Fed Takes Center Stage, a Google Query, and My Nvidia Strategy
My thoughts on today's FOMC presser, Jensen Huang talks GM, and is Google going head-to-head with Amazon Web Services and Azure?
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This afternoon, for the first time since Jan. 29, or for the second time this year, the Federal Open Market Committee will release an official statement on monetary policy. Happy Fed Day, to all who celebrate. The festivities begin at 2 p.m. ET. That's when the statement (delivered eight times a year) will be released alongside the committee's quarterly (first release for 2025) economic projections. A half hour later, Fed Chair Jerome Powell will take to the podium and hold a press conference before the financial media.
The press conference usually lasts about an hour and often influences markets as much as, if not more than, the actual statement. This go-around, I am truly not sure where the impacts on our beloved financial markets will come from. Nobody on planet Earth expects the Fed to cut short-term interest rates at this meeting. That said, the Fed may have to pave the road for future action in the text as economic activity is clearly slowing and at least for now, consumer-level inflation, has once again, apexed.
The Fed has largely stayed out of the arena on the president's agenda in regard to tariffs and the impact of those tariffs upon both economic growth and pricing. In their quarterly economic projections, however, whether the group likes it or not, they will be forced to offer opinions on such things as 2025 GDP, 2025 inflation, and 2025 unemployment as well as where the Fed Funds Rate ends the year. Hence, even without mentioning tariffs, though I am sure that the more astute members of the financial press will ask Powell directly, the committee will by proxy, express both a median viewpoint and a range of expectations for those economic categories just listed and by extension, the impact of tariffs on those items by virtue of how they differ from the opinions held three months ago.
Refreshers....
Back in mid-December, the FOMC's median 2025 expectations were for...
- GDP growth of 2.1% within a range of 1.6% to 2.5%.
- Unemployment of 4.3% within a range of 4.2% to 4.5%. Unemployment currently stands at 4.1%.
- Inflation of 2.5% within a range of 2.1% to 2.9%.
- Core Inflation of 2.5% within a range of 2.1% to 3.2%.
- Fed Funds Rate of 3.9% within a range of 3.1% to 4.4%. The FFR currently stands at 4.2% to 4.5%.
Also in Focus
The Fed could and maybe should put a halt to its "quantitative tightening" program, which would mean that the central bank would put a halt to the balance sheet asset run-off that has taken the size of the Fed's balance sheet down from a peak of $8.965 trillion back in April of 2022 to $6.759 trillion last week.
The Fed has done a truly impressive job of drawing down the monetary base and M1 Money Supply since 2022. To put the size of the balance sheet in perspective, total assets ran just above $4.1 trillion going into the pandemic and less than $920 billion going into the Great Financial Crisis.
Still, with the economy apparently slowing, and inflation just starting to abate, it might be much wiser if the intent is to ease monetary policy down the road to stop withdrawing potential liquidity from said economy ahead of actually reducing interest rates. The last thing this economy needs as it struggles to absorb a new era of fiscal responsibility would be a liquidity crisis.
Huang Spills the Beans
Nvidia NVDA CEO Jensen Huang delivered his keynote address from the firm's GTC Conference in San Jose on Tuesday. Huang announced a new partnership with General Motors GM on delivering advanced driver assistance allowing the automaker to make use of the chip designer's virtual factories. Huang offered evidence that demand for AI-related computing power is still aggressively on the rise across the large cloud providers such as Amazon's AMZN AWS, Microsoft's MSFT Azure, Alphabet's GOOGL Google Cloud and Oracle's ORCL Oracle Cloud.
In 2025, Nvidia has already shipped 3.6 million Blackwell GPUs to these four providers after shipping 1.3 million Hopper GPUs to those four in all of 2024. In his address, Huang said, "I've said before that I expect (the AI) data buildout to reach a trillion dollars, and I am fairly certain we're going to reach that very soon."
In addition, Nvidia unveiled a new inferencing software package named Nvidia Dynamo aimed at improving AI reasoning models while also announcing that next-generation Blackwell Ultra GPUs will be available at some point in the second half of this calendar year. The firm also announced a Vera Rubin chip that will not be available until late next year and robotics partnerships with both Alphabet and the Walt Disney Company (DIS).
Still, Wall Street was unimpressed. The stock sold off 3.43% for the day. I am adding a few shares overnight, separate from my core position, in anticipation of a morning rebound. This would be a short-term rental of a trade as I expect to return my long position to its normal size ahead of the Federal Reserve's dog and pony show this afternoon. Nvidia is not currently a Top 15 holding of mine.
Question for Google
Does Alphabet's $32 billion acquisition of cloud / cyber security provider Wiz eventually make Google Cloud more of a competitor to Amazon AWS and Microsoft Azure? Wiz is already used by more than half of the Fortune 100, so yes... this does likely level a playing field to some degree that has been to this point dominated by two firms. What I am currently thinking about though... is the price paid.
If Wiz, a New York start-up, is valued like this, what does that mean for other "best in class" cyber-security providers? Are they likely to be approached by other hyperscalers? My third heaviest weighted allocation is at this time toward CrowdStrike CRWD. If that stock, which closed at $363.15 can make a run at its 50-day simple moving average ($384.10), then in my opinion a new run at the February high of $455.59 is not out of the question. The stock is already up 9% since taking back its 200-day simple moving average just one week ago.
Economics (All Times Eastern)
07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.67%.
07:00 - MBA Mortgage Applications (Weekly): Last 11.2% w/w.
10:30 - Oil Inventories (Weekly): Last +1.448M.
10:30 - Gasoline Stocks (Weekly): Last -5.737M.
4:00 p.m. ET - Net Long-Term TIC Flows (Jan): Last 72B.
The Fed (All Times Eastern)
2:00 - FOMC Policy Decision.
2:00 - FOMC Economic Projections.
2:30 - FOMC Press Conference.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: GIS (.97), OLLI (1.19), SIG (6.25), WSM (2.93)
After the Close: FIVE (3.37), SMCI (.54)
At the time of publication, Guilfoyle was long NVDA, AMZN, MSFT, CRWD equity.
