Pro Perspectives 4/11/24





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April 11, 2024

After yesterday's inflation report, we talked about the overreaction in markets. 
With a slightly hotter March CPI report, the rhetoric from the investment community surrounding the inflation picture, and the Fed's rate cut prospects, was irrational. 
This is a market that's gone from pricing in as many as seven quarter-point rate cuts this year, to five, to three.  And by the end of yesterday the Wall Street Journal said it was "now a matter of IF," the Fed will cut this year.
Of course, that mentality led to sell-offs yesterday across stocks, and bonds.  
That said, only twenty-four hours later the European Central Bank concluded its meeting on monetary policy (this morning). They (newly) introduced the possibility of rate cuts in the policy statement (likely June). 
Moreover, in the press conference Christine Lagarde (ECB President) admitted that there were members that wanted to cut rates today.
This is of particular significance, when evaluating the Fed path, because global central banks have been overtly coordinating policy — so closely, that they repeat the same language. The latest shared mantra has been the need for more "confidence" in the disinflation trend.
So, if there was concern that the stall in the U.S. disinflation trend was a signal that another inflation shock was coming, the ECB positioning this morning should offer some sanity.             
With the above in mind, yesterday's move in the Nasdaq was completely reversed today.  It was a rare dip to buy in the AI theme, and the investment community showed little patience when presented with the opportunity to buy at lower prices.
On that note, while interest rates and geopolitical noise continue to get most of the media attention, the technology revolution is moving at a sprinter's pace.
This week, Google hosted its annual cloud conference. 
It was all about AI and Google's (Alphabet's) developing AI ecosystem, and maintaining dominance in the age of generative AI.
Google unveiled its "most powerful, scalable and flexible AI accelerator" chip
Intel hosted it's Vision 2024 conference.  It featured a new AI chip called Gaudi 3, which is said to be capable of training large language models 50% faster than Nvidia's H100 chip, and 40% more power efficient. 
Apple announced an AI chip this week, to be in the new Mac PCs (an AI personal computer). 
And Amazon's CEO, Andy Jassy, published his 2023 Letter to Shareholders today.  He said, "generative AI may be the largest technological transformation since the cloud, and perhaps since the internet."  And they have AI chips
So, everyone has AI chips.  And that's good.  If Jensen Huang is right (Founder/CEO of Nvidia), the cost to "retool" the world's data centers to accelerated computing has already climbed from $1 trillion to $2 trillion (over the next five years).  
Given that Nvidia is supplying 90% of it (at the moment), and they've done under $50 billion in data center revenue over the past year, this global computing power transformation has a long way to go. 
There's a lot of demand to fulfill, and it's still very early. The $39 billion worth of Chips Act grants started deployment just three weeks ago.  And we should expect multiples of that amount, in private investments, that will follow the government money.
The next wave will be the tremendous potential for new businesses to form around generative AI, and for old businesses to adopt and realize the benefits of generative AI.
With all of the above in mind, as you know, I've been working on identifying and thoughtfully building a portfolio of companies on the leading edge of this transformation, in my AI-Innovation Portfolio.
We now have 17 stocks in the portfolio, since we launched in June of last year.
We started with a focus on AI infrastructure stocks.  These are the "picks and shovels" of this technology revolution.  And we've since added massive SaaS companies that will deliver the capabilities of generative AI to companies around the world.
We added the cheapest of the tech giants leading the technology revolution, and they own perhaps the most valuable data on the planet.
As for the industrial metaverse, we also own a pioneering infrastructure engineering software firm that's been leading metaverse technology since 2016.  It's founder led, with double-digit growth, high profitability, and high gross margins (already).  And this company is actively shaping the digital transformation that will drive the coming infrastructure/building boom.
Again, it's still early in this technology revolution. There are tremendous investment opportunities, in an era that has already brought us the multi-trillion dollar companies.  More are coming.
If you aren't yet a member, and you'd like to join us and get all of the details on these stocks and the rest of our portfolio, you can do so following the instructions below.
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