VIDEO: One Aspect of the Government Shutdown You May Not Be Thinking About

In today’s Pro Portfolio video, Chris Versace explains why we’re still sticking with our near-term plan even as the market melt-up continues — and with the federal government still shut as we bgin the trading week. He discusses the shutdown's potential impact on the IPO market and why we could see today’s Fifth-Third Bank (FITB) announced acquisition with Comerica (CMA) lead to more M&A ideas.

Chris then explains how the Advanced Micro Devices (AMD) -OpenAI deal is the latest data point for a rising tide lifting multiple AI-related boats, including those in the Portfolio. We also discuss some initial holiday 2025 shopping forecasts, including one with an interesting callout for AI usage.

Tickers mentioned: ADBE, AMD, AMZN, AXP, BAC, CMA, COST, CRWV, ETN, FITB, GOOGL, META, MRVL, MS, MSFT, NVDA, NOW, ORCL, PLTR, SSSS, TJX, WMT.

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At the time of publication, TheStreet Pro Portfolio was long AMZN, AXP, BAC, GOOGL, META, MRVL, MS, MSFT, NVDA, NOW, PLTR, SSSS and TJX.

Transcript

CHRIS VERSACE: Hey, everyone. Chris Versace here. Monday, October the 6th. And yes, the Federal Government remains shut. We have a new chip tie up with OpenAI and a regional bank merger. Let's discuss.

Look, over the weekend, we saw little to no progress regarding the government shutdown. And reports are out there that the House, they are going to remain out until around October 14 or so. And yes, prediction markets, like Polymarkets, they have upped their expectation for the duration of the current shutdown.

At the same time, we are also hearing that if there is no progress towards the reopening, meaning no positive conversations between both sides in Washington, the Trump Administration is increasingly likely to go ahead with these massive layoffs. To us, that continues to say that this sounds much more like a negotiating tactic, but we will have to see what happens.

Now, on this front, the Senate is expected to reconvene today and put some bills to vote at around 5:30 that could potentially break the logjam. Now, we'll have to see what happens. But if the government remains shut after that vote, it means that we are not going to have the usual array of economic data to chew through this week. We'll continue to look for other indicators, sharing them with you as we find them. But again, the usual week to week economic data isn't going to be published.

So what we will be doing is we will be looking to work out some new ideas for the portfolio, things that are percolating in the back of our minds based on some things that we're seeing unfolding. Some of these might be revisiting existing names, but it could also lead us to share some new thoughts and potentially new directions for the portfolio over the coming weeks and months. So we're going to have a lot more on that. Stay tuned.

But before we get there, I wanted to use today's video to really talk about some other things that are going on, including another aspect of the government shutdown that you may not be thinking about.

So when we talk about the government shutdown, we know that a lot of services are down. But that also includes the SEC, which is working with a skeleton crew, which means no new IPO registrations are being reviewed. Yes, companies are still expected to submit their quarterly filings and the like, but no new IPO registrations are being reviewed. So what does this mean? That the longer the shutdown goes on, the greater the risk we see a slowdown in the IPO market.

Now, there are a couple of transactions that are expected to price this week. But again, as we go further out, that pipeline of ready to go deals will shrink. That means that we're going to want to see how long does this duration go on, what's the potential impact for the likes of big investment banks. And that includes Bank of America, Morgan Stanley, and the portfolio in terms of what their outlook could be for the second half of the current quarter if, again, the duration extends. So we'll be watching that.

I would also throw in a little bit that we'll be watching the IPO market for SuRo Capital shares, as well. Remember that for them to continue to fund the forward dividends, we do expect to see them tap their portfolio with IPOs. But again, I think that between now and the end of the year, the recent monetizations that we've had in the portfolio should more than cover the expected dividend stream. Our thinking here with SuRo Capital is more about 2026, so stay tuned for that.

But at the same time, let's just remember that IPOs, they're one part of the investment banking activity. Another is M&A. And we are still seeing a lot of activity in that market. The latest is this big bank tie up that was announced earlier today with Fifth Third buying Comerica. That's roughly going to be a $10.9 billion transaction. And it's going to form the ninth largest bank in the US.

Are we likely to see some other tie ups between regional banks? I think we could. We've talked about this in the past, that when we tend to see a first mover advantage, so to speak, companies kind of shuffle the deck chairs in a game of who can get paired up with whom. So we'll want to see how does this happen. And remember, the regulatory front is a little more friendly towards something like this unfolding.

And yes, even though this tie up between Fifth Third and Comerica is catching a lot of headlines, there are other transactions that are happening today. So remember that just because we might see a potential bump in the road in the IPO market, it doesn't mean that all investment banking activity is grinding to a halt.

Now, the other thing I wanted to talk about is this announcement with OpenAI and AMD. And this is kind of an interesting tie up, but I think when we examine it against other recent announcements like Coreweave and Meta, that big announcement. I think it signals to us that the AI adoption is continuing, both in enterprises and with individuals, and companies need to keep up adding demand so they can address that rising capacity level.

It clearly-- this seems to suggest that the demand is outstripping capacity, not just existing data center capacity, but capacity for chips. And I think this explains why we're seeing some of these other partnerships come around. I will say that the rising AI adoption keeps us bullish on ServiceNow and Palantir, but I will also share that it keeps us bullish on NVIDIA, Marvell, and others in the portfolio.

And we have an added supportive data point for that. Goldman Sachs is out saying that US tech giants are expected to significantly increase their infrastructure investments, with total CapEx just by the hyperscalers rising to almost $1.4 trillion between this year and 2027. Goldman Sachs does call out big increases at Amazon, Microsoft, Google, and Meta. And as they report in the coming weeks, we'll be assessing what they have to say about their capital spending levels for the second half of this year and potentially what they could say for 2026.

And with that in mind, remember we also have Oracle's analyst day later this month, and the company a few weeks ago shared some big expectations for its spending. We'll get a little more color on that.

So from our perspective, we see this tie up between AMD and OpenAI as part of all of that. But remember, this is a rising tide that is going to lift many boats. And again, it points to a nice demand path for NVIDIA, Marvell, Eaton, and others that we have in the portfolio.

Now, we are also starting to get those holiday shopping forecasts that we said we might start to get this week. The first is from Adobe Analytics. This is, remember really focused on online holiday shopping. And they're saying that they expect to see a 5.3% year over year increase to about $253.4 billion, and that's just between November 1 and December 31.

Now, that is a little bit of a slower growth rate. I think that reflects some concerns about the consumer, but we'll also have to see what happens. There's also this potential pull forward that we're going to see really starting tomorrow, with Amazon's latest Prime Big Deal Day events, as well as competing efforts from Walmart, Target, and others. I don't know about you, but I am already getting the emails about these events, so we'll want to measure what that means late this week, early next week as we start to get some of the data.

But as it relates to the holiday shopping forecast, PWC, they are also saying that consumers plan on spending about 5% less, an average of about $1,552 on holiday gifts, travel, and entertainment this year. Now, this too, this 5% less fits with consumers being a little more cautious in their spending, hunting for deals and discounts as they continue to feel the pinch of higher inflation and tariffs. Now, we see that comment really benefiting how we're positioned in the portfolio with Costco, TJX, and, of course, Amazon.

Now, one other thing that I wanted to share is this other little nugget from Adobe. You know how we like to look for signals and kind of tie them together? Well, this one is something that Adobe had to say about AI and the holiday shopping season. And what they said is that they see AI traffic rising-- and this is a big number-- more than 500% this holiday season. This is AI traffic, again. Why? Because they see folks tapping AI to search for gifts, research toys, jewelry, clothing, and other items.

Now, this is an interesting signal to us because I do think that folks who are looking for, gifts, but also ways to save money this holiday shopping season are likely to tune whether it's ChatGPT or some of the other AI tools out there, where can they find the best deals, or, conversely, the hot items that people really want.

Now, as we think about this, 500%, that is a big number. But directionally, I think it is correct. And it just tells us that this is another signal that AI usage will climb and that it is going to pressure capacities both for data centers and networks. And remember, too, that if folks are starting to do this with the holiday shopping season, odds are this is going to continue as they look for other items or other ways to shop. So I think this is more of a step function higher in AI usage than anything else.

And again, this is the type of signal that we like. It is supportive of the portfolio and the number of positions that we have in it, and it also reaffirms our earlier comments, whether they were what Goldman Sachs had to say or others this morning. So we will continue to look for signals like this and other data points, sharing them with you along the way. But I would also tell you, my friends, that we've got a lot more coming at you today, including our initial thoughts on American Express launching Amex ads, a move that will enable merchants to target Amex cardholders, a move that lands Amex in the commerce media space.

So we've got a lot more coming up. Be sure to check your emails, your alerts, and again, if we make any moves with portfolio-- I don't think we will. I think we're going to stick to our near term plan, at least until we have a little clarity on those massive layoffs that are being bandied about by the Trump Administration. But if and when we do make any moves with the portfolio, we want you right there with us. Thanks for watching.