Equity futures, which are being pulled lower by a pre-market decline in Nvidia (NVDA) shares, point to a soft market open later this morning. While Nvidia delivered October quarter results that topped market expectations, its January quarter top-line guidance of $36.75-$38.25 billion encapsulated the $37 billion consensus forecast but fell short of more lofty expectations near $40-$41 billion. Let’s keep in mind that with its January quarter revenue range, Nvidia is expected to deliver 66%-73% top-line growth. The transition to capacity-constrained Blackwell, Nvidia’s newest offering is weighing on margins but those are expected to rebound as the product matures.
What stood out to us for our Digital Infrastructure and Cloud Computing models was Nvidia’s data center revenue more than doubling year-over-year to $30.8 billion. While Wall Street may be somewhat disappointed by Nvidia’s guidance, the vast majority of signs point to AI adoption still being in the relatively early innings. With that in mind, we’d suggest you see today’s Artificial Intelligence model signals below.
As the market digests the implications of Nvidia’s results and earnings call comments, we’ll contend with a trio of Fed speakers today as we get ready for tomorrow’s November Flash PMI data from S&P Global. Following Target’s (TGT)sobering holiday shopping comp sales guidance and affirmation consumers remain selective, we’ll get another look at shopping expectations for the current quarter with results from BJ’s Wholesale (BJ), Gap (GPS), and Ross Stores(ROST) later today. Tallying expectations from those four companies and those from Walmart (WMT) earlier this week will clue investors into what Best Buy (BBY), Macy’s (M), Kohl’s (KSS), and others will have to say next week ahead of the Black Friday-Cyber Monday shopping weekend. Based on the comments received thus far, it is shaping up to be more of a Cash-Strapped Consumer holiday shopping season than a Luxury Buying Boom one.
When we parse today’s retail-facing comments, we’ll also be digging into quarterly results today from Construction Road Partners(ROAD) and Elastic (ESTC) for data points on our Rebuilding America and Artificial Intelligence models.
The next edition of Thematic Signals will be published on Monday, December 2. That’s right, we’re taking the Thanksgiving week off to rest up and recharge for the final push to the end of 2024. And yes, we will be collecting signals and other data points for our targeted exposure models to share with you when we’re back in the saddle.
Model Musings
Aging of the Population
“America’s senior population is growing, putting a strain on services for older U.S. citizens. A Northwest Florida expert says the state has the second largest population of people over 65 behind California. She says this is what has been called the “silver tsunami.”… “We’ll see in the next few years brings in terms of innovation and things,” Dyess says.”On one hand, there may be problems. On the other hand, we see innovation and all of the ways we could use technology,” Read more here
Artificial Intelligence
“Enterprise spending on generative artificial intelligence (AI) increased sixfold in 2024 as businesses began implementing the technology after first experimenting with it… Seventy-two percent of enterprise IT decision-makers from companies with 50 or more employees expect to see broader adoption of generative AI “in the near term” Read more here
“KPMG will spend $100 million over the next four years on its enterprise AI services. It’s part of an artificial intelligence (AI) partnership between the professional services giant and Google Cloud, Steve Chase, vice chair of AI and innovation for KPMG… He pointed to a poll of business leaders conducted by KPMG, which showed that 50% of companies planned to spend $100 million on AI projects in the next 12 months, with 20% planning to invest at least $250 million. Chase added that bookings for KPMG’s Google Cloud-related services have increased tenfold over the last two years.” Read more here
Artificial Intelligence, Cloud Computing
“According to market research firm Canalys, global spending on cloud infrastructure services [1.] increased by 21% year on year, reaching US$82.0 billion in the 3rd quarter of 2024. Customer investment in the hyperscalers’ AI offerings fueled growth, prompting leading cloud vendors to escalate their investments in AI.” Read more here
Cash-Strapped Consumer
“As economic uncertainty and rising costs continue to impact consumers, shoppers are more cautious with their spending, according to Target CEO Brian Cornell… “Consumers tell us their budgets are being stretched,” Cornell said Wednesday (Nov. 20) during the company’s third-quarter earnings call. “They’re becoming resourceful, focusing on deals, then stocking up when they find them. Consumers allow themselves to splurge a little bit when they find the right item.” Read more here
“Credit is getting harder to come by, especially for auto loans, mortgages and those with low credit scores… The Credit Access Survey released Monday (Nov. 18) by the Federal Reserve Bank of New York showed that demand — as in applications — was on par with previous readings. However, credit applications were rejected at a relatively elevated pace through this year and at the highest rate since the start of the survey in 2013.” Read more here
CHIPs Act
“The Biden administration announced it has signed a final deal to provide GlobalFoundries $1.5 billion to expand a chipmaking plant in Saratoga County and update a smaller plant in Vermont. GlobalFoundries will receive $1.375 billion to expand its plant in Malta, where it produces chips for cars, smart phones, artificial intelligence and military hardware.” Read more here
Cybersecurity, Data Privacy
“The holiday shopping season is here, and surging cyberattacks put retail operations at risk. According to VikingCloud’s 2024 Holiday Cyber Threat Survey , 80% of retailers have already experienced a cyberattack in the past year, with nearly all hit multiple times… According to retailers, cyber risks increase due to the surge in in-store and online shoppers, internal cyber workforce challenges, and the targeting of business-critical point-of-sale (POS)devices.” Read more here
Safety & Security
“The 15 largest European members of NATO will need to nearly double their annual military investment to $720 billion — adding $340 billion — to bolster capacity against Russia and offset the possibility of less US support under a Donald Trump presidency, according to a Bloomberg Intelligence report…” Read more here
The Strategies Behind Our Thematic Models
- Aging of the Population – Capturing the demographic wave of the aging population and the changing demands it brings with it.
- Artificial Intelligence – Software, chips, and related companies that facilitate the collection and analysis of large data sets and autonomous generation of solutions given non-machine language prompts.
- Cash Strapped Consumer – Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
- CHIPs Act – Capturing the reshoring of the US semiconductor industry and the $52.7 billion poised to be spent on semiconductor manufacturing.
- Cloud Computing – Companies that provide hardware and services that enhance the cloud computing experience for users, such as co-location, security, and edge computing.
- Core Holdings – Companies that reflect economic activity and are large enough to not get pushed around by day-to-day market trends. Low-beta, large-cap names able to better withstand economic turmoil.
- Cybersecurity – Companies that focus on protecting against the penetration of digital networks and the theft, ransom, corruption or destruction of data.
- Data Privacy & Digital Identity – Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
- Digital Infrastructure & Connectivity –The buildout and upgrading of our Networks, Data Storage Facilities, and Equipment.
- Digital Lifestyle – The companies behind our increasingly connected lives.
- Digital Payments – This model focuses on companies benefitting from the accelerating structural adoption of digital payments and financial technology (FinTech).
- EPS Diplomats – Profitable large capitalization companies proven to produce above-average EPS growth and provide investors with the benefit of multiple expansion.
- EV Transition – Capturing the transition to EVs and related infrastructure from combustion engine vehicles.
- Guilty Pleasure – Companies that produce/provide food and drink products that consumers tend to enjoy regardless of the economic environment and potential long-term health hazards associated with excessive consumption.
- Homebuilding & Materials – Ranging from homebuilders to key building product companies that serve the housing market, this model looks to capture the rising demand for housing, one that should benefit as the Fed returns monetary policy to more normalized levels.
- Luxury Buying Boom – Tapping into aspirational buying and affluent buyers amid rising global wealth.
- Market Hedge Model – This basket of daily reset swap-based broad market inverse ETFs protects in the face of market pullbacks, overbought market technicals, and other drivers of market volatility.
- Nuclear Energy & Uranium – Companies that either build and maintain nuclear power plants or are involved in the production of uranium.
- Rebuilding America – Turning the focused spending on rebuilding US infrastructure into revenue and profits.
- Safety & Security – Targeted exposure to companies that provide goods and services primarily to the Defense and security sectors of the economy.
- Space Economy – Companies that focus on the launch and operation of satellite networks.
The Strategies Behind Our Dividend Income Models
- Monthly Dividend Model – Pretty much what the name says – this model invests in companies that pay monthly dividends to shareholders.
- ETF Dividend Model – High-yielding ETFs that provide a range of exposures from domestic equities, international equities, emerging market equities, MLPS, and REITs.
- ETF Enhanced Dividend Model – A group of high-yielding ETFs that utilize options to enhance yield through collecting option income.
Don’t be a stranger
Thanks for reading and if you have a suggestion for an article or book we should read, or a stream we should catch, email us at info@tematicaresearch.com. The same email works if you want to know more about our thematic and targeted exposure models listed above.