Signals From Our Investing Notebook
Here's what we've uncovered for our thematic framework and portfolio holdings.
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* We’re opening our investing notebook to share some of the latest ripped-from-the-headlines signals and confirmation points for our portfolio holdings.
Another week has gone by and we’ve uncovered an ample number of confirming articles and other reports for our thematic framework as well as holdings inside TheStreet Pro Portfolio. While these findings are not hard data, they support our thinking as well as confirm parts of our investment theses.
Let’s review some of them…
Artificial Intelligence
We may be in the early innings when it comes to AI, but the more use cases we read about the more bullish we become on our shares of Nvidia NVDA, Marvell MRVL, and Qualcomm QCOM.
“AI is redefining work, and it’s clear we need new playbooks,” said Ryan Roslansky, CEO of LinkedIn. “It’s the leaders who build for agility instead of stability and invest in skill building internally that will give their organizations a competitive advantage and create more efficient, engaged, and equitable teams.” Read more here
“AI can manage complexity and make connections across multiple scientific and engineering disciplines, multiple model and data types, and multiple outcome priorities. This can enable AI to create solutions for the ‘grand challenges’ of massive and rapid clean energy deployment that conventional methods cannot,” said Rick Stevens, associate laboratory director for the Computing, Environment and Life Sciences directorate at DOE’s Argonne National Laboratory.” Read more here
“Smith told analysts that Parsons is "applying artificial intelligence across our entire portfolio" and cited a few example areas to consider across its federal tech and critical infrastructure segments. The kinds of systems needed to counter unmanned aircraft are one of those applications. Smith described AI's usage for that as how operators identify, detect and track a drone that is in a location it probably should not be.” Read more here
AI, Cybersecurity
The below signal confirms the AI tailwind for cyber attackers and other bad actors, which should spur another leg up in cybersecurity spending and benefit the constituents of our First Trust Nasdaq Cybersecurity ETF CIBR
“One of the most dangerous abuses of artificial intelligence technology has been scammers’ use of AI to improve their phishing schemes. Large language models can impersonate legitimate humans with a frightening degree of accuracy when they are trained on data showing that person’s writing style, syntax, and other aspects of their voice.” Read more here
Artificial Intelligence, Safety & Security
Even in the defense industry, AI is poised to make a mark and drive an eventual upgrade cycle for the likes of Lockheed Martin LMT and others.
“After riding in the front seat of an F-16 fighter jet controlled by artificial intelligence, Air Force Secretary Frank Kendall said he can see a future where AI agents will fly in war—and will do it better than humans. Computers “don’t get tired. They don't get scared. They're relentless. It's easy to see a situation where they're going to be able to do this job, generally speaking, better than humans can do. They also can handle large amounts of data,” Kendall said Wednesday during an AI and national security conference hosted by the Special Competitive Studies Project.” Read more here
Consumer Inflation Fighters
The continued increase in food prices is leading consumers to reembrace dining at home, increasing demand for groceries. We see this benefitting our Costco COST and PepsiCo PEP holdings, as well as Amazon’s AMZN Whole Foods and larger digital grocery business.
“Restaurant food prices are climbing at a much higher rate than groceries – 5.1% annually versus 1.2%, according to Vericast’s 2024 Restaurant TrendWatch survey. A large majority (68%) of survey respondents are trading down from restaurant meals to food from the grocery store to avoid the rising costs, with more than 71% of Gen Z and millennials doing so. More than two-thirds (67%) say increased food costs are making restaurant dining too expensive.” Read more here
“For about three years following the Covid-19 pandemic, food companies pushed through a series of sharp price increases, saying they needed to recoup their own rising costs—and that consumers would adjust to stick with their favorite brands. As a result, the portion of U.S. consumers’ income spent on food has reached the highest level in three decades. Now, some consumers are hitting their limits. Restaurant chains and some food manufacturers are reporting sliding sales or slowing growth that they attribute to consumers’ inability—or refusal—to pay prices that are in some cases a third higher than prepandemic times.” Read more here
“Global fast-food giants may have to dole out steeper promotions to lure inflation-hit customers who are increasingly opting to eat at home, following weak sales from the likes of McDonald's and Starbucks this week. Disposable income in the United States is declining, particularly in the lower-income cohort, while the slow economic recovery in China has increased industry-wide pressures for quick-service chains including KFC owner Yum Brands (YUM.N), that has extended across several quarters.” Read more here
Digital Infrastructure & Connectivity
This next set of signals confirms the continued build-out in data centers, which should drive favorable revenue comparisons at Nvidia and Marvell in the coming quarters.
“President Biden hailed Microsoft’s MSFT 0.29%increase; green up pointing triangle decision to invest billions of dollars on artificial intelligence in Wisconsin, the latest stop in a global spending spree by the tech giant to build AI infrastructure and calm fears about the powerful technology.” Read more here
“Tech giant Meta is building a data center in Montgomery, Alabama. The social media firm, formerly known as Facebook, this week announced plans to build a $800 million data center in Montgomery County…. The facility is expected to be live at the end of 2026, with work at the site already underway ahead of construction… The data center, the company’s 20th in the US, is expected to bring 100 jobs to the city.” Read more here
“The widespread adoption of cloud computing has reduced the number of organizations that operate their own data centers but has only increased the number of data centers around the world, as large hyperscalers such as Amazon Web Services, Google Cloud Platform and Microsoft Azure continue to build out the infrastructure necessary to accommodate their customers. In fact, according to AFCOM, the leading membership association for data center professionals, we’re about to experience skyrocketing data center construction, with new projects increasing sixfold in the next three years.” Read more here
“The latest report from Cloudflare on internet disruptions pins damage to submarine cables as the leading cause of internet outages in the first quarter of 2024.” Read more here
The two signals below tell us we are on the right track with the addition of Eaton ETN to the Bullpen. Once we finish our homework on the shares, including potential entry points and price targets, we’ll share our thoughts with members.
“The Internet is entering an era of gigawatt-scale data center campuses to power artificial intelligence (AI), according to developers and industry groups, who say this approach provides the best opportunity to support AI workloads with renewable energy. Hyperscale tech companies are already seeking sites for campuses that can support a gigawatt of electric power capacity, equal to 1,000 megawatts or 1 billion watts, according to speakers at last week’s Data Center World conference.” Read more here
“US utility Dominion expects to connect 15 more data centers to the grid in Virginia over the course of 2024, after connecting 15 facilities last year totaling almost a gigawatt of capacity. In its most recent earnings presentation this week, the company said it had connected 94 data centers with more than 4GW of capacity in Northern Virginia since 2019. This included 15 data centers totaling 933MW in 2023, and 15 more are due to be connected in 2024… American Electric Power (AEP), a utility covering large parts of the US, including Ohio, Virginia, Texas, Kentucky, and Tennessee, has seen service requests totaling up to 15GW, with data centers a major driver of demand.” Read more here
At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL, QCOM, LMT, COST, PEP, AMZN, MSFT, CIBR.
