by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with our take on the latest progress in US-Iran negotiations. We then turn to AI, focusing on rising compute costs and what they mean for the pace of adoption. Next, we briefly discuss the EU’s push for greater control over critical supply chains and France’s unexpected economic contraction. We also include, as always, a review of recent domestic and international economic data.

New Deal? The United States and Iran have agreed to extend their ceasefire by 60 days, following Treasury Secretary Scott Bessent’s announcement that both sides have reached a preliminary framework for a deal that could reopen the Strait of Hormuz. While the agreement still requires approval from President Trump, it represents the clearest signal to date that the two parties are nearing a broader resolution. Markets have responded quickly to the development, with oil prices easing and Treasury yields falling.

• The White House appears increasingly confident that a deal is close. While details remain limited, Bessent has emphasized that any agreement must meet three core conditions: the reopening of the Strait of Hormuz, Iran relinquishing its enriched uranium, and a full cessation of its nuclear program. In addition, the US is insisting that all transit through the strait remain free of tolls.
• Iran has thus far negotiated in good faith, pressing for the release of approximately $24 billion in frozen assets as part of any agreement. It is also seeking an end to Israeli strikes in Lebanon and some degree of influence over maritime traffic through the strait. On the nuclear front, Iran would prefer to retain its enrichment program but has signaled a willingness to transfer enriched material to China or Russia as a potential compromise.
• The interim deal now awaits President Trump’s final approval, with reports suggesting he intends to take several days to review the terms despite markets already largely pricing in a green light. Following Bessent’s announcement, WTI crude fell below $90 per barrel for the first time in over a month, while the 10-year Treasury yield declined nearly 10 basis points to 4.43%. These moves reflect growing market confidence that a resolution to the conflict could alleviate the supply chain disruptions triggered by the escalation.
• While markets appear confident that a deal will be reached, we remain more cautious. Although the president typically welcomes market reassurance, he has also shown a preference for securing a clear, tangible win — something this framework may not fully deliver. We are cautiously optimistic that cooler heads will prevail. However, a rejection of the deal would likely trigger a sharp market reaction and could raise the risk of renewed escalation.

AI Costs: More firms are beginning to rein in AI spending as usage costs increasingly pressure budgets. On Thursday, Amazon announced plans to dismantle its internal AI leadership board in an effort to discourage the use of AI for its own sake rather than for clear productivity gains. The move follows internal findings that some employees were deploying AI for low-value or unnecessary tasks — a trend increasingly referred to as “tokenmaxxing.” This shift toward tighter controls suggests that the pace of AI adoption may be slowing as firms look to rein in costs.

• As AI adoption has accelerated, providers have periodically struggled to keep up with demand given finite computing capacity, leading to the use of quotas and rate limits to manage usage. Anthropic, for example, initially tightened Claude Code limits in response to “unprecedented demand,” but more recently has been able to raise those limits significantly after securing additional compute capacity through a new partnership with SpaceX and other cloud providers.
• Another sign that AI costs are mounting is the trend of companies moving toward public markets. This shift will likely force these firms to prioritize profitability over aggressive market share expansion. Anticipated IPOs from industry leaders like OpenAI, Anthropic, and SpaceX could provide a necessary capital influx; however, these moves will also subject the companies to intense public scrutiny regarding revenue targets and fiscal discipline.
• Despite the hype around AI, questions remain about its ability to generate robust returns on investment. A widely cited MIT study released in August 2025 found that more than 95% of surveyed firms had yet to demonstrate a positive ROI from their AI initiatives. A follow‑up report from PwC in January indicated that 56% of CEOs saw neither higher revenues nor lower costs from AI over the prior 12 months, and only about 12% reported achieving both outcomes.
• AI still appears poised to be a positive force for the economy and markets over time, but we are increasingly focused on the buildup of related risks. Rising implementation and infrastructure costs, in particular, could slow future adoption and make it harder for AI providers to deliver on today’s lofty expectations. In this environment, it remains sensible to maintain broader tech exposure, while continuing to monitor concentration and valuation risks.

EU Chip Takeover: The EU is weighing emergency powers that would allow it to compel chipmakers to override existing contracts in times of crisis. The proposal is intended to reduce the bloc’s vulnerability to economic coercion from the US and China, given Europe’s heavy reliance on imported semiconductors. It also follows the Dutch government’s controversial intervention involving chipmaker Nexperia and underscores how, in a less globalized world, governments are likely to take a more active role in strategic sectors of the economy.

France Contraction: The French economy unexpectedly contracted in the first quarter. According to the national statistics office Insee, GDP fell 0.1% quarter‑on‑quarter, weighed down by weaker exports and soft domestic demand. While some observers view the decline as a one‑off that could be reversed in the second quarter, concerns persist that France’s rising debt burden, new US trade restrictions, and the energy shock linked to the conflict in Iran could pose additional headwinds to growth.

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