TMTB EOD Wrap
Good afternoon. QQQs -2% driven by continued weakness in semis. On the macro front, CPI came in a bit cooler, Trump’s Iran rhetoric vs. Iran was pretty hawkish which had Oil +4% and yields up 1-3 bps across the curve, as market continues to price in 25bps worth of cuts this year.
The main debate today in AI semis was around Token Optimization as the chart below as being passed around:
What exactly is the “Token Expenditure Index” and why does it matter? It’s basically a usage weighted average price per million tokens, which is supposed to capture the market’s marginal willingness to pay for frontier models. Here’s Claude explaining things:
It’s unclear to me - and others - how accurate this index is. But technicals and semis were weak today so lots of eyes on it today. I spent some time trying to figure out what moves this index and had Claude annotate it for me. This is a bit detailed, but the logic seems to hold up at first glance:
So conclusion is we should likely see a turn in the next couple weeks assuming demand holds up amidst the Fable/Mythos price increases. Still, I’m not convinced this index by itself can tell us anything useful without any more detail. It measures spend divided by tokens and Silicon Data publishes neither so tough to tell which side of the equation is driving things. This illustrative example from Claude shows us how the index can change with 3 drastically different interpretations:
The counterargument? This chart also going around today:
Ramp's spend-per-employee data through May 2026 is up and to the right across the entire distribution. If total wallet is rising while blended price per token falls (Ramp's data shows average cost per million tokens across major providers dropped from roughly $10 to $2.50 in a year), then token volume is arithmetically exploding.
The Token optimization debate has definitely heated up after many realizing tokenmaxxing without a focus on ROI wasn’t the smartest thing to do. UBS’ Karl Keirstead had a good note after doing a round of checks earlier this week on it, explaining how enterprises are thinking about: