More irrational than the shoe company example but admittedly not as embarrassing

 

pretty depressing that there's basically nothing a company like Ford can do on the car business side of things to get a 25% stock bump, but say you're putting CATL cells in a box for data centers and boom

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— e.w. niedermeyer (@niedermeyer.online) May 14, 2026 at 11:19 AM

 

This is another one of those cases (and they have gotten awfully common over the past year or so) where simply running the numbers shows there is simply no way that a certain market move can be considered rational.

For a company like Ford, which, to put it in technical terms, is really big, it is extremely difficult for a new product line to substantially increase the reasonable valuation of the company.

With smaller companies, it is at least possible to justify huge relative increases in valuation. If a third-tier construction company announced it was going into the data center business, there are at least plausible scenarios where you would see a manyfold relative increase in revenue. It's the classic big-denominator-versus-small-denominator question.

You're probably saying at this point, "But the amount of money being spent on data centers is so unprecedented that it could move the needle even for the biggest of companies." That's true, but there are a couple of things we need to keep in mind. First, we need to distinguish between the amount of money currently being spent, the amount of money being invested but not yet spent, and the amount of money companies are proposing to spend. All of these numbers are huge, but they grow progressively more huge as you go down the list. Add to that the pervasive circular financing and creative accounting that defines the industry. (Things have gotten so bad that the CFO of OpenAI no longer reports directly to the CEO. That can't be good.) The upper bound of the numbers you've been hearing about depends on these companies raising hundreds upon hundreds of billions of dollars in the next three years. If that does not happen, the potential market is much smaller.

Even more important, Ford is talking about becoming yet another player in a highly competitive, relatively small sliver of the data center business. Most of the cost of these centers goes to GPUs, with power coming in second or third. Furthermore, most of the money spent on power goes to generation, not storage.

Don't get me wrong, in absolute terms we are still talking about a lot of money, but in relative terms, for a company with revenue of close to $200 billion a year, there is simply no way to justify the bump we saw in the stock.

This is the culmination of a decades-long trend of increasing market irrationality, originally driven by bubbles, deregulation, and demographics, becoming truly dangerous during the post-financial-crisis asset bubble until it reached its current febrile state, where the dumbest of dumb-money retail investors determine the direction of the markets.

This will end badly, and the longer we have to wait for the crash, the worse it's going to be.