Jet fuel prices have roughly doubled since February in the wake of the Strait of Hormuz disruptions:

The damage is already showing up in airline stocks. Morgan Stanley cut earnings estimates across the sector and several airlines have begun raising bag fees and cutting capacity.

Per their annual filings, a one-cent increase in jet fuel per gallon costs American Airlines roughly $50 million annually, Delta about $40 million, and Southwest $22 million. Reuters estimates those three carriers plus United are looking at a combined $5.8 billion in additional fuel costs if prices remain at these elevated levels all year.

If history is any guide, airfares will follow. Analysis from Apollo’s Chief Economist Torsten Slok shows that US jet fuel prices have led airline fare CPI by about three months fairly consistently over the past 25+ years.

The current spike in jet fuel prices is among the sharpest in the data set. If the relationship holds and jet fuel prices don’t come down, airfare inflation could accelerate meaningfully by summer, right as travel demand hits its seasonal peak.

There’s a common misconception that the AI infrastructure buildout is mostly about training – the expensive, one-time process of building foundation models. But McKinsey’s data center demand model tells a different story.

By 2030, AI inference – the process of actually running models for end users – is projected to surpass training as the dominant AI workload, representing over 40% of total data center demand and growing at a 35% CAGR.

Training grows too (22%), but inference is the workload that compounds with usage. Every chatbot response, code completion, agent action, etc. is an inference call.

As AI products spread to hundreds of millions of users, inference will be the dominant AI workload. And all of that compute will need chips.

McKinsey projects the global semiconductor market will roughly double from $775 billion to $1.6 trillion by 2030, with computing and data storage accounting for 55% of all industry growth – dwarfing every other vertical combined.