VIDEO: This New AI Report Could Shape Nvidia Keynote

In today’s Daily Rundown video, Chris Versace explains why we’re sticking with the Portfolio’s plan as we approach the March quarter earnings season. 

He also lays out what the Portfolio will be focusing on this week from the latest retail sales data to the Fed’s updated set of economic projections and quarterly results from FedEx FDX, Micron MU and Nike NKE. 

Chris also shares a new report on the future of AI and data center spending, and how it could influence Tuesday's GTC 2025 Keynote from Nvidia NVDA CEO Jensen Huang.

Transcript

CHRIS VERSACE: Hey everyone, Chris Versace here. Monday, March 17. Happy Saint Patrick's Day to those of you out there. Just wanted to get our selves ready for the coming week. Reason being, it is going to be kind of a big one, whether it's fresh economic data, the Fed, or some other things that we want to keep our eyes on this week, it's going to be busy. But before we kick it off, I want to make sure that you read our comments in Friday's weekly roundup.

There, we kind of reviewed that, yes, the market did rally from extremely oversold levels, but as we discussed, there are a number of headwinds that remain in place. Probably the biggest one and the one that we really called out in the weekly roundup on Friday was the concern that we have about corporate guidance when companies report their March quarter results. So what that means, just to be clear, is we are going to stick to our strategies. We're going to continue to pick our spots and continue to manage the portfolio for the long term, but we will be mindful of what's unfolding in the near term.

So as this week goes, there's really about four buckets that I want to call out and share with you that we will be paying attention to. And the first is pretty straightforward. We have a fresh week of economic data. We'll be getting February retail sales, housing starts, industrial production. They're all going to help us of get a better bead on the speed or the vector, as I like to say, in velocity of the economy in the current quarter.

But when we kind of look at the different reports, given all that we've heard in consumer sentiment data, as well as other retailers that have already reported and the weaker than expected guidance, we are going to want to be taking a careful look at the February retail sales data, really to see to what degree folks are dialing back, and to the extent that they are still spending, where are they spending?

And the backdrop for this report is kind of interesting because over the weekend, one of Canada's largest retailers, Hudson Bay, said that they're filing for bankruptcy. And then yesterday, early this morning, we read that Forever 21 is doing the same. So that clearly tells us where consumers are not spending. And we're going to have some more thoughts on that later today. But remember too, that as we get the retail sales data, housing starts, industrial production for February, we're also going to get an updated look at the Atlanta Fed GDPNow model for the current quarter.

Now, this, as you know, is a rolling forecast, meaning that as more data points become available, the figure tends to reflect that. What's interesting this time around is we haven't had an update for this GDPNow model in several days. So the last time we looked at it, it was around a negative 2.4%, and that really irked a lot of folks. But there was a lot of data since then. So the next update that we get and subsequent ones are going to be very important.

The timing on this though, this next update, is kind of interesting because as you know, tomorrow, the Fed begins its two day policy meeting. And on Wednesday afternoon, they will come out and they will update their expectations for monetary policy in the short term. But while no rate hikes are expected, we are going to want to pay careful attention to the policy note, what it says, if anything, about the speed of the economy and inflation concerns and monetary policy.

The same goes during Fed Chair Powell's press conference. And usually when Powell speaks, it's going to be the choice of language, the tone, that we want to pay close attention to. But what's going to set the stage, really for Powell's press conference, in addition to the policy statement, it's going to be the Fed's updated set of economic projections.

Now, when we pore pour through that, we are of course going to want to compare that to the ones that they issued at the end of 2024, when it relates to 2025 expectations for GDP, the unemployment rate, but also the number of rate cuts that are implied in the forecast. The last time around, it showed two cuts for 2025. But as we've discussed almost ad nauseam, a lot of the inflation data since those December, projections have really moved in the wrong way. Yet, the market continues to see as of this morning, two, maybe three rate cuts this year.

I think there's risk that the Fed underwhelms the market's expectations. So we want to be careful going into that report. Moving on from economics and GDPNow and the Fed, we have some interesting earnings this week. The actual number of companies reporting is rather small. Again, we're kind of in that limbo period as we get ready to close out the March quarter and get ready for that ensuing earnings season.

But the reports that we will get this week from Fedex, Micron, Nike, they're going to be important. You know with Fedex, it tends to give a nice read on the overall pace of the global economy. We'll want to hear what they have to say about tariffs, currency, that sort of thing. With Micron, it's going to be its comments on data center, smartphone, PCs, and other end markets. And its guidance is going to be something that we really want to focus in on. But that's the case with all three of these reports, again, given our concerns that I mentioned earlier about guidance for the March quarter, or sorry, March quarter guidance for the June quarter.

And then, lastly, with Nike, of course, it's going to be what they have to say about the consumer and currency. But really, tariffs, how is that impacting their business? So those three reports that come Wednesday, Thursday are going to be very, very important for us and for the market. And finally, there is one other event that has kind of started already. That's NVIDIA's GTC 2025 event. But the real focal point will be when Jensen Wang gives his keynote tomorrow.

You know he's going to talk about AI. It's going to have impacts on data center, not just for Nvidia, but others in the food chain, whether it's our positions in Marvell, Eaton, or others out there. So what's kind of interesting about this is this morning, there's this new report from Bloomberg Intelligence, and it says that $371 billion is expected to be spent this year on data center and computing resources, all for AI. And we know it's a big increase, but they peg it around 44% year over year.

What's interesting is that the report says the spending is supposed to rise to $525 billion by 2032. And the key here is the shift in the type of AI spending, from training, which is what's happening now, to inference, or as more commonly referred to as the process of running the systems that they've been trained for. So this kind of sets the stage for Jensen Wang to deliver kind of some big news, some big forecasts out there.

You know, I kind of step back and I think this is really similar to how we saw the internet evolve and the spending evolve, that as time went on and as more applications came around, there were greater capacity demands. And again, I see this kind of unfolding the same way with AI. It's going to be good for our shares in Nvidia and Marvell and others. Of course, we're still in the relatively early innings of AI adoption.

As it matures, as we go from early innings to mid innings, call them five, six, seven, we're going to want to be a little more mindful about capacity additions, but we have plenty of plenty of time until we get there. In the near term, all the other data points that we see, whether it's in the enterprise, consumer, or elsewhere of ramping AI adoption, it tells us that just like we saw with the quarterly results recently from big, big tech, that their capacity constrained, and it's going to accelerate. And again, that keeps us bullish in Nvidia, Marvell, Eaton, and a bunch of others.

Now, that is today's video, but I do have a programming note I want to share with you, and it's this. Last week, we had office hours on Monday. This week, we're going to do the same. Reason being is that my trip to New York that got scrubbed last week, well, it's on for this week. So that means I will be seeing you in the forum today, between 4:00 PM and 5:00 PM. Look out for the alert. We'll make sure that everybody gets a heads up on it, but also keep an eye out for what else we'll have coming your way today. Thank you.

At the time of publication, TheStreet Pro Portfolio was long NVDA.