AI Stocks, NVIDIA Earnings & the Bond Market

0:00Welcome to the Protect Your Assets Market Briefing. I'm David Hollander, your host, now let's get started. So good question. Do you need to AI-proof your portfolio? The markets this week, after Nvidia had such great earnings, the Dow was off 1.3% still positive for the year, almost 2% up. MP 500 off about 4, 4 tenths of 1%, barely up this year, and the NASDAQ, pretty tough, weak down 1% off 2.5% for the year. The MSCI International continues to trend ahead up 0.7%. You're today, we're at 9.4%, 10-year treasure yield broke for downing 3.95, 3.95%. So there was a big week in a lot of ways. Let's talk about it. AI continues to dominate the market, sentiments, whipsign between dystopian fear and innovation

1:04led optimism. On one side is the disruption, the concern, rapid AI advancement, compressing values, challenging legacy business models, raising concerns about knowledge and worker displacement. On the other side, well, you have the promise of higher productivity, and you have an earnings backdrop, like with Nvidia this past week, that continues to beat expectations, and in many cases, accelerate. So caught between these opposing narratives are US large cap stocks, which have traded essentially sideways for the last four months, and the range between this year's high and low and the S&P 500 is one of the narrowest on record. And this is hiding the dispersion beneath the surface, as weakness and tech has been offset by strength in the other areas of the market, like we saw here in the Dow and the MSCI.

2:07So Nvidia, the world's most valuable company, still by market cap, reported quarterly results last week, as I've been talking about the valuation above, get this $4.7 trillion. They have an 8% weight of the S&P 500, and the results for AI were among the most anticipated for the season. So it's been the case for several quarters in video delivers record revenue, beat analyst expectations, and issues strong guidance, noting that computing demand continues to grow exponentially, and that enterprise adoption of AI agents is also accelerating, yet despite the strong fundamentals and confirmation that AI infrastructure is in full swing, investors just weren't impressed. Cheryl shares of Nvidia fell 5% last week, reflecting the concern that AI may be overheating.

3:09And so when you add the other mega cap tech companies that continue to pour capital into chips, data center, power capacity, you have AI spending now expected to reach, get this $700 billion this year, double last year's spend. We've got some concerns, there's skepticism, it's rising right now around the pace of this kind of spending, the step up in capital intensity, and the ultimate return that these investments are going to generate. Markets believe that AI infrastructure and demand is healthy, and that it's anchored. At the same time, they're also skeptical about the cost and pace of spending, and so far, if you think about it, it's kind of kept a lid on Nvidia, because if we go back to the 2000s, remember anything with a .com on it would just blow it, just go crazy, right? Prices were just insane, we're not seeing that right now. And so I like to look at the bond market, because I think the bond market is calling this

4:14right now, and so that's going to be our topic today as we talk about bonds, in other words, they call it the smart market. What's it telling us right now? The bond market commonly referred to as the smart market, because a lot more goes into the process of price, pricing fixed income securities compared to the relative process of pricing equities. What do I mean? To that point, in its simplest form, stock prices are based on the present value of expected future cash flows given forecasted revenue earnings. On the other hand, future earnings potential for fixed income securities like treasuries is already known via the coupon rate, leaving the macroeconomic backdrop of the broader market to decide what the value of that coupon should be each month or each quarter. And so as we start to see, as I said, Google the search for quote, yield curve, investors

5:19are looking into the interest in the bond market, as we see the yield curve at the highest rates we've seen since late 21, early 22. Other spikes and searches for this quote, yield curve, it coincides with period of inversion. And we're going to look at the bond market day and some of the inversion that's going on. Does this signal a slow down or recession like we saw in the great financial crisis or COVID-19 pandemic? Very good questions. The good news right now, because there is some good news, is that we continue to see the US economy still relatively positive and growing in line with the trend that we've been talking about. Good corporate earnings, double digit growth in 26. You can hear the Protect Your Assets Market Briefing on your favorite podcast app, just search for Protect Your Assets Market Briefing. Links to subscribe free wherever you listen are at LibertyGroupLLC.com, slash PYA Market,

6:26LibertyGroupLLC.com, slash PYA Briefing, LibertyGroupLLC.com, slash PYA Market Brief. Investment advisory services are offered through Liberty Wealth Management, a registered investment advisor. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. The strategies mentioned are not suitable for everyone. The information expressed does not consider to your specific situation or objectives and may not be appropriate for all investors. Pass performance is not indicative of future results. To better understand the risk associated with investing and how it reacts to different market conditions, listeners should always consult with a qualified investment professionals, financial advisors, legal or tax specialists, and conduct their due diligence before making any financial decisions or taking any action. The legal information provided on the air is not intended to substitute for scholars hiring their lawyers to advise them about personal legal matters. Investments involve risk and unless otherwise stated are not guaranteed. LibertyGroupLLC paid for the following program and the host views and opinions do not represent

7:26those of the station or its ownership. California Life Agent, number 048569, persons engaging the services of one affiliate of Liberty GroupLLC companies should be aware that each company is operated separately. For listening to the Protect Your Assets Radio Network.