Market Musings 1/6/2025
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
Investors may be starting to worry about a #Recession, but for #AI… what recession?
Markets kicked off May surging on a pair of #BigTech earning beats and, as usual, #AI hype was the theme.
Microsoft’s Intelligent Cloud grew 21% year over year lead by its Azure cloud services business. Meanwhile, Meta (aka Facebook) topped expectations as well highlighting 1B monthly active users on Meta AI.
Meta also bumped its CapEx or essentially planned infrastructure spending (mostly for #AI) by 9% giving a boost as well to the #AI buildout ecosystem. Year-to-date, the #AI trade has been fairly weak. The market leader and #AI bellwether Nvidia is still down -17% since the start of the year.
However, despite the #Tariffs challenges and macro uncertainty, hyperscalers are still maintaining and boosting their #AI infrastructure spending plans. It was Meta on Wednesday, but Alphabet (aka Google) had already bumped their spending target a few months ago in February.
More #AI spending was enough to drive markets solidly higher on Thursday despite negative economic news. What negative news?
Well, GDP has already weakened more than expected in Q1 and doesn’t bode well for Q2. April #LaborMarkets data is coming in very weak so far. Private hiring missed expectations by almost -50% while unemployment claims have trended higher. Plus, #ConsumerConfidence continues to weaken amid #Recession fears.
Basically, the economy is already feeling the impact of #Tariffs despite the delays and assurances of deals by the White House. However, markets remains extremely optimistic with Thursday marking the 8th straight day of gains and a full recovery from the so-called “Liberation Day” market tumble.
We, though, remain on the bearish side and don’t see a #Tariffs deal with China made fast enough. Other deals may be in the works with varying levels of significance, but essentially lifting an embargo on all trade with China is what matters most. We still haven’t seen evidence of China engaging in talks yet.
However, on the flip side, we are optimistic that #AI could be a ship to weather the storm. We see hyperscalers boosting infrastructure investments with no reservation. This should help maintain strong near-to-mid term growth and demand for #AI supplies－even in a #Recession…
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As of the publish date, Ursa portfolios may own MSFT, META, NVDA and GOOG. The stocks mentioned in this article may cease to be owned by Ursa portfolios at any point.
The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.
Original Photo by Pixabay.