Posted: July 31, 2026, 12:09 pm

Microsoft’s Big Day

We realize not all our readers will remember October 19, 1987, but if you are of a certain age, you remember the day as Black Monday. It’s the day the stock market crashed and was the headline on every news cast and front page in every newspaper the morning after. People cried on television, deaths were attributed to the crash, and calamity hung in the air- how’s that for drama? On that day, roughly $500 billion in market cap was erased on the New York Stock Exchange as the index closed down 508 points or 23%.

The 1987 market crash is interesting, but why the history lesson? Context. This week Microsoft reported earnings and rallied $480 BILLION worth of market cap, or almost the equivalent of the entirety of the DJIA 87 crash. As an aside, in October 1987, Microsoft had been a public company for about 19 months and lost roughly $600 million in market cap that day.

The reason we bring up Microsoft (MSFT) and it’s historic daily increase is in the “why”? Sure MSFT showed growth in cloud and it’s other business lines, sure EPS guidance was inline to above expectations, but what really sparked the rally was their muted commitment to AI spending. We’ve written about data centers on these pages to the point of this darn near turning into an investment letter on the sector, but it’s relevant because you can’t talk about data centers without electricity. We’ve talked about the tide seemed to be turning as indiscriminate spending on data centers was starting to be questioned. While there were plenty of earnings reports this week that included spending plans on data centers, it’s fair to assume the market has spoken on some of this stuff. An actual business case might be a new requirement.

Generation Growth Math

While we are on the data center topic, the growth estimates that get thrown around are something that stick in our craw. This week Bloomberg released a report that their baseline data center energy demand will be an additional 195GW by 2035. Currently the US grid runs consistently on 500GW. This reminds us of the Net-zero discussions of a few years ago where simple third grade math would deem the idea nonsensical. With current processes and financing appetite, the plausible argument to increase the grid capacity almost 50% seems iffy at best. It certainly can’t happen one solar project at a time. This calls for big baseload projects which would have needed to be under construction yesterday. We aren’t arguing the demand won’t be there, but if we were betting, we’d put our money on some sort of Moore’s law and expect compute power efficiency to be the answer, not enormous generation growth.

Natural Gas Market Commentary

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After holding steady for most of July, natural gas futures broke to the downside on Monday and remained suppressed through the end of the week. The August 2026 NYMEX contract expired on Wednesday at $2.725 per MMBtu, marking a significant drop from the July settlement and the lowest contract expiry since November 2024.

Market participants continue to largely shrug off widespread heat in the forecasts, as storage inventories have weathered the summer heat so far while maintaining a healthy surplus to the five-year average. Yesterday’s storage report showed the smallest build of the season to date, and even smaller additions are anticipated in the weeks ahead. However, smaller builds are not unexpected during this stretch of the summer. The market remains more focused on the fact that power-generation demand continues to trail recent years, while LNG export demand has softened due to maintenance and seasonal factors. Hot weather along the Gulf Coast also tends to limit liquefaction demand, as elevated ambient temperatures reduce the efficiency of the process.

Although the risk of extended heat remains, the approaching shoulder season is coming into sharper focus with each passing week. September gas is now at the front of the curve, and demand will soon begin trending lower into the fall. Barring an unexpected shift in fundamentals, the path of least resistance for natural gas futures appears to have moved to the downside.