VIDEO: Foxconn Forecast Is Big for Nvidia and This Other Holding

In today’s Daily Rundown video, Chris Versace recaps Thursday's October PPI report and explains why we’ll be listening to Fed Chair Powell’s 3 p.m. ET speech rather closely. 

Chris also shares why Foxconn’s latest AI server forecast is positive for Nvidia NVDA and Marvell MRVL, and what’s weighing on the Portfolio’s shares of Lockheed Martin LMT. 

Rounding out today’s video, he discusses what he’ll be eyeing when Applied Materials AMAT reports after Thursday's close. 

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace here, Thursday, November 14. I hope you enjoyed the thematic investing 101 teaching that I did yesterday. If you missed it, be sure to catch the replay. And don't worry, we will have a link to the replay in tomorrow's weekly portfolio roundup.

As you've probably seen already today, however, the market is trading off modestly, following what we would characterize as a warmer than expected October Producer Price Index. If you saw our Alert, then you likely saw the table in which pretty much all the key metrics in the PPI Report rose in October compared to September.

Now, that's moving in the wrong direction. It continues the trend that we saw with yesterday's October CPI. And again, in our opinion, when we take these together, it suggests that at a minimum, inflation is far stickier than what many people have previously thought. But the reality is that, again, the continued inching higher has to give the Fed something to think about.

And what I think is going on today is the market is really waiting to see what, if anything, Fed Chair Powell has to say when he speaks at a Dallas Fed event this afternoon at 3:00 PM. Now, it is possible that Powell doesn't really say anything, sticks to the script, if you will, data dependent, more data, meeting by meeting. You know, those sort of catch phrases that we tend to hear during his press conferences when the Fed announces either monetary policy changes or no changes. So the odds that Powell will break new ground in between meetings with a lot of data to go-- questionable.

But we will want to parse his comments. And when we do that, we will be breaking them down, sharing our thoughts on are there any changes? What are the implications of what he has to say today? There may be none, but if there are, what does it mean for us? What does it mean for rate cut expectations? What does it mean for the portfolio? So we will be having more comments on that this afternoon.

Before we get there, there are some other updates that I want to share with you, including earlier this morning, known Apple supplier, Foxconn, reported that it is seeing robust demand for AI servers. The company is saying that its AI servers should account for more than 50% of overall server revenue in 2025. Where is that from this year? That's going to be around 40%.

So that's another big move. Candidly, it's the latest positive data point that we have for Marvell and NVIDIA. Remember, NVIDIA reports next week. And what they say will kind of set the tone for what Marvell says when it reports its quarterly results in December. I also want to quickly touch on the shares of Lockheed Martin. They are trading off today.

The likely catalyst is a report in the Washington Post that says Israel is preparing a ceasefire plan with Lebanon. Now, we will have to wait and see if that comes to pass. But as it relates to Lockheed specifically, let's remember a few things. One, F-35 production is ramping and the company has record backlog. As it works through that backlog, margins should get a little bit better. And we are waiting on its multiyear delivery schedule. We'll likely get that when Lockheed reports its December quarter results sometime in January.

We also know that NATO countries are ramping their overall defense spending, trying to hit that or get closer to that 2% of GDP target that they have. But we also know that candidate Trump was talking about trying to increase that GDP target to 2.5% for defense spending for NATO. So we'll have to see in the coming weeks and months, is that a President Trump agenda or was that just candidate Trump kind of campaigning? So we'll have to wait and see on that.

Also today after the close, we have quarterly results from Applied Materials. And I suspect that we're going to hear how AI data center demand is driving tight chip capacity. That was something that ASML talked about this morning when it confirmed its long-term revenue guidance that calls for its revenue to hit somewhere between $46 and $63 billion by 2030.

Now, I know that is several years away, but when we parse the numbers, it suggests an annual growth rate of around 8% to 15% over those coming years. What's likely to be driving that?

Well, increasing chip capacity tightness. We already heard that Taiwan Semiconductor is increasing its 2024 capital spending, and likely to increase its 2025 capital spending. We'll hear more about that when TSM reports its December quarter results also in January. Now when Applied Reports, and I do think that it should be a good report, but there are some other things that we're going to want to pay attention to.

First and foremost, what does management have to say about potentially escalating tensions between the US and China, as well as the US kind of once again trying to tighten AI restrictions as it relates to China? So we'll be listening for that and any potential impact. On the other hand, there are reports that we should see some announcements tied to the CHIPS Act over the next couple weeks, actually. Why do I say this?

Well, if we take a look at what's been reported, the Commerce Department has awarded roughly 39 billion in programs across a variety of companies, including Intel, Micron, Taiwan Semiconductor, Texas Instruments. But so far, no money has been dispersed. So it's been awarded but not passed on. So that could be a nice catalyst for Applied Materials shares between now and the end of the year. But we'll also want to see what does Applied have to say about that.

What is it hearing, given that these funds have been awarded-- granted not dispersed, but awarded. And how does that tie into what its customers again, Intel, Micron, Taiwan Semiconductor, and the like are saying about their capital spending plans for 2025. So we'll be tying all that together. And remember, we've covered quite a bit, but we've got a lot more coming. Tomorrow, we know we're going to discuss our reaction to Applied Materials earnings. We're going to have comments this afternoon on what Fed Chair Powell has to say.

And of course, tomorrow morning we have tomorrow's Retail Sales Report, which could be a little messy. Remember, we're going to have the combination of Hurricanes Helene and Milton, in some respects, negative impacts. But as we saw from what Home Depot said, there could be some positive impacts in certain categories of the Retail Sales Report. We also have Amazon's Prime Big Deal Day Event in October that should be very positive for nonstore retail sales. We also had competing efforts as well.

So we do expect that to be a nice print. But what that means for overall retail sales, we will have to see. And remember, we will be parsing those light items. One thing, I think, is I won't say a safe bet, but one thing I suspect we will see is that when we compare the overall Retail Sales Report for October, it will be another positive confirmation point for Costco and its vibrant, vibrant October Sales Report.

So my friends, be sure to check your emails, your Alerts. We've got a lot of stuff coming between the balance of today and tomorrow. We want to make sure you get all our thoughts. And if we make any moves with the portfolio, we want to make sure you are right there with us. Thanks for watching.

At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL, LMT and AMAT.