Salesforce Sinks, GDP Expectations, Costco, Dell, Marvell After the Close
Plus why we're not so focused on tomorrow's April core PCE data
US equity futures point to a rough open later this morning as the market digests quarterly results from Salesforce (CRM)that left many wanting and getting ready for the second print for 1Q 2024 GDP. While Salesforce lifted its bottom-line expectations, the company shared it expects deal compression and slowing projects in the professional services business through the current fiscal year. Inside the updated 1Q 2024 GDP figures, headline GDP is expected to fall to 1.3% from 1.6% but the core PCE Price component is seen rising to 3.7% from the initial 3.4% figure.
While those figures are a bit rear-facing, and we would argue tomorrow’s April core PCE figure will have a greater impact on Fed rate cut timing, it’s all a bit overshadowed by yesterday's latest Fed Beige Book that found “prices increased at a modest pace” over the April to mid-May reporting period. For our money this means the inflation insights coming in next week’s May PMI reports from ISM and S&P Global will be more insightful, but we recognize the market will still take more than a passing interest in the Fed’s preferred inflation metric. The current market consensus sees the April core PCE price index matching March’s 2.8% figure.
Even though that aspect of the April Personal Income & Spending will be the focal point, we doubt the market will gloss over the findings on income and spending given the importance of consumer spending on the overall economy. The market will also be focusing tomorrow on China's latest NBS Manufacturing and Non-Manufacturing PMI data, looking to see if stimulative efforts are paying off.
Companies reporting today include Best Buy (BBY), Kohl’s (KSS), Costco (COST), Dell (DELL), Marvell (MRVL), Nordstrom (JWN), Ulta Beauty (ULTA), and Zscaler (ZS). We’ll be mining the results and conference call comments for our Artificial Intelligence, Digital Infrastructure, Consumer Inflation Fighters, Cybersecurity, and Luxury Buying Boom strategies.
Model Signals
Aging Population
“From now until 2050, the number of people 60 years or older will double to nearly 2.1 billion, making up 21% of the global population, according to projections from the World Health Organization.” Read more here
Artificial Intelligence
“The tech labor market is in an unbalanced state. There is demand for a specific type of tier-one AI talent—namely those who have the technical knowledge or experience working with large language models, or LLMs, that fuel chatbots with the ability to generate content. There are companies seeking candidates with those skills, but not enough workers who are qualified to do them. Then there is everyone else.” Read more here
“Arm Holdings on Wednesday unveiled new chip blueprints and software tools to help smartphones handle artificial intelligence tasks, along with changes to how it delivers those blueprints that could help speed their adoption… Arm launched new designs for central processing units (CPUs) that it said are better suited to AI work and new graphics processing units (GPUs). It will also provide software tools to make it easier for developers to run chatbots and other AI code on Arm chips.” Read more here
Artificial Intelligence, EV Transition
“New AI tools could give utilities real-time data to make the power grid and EV charging more reliable, a very small study by the University of Michigan Transportation Research Institute (UMTRI) and startup Utilidata suggests. The researchers are using AI to analyze EV charging behavior, hoping those insights might improve the experience for drivers and help utilities prepare for the spike in electricity demand.” Read more here
Cybersecurity
“The FBI said it has dismantled what is likely the world’s largest botnet — an army of 19 million infected computers — that was leased to hackers for cybercrimes. The botnet, which was spread across more than 190 countries, enabled financial fraud, identity theft and access to child exploitation materials around the world…” Read more here
“Over 60% of vulnerabilities discovered in network and security appliances in 2023 were exploited as zero days, according to a new Rapid7 report. This follows a broader trend of attackers being adept at exploiting vulnerabilities before a patch has been released. The researchers found that more mass compromise events arose from zero-day vulnerabilities than from n-day vulnerabilities in 2023 (53% vs 47%).” Read more here
Digital Infrastructure
“Raxio Group, a data-center company backed by global investor Meridiam Infrastructure Partners SAS and US private equity firm Roha Group, is opening its first facility in Mozambique as part of its $290 million investment strategy in Africa… Tech giants such as US-based Microsoft Corp. and China’s Huawei Technologies Co. have been investing in data centers on the continent in recent years as demand for better connectivity, artificial intelligence capability and storage increases.” Read more here
“Google committed to making $2 billion in investments in Malaysia, including developing its first data center and a cloud facility. The pledge marks Google’s largest planned investment in the Southeast Asian nation…” Read more here
“Singapore aims to increase the amount of power it allocates for data centers by as much as 35%, according to Janil Puthucheary, senior minister of state at the Ministry of Communications and Information. The city-state will free up about 300 megawatts of capacity in the short term via resource allocation and efficiency enhancements, with possibly another 200 megawatts to come through partnerships with clean energy providers…” Read more here
“Former aircraft hangers at Blackpool Airport are set to be converted into a high-performance data center campus in Blackpool, the UK. According to a report from The Business Desk, civic leaders in Blackpool are now looking for data center operators to run the project - named Silicon Sands. The first data center is set to begin construction next year on a cleared area of land. Work is also progressing to relocate and rebuild old hangers closer to the main runway.” Read more here
EV Transition
“Volkswagen is aiming for its new low-cost electric vehicles to debut in 2027. The new affordable VW EVs are expected to be priced around $21,800 (20,000 euros). Read more here
“Another low-cost electric vehicle is headed to the US. According to Stellantis CEO Carlos Tavares, Jeep plans to launch a $25,000 EV in the US “very soon.” Read more here
“Airbus will work with hybrid-electric aircraft developer Aura Aero after the two companies signed a new cooperation agreement. Through Airbus’ subsidiary Airbus Protect the collaboration will look to help with the certification process of Aura Aero’s regional transport 19-seater hybrid-electric aircraft named Era.” Read more here
Luxury Buying Boom
“Last year, China's demand for gold jewelry rose 10% from 2022 to 630 tons acquired, making the country the world's largest buyer of the commodity, according to the World Gold Council. China's demand for gold jewelry softened in the first quarter of this year because of the surge in gold prices but still held up well, according to the council… Chinese consumers are still expected to retain their appetite for gold.” Read more here
Nuclear & Uranium
“The White House on Wednesday plans to announce new measures to support the development of new U.S. nuclear power plants, a large potential source of carbon-free electricity the government says is needed to combat climate change. The suite of actions, which weren't previously reported, are aimed at helping the nuclear power industry combat rising security costs and competition from cheaper plants powered by natural gas, wind and solar.” Read more here
Space Economy
“Starlink, a unit of Musk’s rocket-ship endeavor SpaceX, operates more than 5,000 satellites that provide high-speed internet to close to 2.5 million people in places that, until recently, couldn’t easily access the web. Musk accomplished this in a relatively short period of time…” Read more here
“AST SpaceMobile and Verizon have announced a strategic partnership with a commitment of $100 million from Verizon, to provide direct-to-cellular AST SpaceMobile service when needed for Verizon customers in the US.” 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.
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.
Consumer Inflation Fighters - Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
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.
Digital Infrastructure & Connectivity -The buildout and upgrading of our Networks, Data Storage Facilities, and Equipment.
Data Privacy & Digital Identity - Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
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.
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.
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.
Precision Ag & Agri Science – Companies that look to address shrinking arable land by helping maximize crop yields utilizing technology, science, or both.
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 below.