Nvidia Fans AI Tailwinds, ISM Data on Deck
The FOMC roster change takes the focus off today's December Fed meeting minutes
Equity futures are mixed this morning following two back-to-back days of gains. While a Santa Claus Rally failed to emerge, we are smack dab in the middle of another seasonal indicator - “the first five days.” The rationale behind this indicator is if stocks end the first five trading days of a new year with a gain, the market should see net gains for the 12-month stretch. Some view it as investors tipping their hands early in the calendar year but looking over the correlation analysis, the indicator’s performance means we’ll stick to following the data and thematic tailwinds.
The tailwinds for AI and our corresponding models for that as well as Digital Infrastructure were blowing hard last night in Las Vegas when Nvidia (NVDA) Jensen Huang gave his CES 2025 keynote. Huang offered a vision for how AI will spread through the economy and made several announcements, including working with Toyota (TM) and Uber (UBER)on autonomous driving solutions, Nvidia Cosmos, and a new desktop PC called Project Digits. From TVs and PCs to smartphones and other connected devices, AI is expected to be a hot topic at CES 2025 but seeds are being planted for future events with Samsung sharing its next Unpacked event will be held on January 22.
Upcoming data on jobs and wages
Coming up this morning, we’ll receive ISM’s December Non-Manufacturing PMI, the next ingredient to be incorporated into Q4 2024 GDP forecasts. Ahead of Friday’s December Employment Report and next week’s CPI and PPI readings for December, we’ll be reviewing what ISM’s findings say about job creation and inflation during the last month of 2024. Coming off other December Manufacturing and Services PMIs, today’s data should show the Services economy continuing otherwise carry the overall US economy. New order growth should point to a solid start for the economy entering the new year.
Alongside ISM’s findings, we’ll also get the November JOLTs data, which in our view is a bit rear-facing but there will be those that tear into it, looking for more color on the employment market. To us, the color to focus on will be in tomorrow’s December ADP Employment Change Report for what it shows not only for job growth but also wage pressures. Consensus expectations for ADP’s report peg job creation around 131,000, down from 146,000 in November. Complimenting those learnings will be Thursday’s Challenger Job Cuts report for December, and while many will be focused on the number of cuts, we’ll be much more interested in a few lines near the end of the report. That is where Challenger shares insight it collected on hiring plans.
Fed meeting minutes this afternoon, roster change means no biggie
We have no corporate earnings reports out today that will shape the market, but you will want to keep your eyes and ears open for any earnings pre-announcements. This afternoon brings the meeting minutes from the Fed’s December policy meeting, which are not likely to be revolutionary given the reconstitution of the Federal Open Market Committee(FOMC) that includes four new 2025 voting members. They include Boston Fed President Susan Collins, Chicago Fed President Austan Goolsbee, St. Louis President Alberto Musalem, and Kansas City Fed President Jeffrey Schmid. According to InTouch Capital Markets, Goolsbee is the only dove of the four.
Model Musings
Artificial Intelligence
“Investment in artificial intelligence medical note-taking apps doubled in 2024, as Big Tech giants including Microsoft and Amazon and start-ups race to grab a share of the $26bn AI healthcare market. AI start-ups focused on creating digital“scribes” for health professionals raised $800mn in 2024, compared to $390mn in 2023, according to data from PitchBook.” Read more here
“New survey research from leading global technology research and advisory firm Information Services Group (ISG)(Nasdaq: III ) finds enterprise leaders plan to increase spending on AI by an average of 5.7 percent in 2025, despite much more modest increases in overall IT budgets, and reinvest savings from cost optimization and productivity into AI-enabled transformation.” Read more here
Artificial Intelligence, Cybersecurity & Data Privacy
“The share of chief operating officers (COOs) who report that their companies have implemented artificial intelligence(AI)-powered automated cybersecurity management systems has increased threefold since earlier this year. The increase brought the share of such COOs to 55% in August, up from about 17% in May… They are moving to proactive, AI-driven frameworks — and away from reactive security approaches — because the new AI-based systems can identify fraudulent activities, detect anomalies and provide real-time threat assessments.” Read more here
Cash-Strapped Consumer
“Defaults on US credit card loans have hit the highest level since the wake of the 2008 financial crisis, in a sign that lower-income consumers’ financial health is waning after years of high inflation. Credit card lenders wrote off $46bn in seriously delinquent loan balances in the first nine months of 2024, up 50 per cent from the same period in the year prior and the highest level in 14 years, according to industry data collated by BankRegData. Write-offs, which occur when lenders decide it is unlikely a borrower will make good on their debts, are a closely watched measure of significant loan distress.” Read more here
Cloud Computing
“… healthcare providers are using the cloud to do everything from streamlining note taking to allow doctors more face time with patients to building entire virtual primary care clinics, executives from AWS and Inception Health told Fierce… Like with modern banking, the healthcare experience of Inception’s clinic is “by default digital” but is backed up by a stack of clinical professionals whom the patient can access by phone, video visits or in-person when necessary. All of this is built on AWS’ cloud services, which Somai said allows Inception to develop new tools and experiences in an“extremely secure environment” that exceeds the standards of even HIPPA requirements.” Read more here
Cybersecurity, Data Privacy
“Chinese hackers had gained the ability to shut down dozens of U.S. ports, power grids and other infrastructure targets at will, Jake Sullivan told telecommunications and technology executives at a secret meeting at the White House in the fall of 2023, according to people familiar with it. The attack could threaten lives, and the government needed the companies’ help to root out the intruders. What no one at the briefing knew, including Sullivan: China’s hackers were already working their way deep inside U.S. telecom networks, too.“ Read more here
“Chinese state-backed hackers have reportedly breached the Office of Foreign Assets Control (OFAC), a Treasury Department office that administers and enforces trade and economic sanctions programs…In a letter sent to Congress this week, the Treasury Department disclosed that Chinese government threat actors hacked its network in what it described as a "major cybersecurity incident" after breaching the BeyondTrust remote support SaaS platform.” Read more here
“The U.S. Treasury Department said a state-sponsored Chinese hacking operation was able to access third-party software to tap into desktop computers of Treasury employees in what the department is calling “a major incident.” Read more here
Digital Infrastructure
“Microsoft plans to invest $80 billion to build data centers in fiscal 2025, aiming to use them to power the development and use of artificial intelligence (AI). The company is doing so amid a “golden opportunity for American AI,” Microsoft Vice Chair and President Brad Smith wrote in a Friday (Jan. 3) blog post. More than half of this investment in AI infrastructure will be deployed in the United States, according to the post.” Read more here
“Taiwan's Foxconn, the world's largest contract electronics maker, beat expectations to post its highest-ever revenue for the fourth quarter on continued strong demand for artificial intelligence (AI) servers.” Read more here
Digital Lifestyle
“Online spending rose 3% to a record $1.2 trillion globally over the holiday period, with U.S.-sales, specifically, growing 4% to $282 billion. That’s according to a new report from Salesforce, which aggregated data from across its various cloud services, including Agentforce, Commerce Cloud, Marketing Cloud, and Service Cloud, to garner insights into spending activity spanning 1.5 billion shoppers across dozens of countries from November 1 through December 31, 2024.” Read more here
“The Circular Ring is a smart ring that offers fitness tracking capabilities in an extremely compact package. The second-generation model takes the concept further, with enhancement and more flexibility… For 2025, Circular also makes it easier to get the right fit via Digital Ring Sizing, ensuring the user gets the correct size from the start. Along with the previously available heart monitoring features, the Ring 2 adds an ECG capability as part of its enhanced sensing capability. The sensors are also claimed to be more accurate than before, giving users an even clearer picture of their health.” Read more here
Safety & Security
“Donald Trump’s team has told European officials that the incoming US president will demand Nato member states increase defence spending to 5 per cent of GDP, but plans to continue supplying military aid to Ukraine… At the same time Trump is to demand Nato more than double its 2 per cent spending target — which only 23 of the alliance’s 32 members currently meet — to 5 per cent, two people briefed on the conversations said.” Read more here
Recent Thematic Signals
January 6: The Week Ahead
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.