From AI to Aging Americans, We've Got the Scoop

One way to stay ahead in investing is to know what's going on in the world around you. But it's a lot of work to scan the newspapers, trade publications, business and tech sites. So, we got our hands dirty for you, bringing you the latest headlines that speak to the Pro Portfolio's investing themes.

Artificial Intelligence, Aging of the Population

We’ve talked about several of the pain points tied to our "Aging of the Population" investing theme, including the doctor and nursing shortage. The below means we should be watching the adoption of artificial intelligence at hospitals and related companies. With health care spending accounting for around $4.8 trillion in 2023, the proper use of AI could be one way to help reign in costs. This one speaks to that topic:

“The transformative power of generative AI (gen AI) will likely reshape the healthcare industry over time, and organizations are beginning to take action. In our Q1 2024 survey, more than 70 percent of respondents from healthcare organizations—including payers, providers, and healthcare services and technology (HST) groups—say that they are pursuing or have already implemented gen AI capabilities…” Read more from mckinsey.com.

Artificial Intelligence, Cloud

The below supports the expected demand ramp at Amazon AMZN, Microsoft MSFT, Alphabet GOOGL, and others, including our position in ServiceNow NOW.

“According to a survey by Wipro, 54% of organisations report the rollout of AI services as the primary driver behind their increased investment in cloud infrastructure. Much of this funding, too, is being targeted at hybrid cloud solutions, said the IT consultancy… The report indicates that 54% of organisations plan to enhance their hybrid cloud infrastructure, while 56% are focusing on expanding public cloud environments over the next six to twelve months. This trend highlights the preference for hybrid cloud solutions, which remain the most widely adopted approach, with 60% of organisations utilising this model.” Read more at techmonitor.ai

Artificial Intelligence, Digital Lifestyle

One of our tenants for Marvell MRVL is the adoption of AI in devices will drive the next explosion in content creation and consumption that will pressure existing network use levels and foster capital spending. The below data points and others like it point to that starting to unfold and also give confidence for Qualcomm’s QCOM move into the AI on PC market.

“At the ongoing Made by Google event, Google unveiled its latest flagship smartphone series, Pixel 9. This includes the new Pixel 9, Pixel 9 Pro, Pixel 9 Pro XL, and Pixel 9 Pro Fold smartphones. The series boasts advanced AI capabilities through Gemini and showcases a range of new features designed to enhance photography, productivity, and overall user experience.” Read more at thefastmode.com.

“The advanced version of Google's Gemini AI assistant, Gemini Live, has started rolling out to Samsung smartphones ahead of the launch of the Pixel 9 series. So, Samsung smartphones and tablets are among the first devices to have access to Gemini Live.” Read more at sammobile.com.

“Shipments of AI-capable PCs represented 14% of all PCs shipped in the quarter. With all major processor vendors’ AI-capable PC roadmaps now well underway, the stage is set for a significant ramp-up in device availability and end-user adoption in the second half of 2024 and beyond, the researcher said. The market performance of AI-capable PCs has largely aligned with expectations and the industry remains on track to ship around 44 million units in 2024 and 103 million units in 2025, according to Canalys forecasts.” Read more at csimagazine.com.

“Lenovo in May unveiled its AI PCs, equipped with Microsoft's Copilot tool and Qualcomm's Snapdragon X Elite processor. The company, which called the rise of the AI PC "an inflection point" for the industry, expects its adoption to lead the global PC market to a long-term recovery, with sales surpassing prepandemic levels.” Read more at the Wsj.com.

Artificial Intelligence, Safety & Security

More signals the defense industry is embracing the use of AI, and ones that say we should be watching for mergers and increases in research and development spending at Lockheed Martin LMT and its competitors, closely.

“At this weekend’s DEF CON conference, the Defense Advanced Research Projects Agency convened 90 teams and asked them to build autonomous agents to probe open-source code bases, find vulnerabilities and automatically fix them. Building technology capable of doing so represents a white whale of AI development: a highly difficult-to-achieve technological breakthrough that could deliver massive gains in cybersecurity.” Read more at cyberscoop.

“The US Army is upping its bet on artificial intelligence and working to broaden acquisition plans in hopes the cutting-edge, at-times-controversial tech can help with everything from sensor operations to ground vehicles to aviation and training, according to one of the service’s top tech officials.” Read more at breakingdefense.com.

Cash-Strapped Consumer

Despite the positive surprise in the July Retail Sales report, these signs keep us mindful of the potential demand pull forward captured in that report by events like Amazon’s AMZN 2024 Prime Day and others:

“On Monday, the Federal Reserve Bank of New York reported that Americans’ expectations of how much they’ll spend in the next 12 months has declined — and so has their outlook for inflation. Consumers expect their spending to grow 4.9% in the coming year, according to a survey by the New York Fed. That is the lowest such reading since April 2021, when inflation was beginning to surge.” Read more apnews.com.

“Despite decreases in inflation rates, consumers continue to perceive that the cost of everyday essentials, including groceries and retail products, are on the rise. This is especially true among struggling paycheck-to-paycheck consumers. In addition, 7 in 10 consumers believe that their income has not matched inflation. As a result, from groceries to retail, many consumers are trading down. If they’re buying at all, many are buying cheaper or lesser quality alternatives.” Read more at pymnts.com.

“Well, in our consumer base of 60 million customers spending every week, what you're seeing is they're spending at a rate of growth of this year over last year, for July and August so far, about 3%. That is half the rate it was last year at this time. And so the consumer has slowed down. They have money in their accounts, but they're depleting a little bit. They're employed, they're earning money, but if you look at- they've really slowed down.” Read more cbsnews.com.

Cybersecurity, Data Privacy & Digital Identity

Another week turns up more reasons why we remain long shares of the First Trust Nasdaq Cybersecurity ETF CIBR:

“Almost 2.7 billion records of personal information for people in the United States were leaked on a hacking forum, exposing names, social security numbers, all known physical addresses, and possible aliases. The data allegedly comes from National Public Data, a company that collects and sells access to personal data for use in background checks, to obtain criminal records, and for private investigators. National Public Data is believed to scrape this information from public sources to compile individual user profiles for people in the US and other countries.” Read more from bleepingcomputer.com.

“Attackers impersonating the Security Service of Ukraine (SSU) have used malicious spam emails to target and compromise systems belonging to the country's government agencies. On Monday, the Computer Emergency Response Team of Ukraine (CERT-UA) disclosed that the attackers successfully infected over 100 computers with AnonVNC malware.” Read more from bleepingcomputer.com.

“Monitoring evolving DDoS trends is essential for anticipating threats and adapting defensive strategies. The comprehensive Gcore Radar Report for the first half of 2024 provides detailed insights into DDoS attack data, showcasing changes in attack patterns and the broader landscape of cyber threats. Here, we share a selection of findings from the full report. The number of DDoS attacks in H1 2024 has increased by 46% compared to the same period last year, reaching 445K in Q2 2024. Compared to data for the previous six months (Q3–4 2023), it increased by 34%.” Read more from thehackernews.com.

Digital Infrastructure, Power Pain Point

A clear reminder the data center build-out will take the existing power capacity to task driving capacity expansion plans. Signs like this were behind our adding Eaton ETN shares to the portfolio.

“Across the U.S. East Coast, nuclear power plant owners are proposing marriages to tech giants who are both desperate for electricity to fuel their massive data-center expansion plans and publicly committed to using clean energy. The proposals go like this: Build data centers that connect directly to our round-the-clock, carbon-free nuclear power, and secure long-term financial and clean-energy benefits for the both of us.” Read more at canarymedia.com.

Safety & Security

These signals speak to public safety spending and the continued re-arming of defense capabilities outside the US. Positive data points for our positions in Axon AXON and Lockheed Martin.

“Millions of K-12 students are heading back to school this week, and many will encounter or soon be encountering enhanced security technologies, policies, and procedures. In Las Cruses, New Mexico, each public middle school and high school will install two AI weapons detectors this year, reports KFOX14. The installation of the equipment was prompted by a recent incident involving two students who allegedly were found with handguns at Organ Mountain High School. A school security grant will pay for the detectors, which will cost approximately $1,500,000.” Read more at securitysales.com.

“The Biden administration on Tuesday approved more than $20 billion major arms sales to Israel, including new F-15 fighter jets and tens of thousands of tank and mortar shells.” Read more at axios.com.

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At the time of publication, the Pro Portfolio was long AMZN, MSFT, GOOGL, NOW, MRVL, QCOMM, LMT, CIBR, ETN, AXON.