks are making a lot of money, and credit markets haven’t broken. This led it to the conclusion that the cost of capital will stay “higher for longer,” no matter what the Federal Reserve does.

It had earlier said that up to half of venture capital firms would leave the business. Now, the “inferno” is spreading faster than it thought, with 25% of active investors from 2023 already gone and 40% of general partners canceling or delaying raising money for a new fund.

The markets

Before Wall Street opened, U.S. stock futures ES00 0.50% NQ00 0.32% kept going up, while bond yields TMUBMUSD10Y 4.290% and the dollar DXY -0.76% went down.