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Low-K Consumers Are Falling Behind… 5 Trillion Reasons Wall Street Doesn’t Care… What Will Spark the Reckoning… Watch the Rising Anti-AI Legislation… Exactly When It’s All Over
Two weeks ago, the University of Michigan Consumer Confidence Index fell to 48.2 — the lowest reading in the survey’s 74-year history.
This is a lower reading on consumer confidence than it was during the Great Financial Crisis. Less than the dot-com crash. And less than every recession in modern American history.
Meanwhile, last week, AI semiconductor company Cerebras Systems went public at a valuation of $100 billion after being oversubscribed 20 times.
In contrasting this massive IPO with the gloomy sentiment report, our technology expert Luke Lango, editor, said: Innovation investorHe put it clearly in his daily notes:
This (Cerebras IPO) is America’s second. She had no idea that the first America existed.
He’s right.
But for AI investors, understanding why it’s true — and when it will stop being true — is the most important question for a portfolio over the next three years.
First America: The Diagnosis
Let’s start with the data…
normal digest Readers are familiar with our K-shaped economy, where low-income households face a radically different financial reality than their asset-owning counterparts. This picture has gotten materially worse since we last covered it here.
According to the Federal Reserve Bank of New York’s quarterly Household Debt Report, in the fourth quarter of 2025, overall household debt delinquency rates reached 4.8% — the highest level since 2017. The pressures are almost entirely concentrated in low-income borrowers.
On the other hand, the subprime car market – one of the most trustworthy canaries in what we call the Lower Kenan economy and associated with what Locke calls “America First” – seems a bit quiet these days.
More than 6% of subprime auto loans were at least 60 days past due, the highest rate ever recorded in Fitch data dating back to 1993. Vehicle repossessions reached 1.73 million vehicles last year, the most since 2009.
Meanwhile, A PYMNTS INTELLIGENCE A survey conducted in early 2026 found that need-based paycheck-to-paycheck living has overtaken choice-based living for the first time – meaning financial pressure, not lifestyle, is now the dominant explanation.
This is not a soft patch – it is structural pressure.
America II: Why doesn’t it bother Wall Street so much?
This is where most coverage of the K-shaped economy goes wrong…
The typical framework is that Wall Street ignores the Lower-K data. This is not entirely true.
The more accurate reading is that Wall Street is accurately pricing the economy as the lower-tier consumer has become structurally less important to corporate profits. It’s less “cruel” and more “calculating.”
The multi-billion-dollar, AI-driven capital spending loop that I regularly highlight – the engine that drives the Upper Kentucky/“Second America” economy – does not pass through fast-food customers or subprime auto borrowers. It is implemented through enterprise contracts, sovereign AI deals, and hyper-sized balance sheets.
So, what is the status of this tsunami of money flow?
Bloomberg Intelligence It forecasts cumulative AI capital spending of $5 trillion over five years. For context, that’s more than the entire UK’s GDP.
Back to Luke:
The AI economy has achieved a complete structural break from the consumer economy. The Iran war did not slow it down. The decline in consumer sentiment at all is not slowing it down.
The only economic variable that impacts building AI is whether Nvidia is able to manufacture enough chips and whether the grid is able to provide enough power.
Everything else is noise.
So, for now, if your portfolio is positioned in the right tier of AI trading, this low lag/“America first” is pretty much just background noise.
But the thing about structural segregation is that it doesn’t last forever. History indicates that economic balances that have become unbalanced to this extent do not remain that way.
What brings that back into alignment is not always the markets…
Sometimes it’s politics.
What could end AI trading?
So far, the long-awaited wave of mass unemployment due to AI has not materialized.
This may change, but my hunch is that it will. But it doesn’t have to happen – at least not to trigger a political backlash that ultimately threatens AI commerce. It just takes enough people feeling enough economic pain and then connecting that pain to AI.
Enter your electricity bill…
According to the nonprofit Power Lines, electricity and natural gas bills were among the biggest drivers of inflation last year, rising 7% and 11%, respectively. Utilities have requested a record $31 billion in rate hikes in 2025 — more than double the amount requested in 2024.
Here’s Charles Hua, CEO of PowerLines:
There are millions of Americans who only pay 10% to 20% of their income on their utilities, which is unfathomable to the vast majority of Americans.
This turns data centers into a kitchen table political issue.
Take Pennsylvania’s Democratic Governor Josh Shapiro — a 2028 presidential candidate. He initially embraced the data center boom in his state. Then popular resistance escalated.
In his February state budget speech, he reversed course:
We need to be selective about the projects that are built here.
I know Pennsylvanians have real concerns about these data centers and the impact they could have on our communities, our utility bills, and our environment.
Me too.
It won’t stop with Shapiro in Pennsylvania.
Here he is, talking to luck:
You could argue that utility bills will play the most prominent role in this year’s national election, and perhaps in any other election in American history.
The AI boom is being fueled in part, on a monthly billing cycle, by the same lower-class households already stressed by gas prices, negative real wages, and high delinquency rates.
This generates a specific personal complaint. Specific personal grievances are often transformed into votes.
The backlash moves from complaint to legislation
This morning brought the following headline from The Wall Street Journal:
Here is the subtitle:
Back in February, Axios I surveyed the landscape and found that just 7% of Americans believe AI will increase jobs — statistically unchanged from the previous fall, meaning the growing visibility of the boom has done nothing to ease fears of displacement.
But feelings – although very important – are no longer the main story. This is what feelings become when they crystallize…
legislation.
In the first six weeks of 2026, more than 300 data center bills have been introduced in more than 30 states — a clear shift from incentive-focused policies to regulatory oversight.
No state has yet enacted a statewide data center moratorium, though Maine came the closest, passing one through both chambers before the governor vetoed it in April.
But the movement is finding a foothold at the local level. The city of Seattle announced a 365-day emergency moratorium last week, leading to this headline from the Seattle Times:
Denver and Minneapolis are voting on their own moratoriums this week. Camden County, Georgia, issued a nine-month ban on May 5.
According to Good Jobs First, public opposition has already blocked or delayed $156 billion in data center projects across 40 states in just over a year.
The direction of travel is clear.
And since we mentioned AI and “jobs,” let’s cover that as well…
The California Federation of Labor has pledged to support more than two dozen labor protection bills related to artificial intelligence this year.
California’s SB 951 would amend the state’s WARN law to cover AI displacement, requiring 90 days’ advance notice of automation-related layoffs as well as disclosure of the specific AI system used.
California’s AB 2027 would prohibit employers from using worker data to train artificial intelligence systems designed to replace those same workers.
This latest bill, in legislative form, is a direct response to the “train your replacement” dynamic I highlighted in our report May 5 digest – Intentional workflow documentation programs that preceded the layoffs of 30,000 Oracle employees and 8,000 Meta employees this spring.
Put it all together, and here’s where this backlash takes us:
The force that could derail the AI boom is not technological failure, a collapse in demand, or even a recession.
It’s politics – specifically, the populist backlash against AI, that has already begun to build momentum, fueled by the growing economic pains hitting American families right now.
So when does all this hit your wallet?
Luke expects close to the 2028 presidential election cycle.
His case rests on three compound pressure points: rising energy costs from the construction of data centers that directly impact residential electricity bills… accelerating AI-driven layoffs among major employers… and widening wealth inequality that is clear, measurable and personal to the families who suffer from it.
By 2027, anti-AI messages will become the dominant political narrative, Locke says. This will lead to legislation to limit AI – taxes, restrictions on building data centers, and labor displacement provisions.
This, according to Luke, happens when the curtain falls:
This is the scenario that ends the AI boom. It is not a long-term risk.
Earn your money now.
The opportunity to create transformative wealth in this AI cycle is the next two to three years.
This is not a bear call. It’s the opposite – a short call with a specific expiration date. As Luke said:
This trade won’t last forever. Like everything, it has an expiration date.
To find out how Luke plays the AI trade while the window is open — including his latest research on what he believes could be Elon Musk’s most ambitious project yet (no relation to Tesla or SpaceX) — Click here for full view.
As we begin to conclude, there are two things to consider
The first can speed up this trade, while the second can slow it down considerably.
Locke’s political clock vision – the fact that savvy investors can now see the 2028 timeline coming – may actually be pulling capital and returns forward.
If the window closes in two to three years, the rational response is to accelerate it now, not roll it back. This is part of what you’re seeing in Cerebras’ oversubscription, SpaceX’s IPO waiting list, and the latest… The opportunity related to Tesla that Luke found: The race of capital to obtain its positions before friction arrives.
Seeing the clock does not slow down the trade. It just intensifies it – until that doesn’t happen.
Meanwhile, the other issue is the wildcard – or perhaps we might call it the “Trump” card…
In March 2026, the White House published a National AI Legislative Framework calling for Congress to preempt state AI laws that “impose undue burdens” – a direct attempt to neutralize California’s bills, the data center moratorium, and the entire statewide wave before it reaches critical mass.
If this preemptive federal push succeeds, Locke’s political clock will be extended considerably.
We will continue to track both.
So, what does all this mean for your wallet today?
The business of artificial intelligence – which is now catching its breath – is starting to work. The capital expenditure cycle is healthy and growing. It appears that what Luke called “the summer of artificial intelligence” has already begun.
But this is not a forever trade…
Lower-K’s deteriorating financial health does not pose a risk to AI trading today. But it is the flame of tomorrow.
On the other hand, rising electricity bills, stagnant wages, unprecedented delinquencies, and absolutely low morale – none of this threatens Anthropic’s Google Cloud deal or Cerebras’ IPO. But it creates the conditions when political anger is sparked and ignited.
Luke’s bet: It will happen around 2028.
The Americas. One trade. And the clock is ticking.
I wish you a good evening,
Jeff Remsburg
Note: As the political clock ticks on AI trade, Louis Navellier focuses on what’s happening now…
He believes a rare window is opening into a corner of the market that most investors are completely ignoring thanks to the Federal Reserve and its new chairman, Kevin Warsh.
In his country View the latest researchLewis explains exactly what his system sees and why timing is important, and he even shares a free stock pick tied to this opportunity.
We’ll be taking Lewis’ research video offline tomorrow, So if you want to catch it before it comes out, this is your chance.
