Dell’s Big AI Boost: 8 Key Items Shaping the Stock Market Wednesday

These are the early headlines and other items poised to influence the market at the start of trading Wednesday. As we share this collection of market drivers, U.S. equity futures point to a mixed market open.

1. Iran and its Arab neighbours were plunged back into war on Wednesday by the biggest exchange of fire between Tehran and Washington since July, with U.S. forces striking Iran’s southern coast and Iran firing at American bases ‌across the region… Asian and European stocks fell after the renewed U.S. airstrikes, which pushed oil prices back up to levels unseen since July, compounding the economic impact of a global sell-off in bonds as disrupted energy supplies fuel inflation worldwide. (Reuters)

Normally renewed fighting would flow through to oil prices continuing to rise, however, there are counter-balancing developments that are leading them to move lower this morning.

2. US Energy Secretary Chris Wright said companies are on the cusp of signing a series of deals that will put Venezuela on pace to rapidly expand its output of crude. “Several deals will be announced,” Wright told reporters after arriving in Caracas on Tuesday night. “Those deals will lead to a more than doubling of Venezuelan oil production in the next few years.”… The announcements are separate from a plan Trump announced Friday for the US to take control of 65 billion barrels of Venezuela’s oil reserves… (Bloomberg)

As expected following President Trump’s meeting with oil executives yesterday, we are seeing multiple articles like the one above point to the U.S. tapping Venezuela oil. What’s incrementally new is the plan to utilize Venezuela’s existing oil reserves in the near-term while efforts to ramp Venezuelan oil production unfold over the next few years. We were half right in thinking that production ramp would not be a near-term fix to oil prices, now we need to see exactly how the U.S. will use its oil reserves between rebuilding the U.S.’s Strategic Petroleum Reserve and lower gas prices.

With U.S. diesel prices hitting their highest levels since peaking in April, a headwind to progress on inflation, it gives the White House more reason to spell out its plans for Venezuela oil sooner than later.

3. Treasury Secretary Scott Bessent pushed back Tuesday against concerns that rising long-term interest rates could undermine the economy. Speaking at a G-20 press conference in Asheville, N.C., Bessent said during a question-and-answer session that elevated long-term yields should be viewed as a sign of economic strength rather than weakness. (Barron’s) U.S. stock investors are warily watching the rise in Treasury yields as a stumbling block for Wall Street’s record-setting rally, with particular trouble seen if the benchmark 10-year yield jumps abruptly toward 5%. Higher bond yields pose a number of obstacles for stock performance. These obstacles include stiffer investment competition and pressure on equity valuations, ‌as well as higher borrowing costs, which can eventually stymie economic growth. (Reuters)

Bessent wasn’t the only White House official deflecting concern about Treasury yields, and while a strong economy can withstand higher rates, the issue this time around is it isn’t an overheating global economy that is driving inflation pressures. But our view is that as the shares of quality and well-positioned companies go on sale, we’ll have the opportunity to pick them up at better prices.

4. Dell Technologies’ shares climbed nearly 10% in premarket trading on Wednesday, as strong demand for its AI-optimized servers powered an increase in its annual revenue and profit forecasts… Dell raised its annual revenue forecast to $192 billion from $167 billion, and adjusted earnings per share target to $25.50 from $17.90 earlier. Its second-quarter revenue jumped 58% to a record $47 billion, surpassing Wall Street estimate of $44.92 billion. (Reuters)

If those figures alone weren’t enough to support the demand for AI and data center servers and the chips that power them, Dell (DELL) exited the quarter with a record $95 billion of AI backlog, even after converting $131.7 billion into orders over the past 12 months. Per Dell management, demand is broadening across neoclouds, sovereigns and enterprise customers, and its customer count has surpassed 6,500.

During the earnings call, Dell management also provided a comment that confirms AI adoption is rising and usage expanding: “We are seeing a growing trend of customers that require meaningful CPU compute capacity to support AI and agentic workflows.”

Very constructive and supportive for the Portfolio’s thesis on AI, and one that builds on similar findings for software companies that recently reported their quarterly results. After today’s market close, Hewlett Packard Enterprise (HPE) will deliver its quarterly results and discuss how AI and data center server demand is driving its business. While the market may be understandably focused on Treasury yields and oil prices, data points like this help keep us focused.

5. … while inflation will likely remain the driver behind the September rate decision, investors shouldn’t dismiss the possibility that the latest raft of employment data could shift expectations again. Traders are now pricing in 68% odds of a rate hike as of Tuesday, according to the CME FedWatch tool. Yet Friday’s jobs report could revive fears that labor conditions are not strong enough to handle higher interest rates. (Barron’s)

ISM’s Manufacturing PMI pointed to slower job creation in August, and ADP’s Employment Change Report for August showed 38,000 jobs were created compared to 46,000 in July and the 51,000 expected. While not job losses, the August print, which was the lowest figure in the last seven months, continues the trend of slowing job creation in the private sector. Much like the July data from ADP, the August figure is a sharp drop compared to the 107,000 jobs per month created in April, May, and June.

Tomorrow brings ISM’s Service PMI data for August, and if it shows another month of contracting employment in that part of the economy, we could see the market’s expectations for 53,000-58,000 jobs created in August move lower. The thing is, so long as the Fed sees positive job creation on a trailing three-month basis and other favorable PMI data, odds are it won’t be enough to remove its focus on inflation.

What this means is, should we see another month of job losses, that bad news for the economy could be good news for the Fed re-thinking a September rate hike. Now to see what the data tell us tomorrow and Friday.

6. Tesla plans to launch the two-seat, purpose-built robotaxi at an event in Austin on Thursday. Central to Tesla’s self-driving ambitions, the steering wheel- and brake pedal-free car—which Tesla plans to make 125,000 of per year—will test whether the automaker’s camera-only autonomous tech can scale more widely, and how quickly it can do so. Right now, Tesla operates driverless Model Ys in Austin, Dallas, Houston, Miami, Orlando, and Tampa. But the service is fairly limited, especially outside of Austin. (Inside EVs) Amazon’s Zoox and Alphabet’s Waymo on Tuesday separately announced expansions of their driverless ride-hailing operations into new U.S. cities, weeks after Zoox started paid services. Zoox ‌said it would begin testing in Houston and San Diego, bringing its presence to 12 U.S. locations… Waymo, meanwhile, said it would begin welcoming its first public riders in Denver, San Diego and Tampa, bringing its fully autonomous ride service to 14 cities. (Reuters)

While the Portfolio is not involved in Tesla (TSLA) shares, we will be tuning into the event to gauge the competitive landscape against the autonomous efforts at Portfolio holdings Google (GOOGL) and Amazon (AMZN). We will interested in any remarks from Tesla about the creation and consumption of data, and the impact on data center capacity and networking demands. The focus these days is on AI, but the rise of autonomous cars should be another massive tailwind for both, hence our interest in tomorrow’s event.

7. Economic data today per TipRanks: MBA Mortgage Application Index (Weekly), ADP Employment Change Report (August), Factory Orders (July), EIA Crude Oil Inventories (Weekly), Fed Beige Book (September).

8. Companies reporting today per TipRanks: AM – Brown-Forman (BF.B), G-III Apparel (GIII), Ollie’s Bargain Outlet (OLLI), Sprinklr (CXM). PM – Broadcom (AVGO), c3.ai (AI), Five Below (FIVE), Hewlett Packard Enterprise (HPE), NetApp (NTAP), Petco Health & Wellness (WOOF), PVH (PVH), Snowflake (SNOW).

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At the time of publication, TheStreet Pro Portfolio was long AMZN and GOOGL.