WS #15156
The US inflation data for August showed price pressures easing more than anticipated, while consumer spending held up, signaling a resilient economy without runaway inflation. This has led analysts to price out an October rate hike and increase the probability of a November cut. The shift is driving a rally in equities and a decline in Treasury yields, reversing the previous pressure from multi-decade high yields. This macro pivot supports growth stocks and reduces the cost of capital for capital-intensive sectors like AI infrastructure. The demand for AI infrastructure continues to outpace supply, particularly in networking components required to connect GPUs in data centers. Celestica is rallying on reports of a critical bottleneck, while HPE has raised its FY27 networking revenue guidance. Microsoft is also seeing bullish upgrades from Piper Sandler, citing billions in potential revenue from its E7 chip and AI services. This trend reinforces the 'picks and shovels' narrative in the tech sector, benefiting hardware and networking suppliers over pure software plays.
US Inflation & Fed Pivot
The US inflation data for August showed price pressures easing more than anticipated, while consumer spending held up, signaling a resilient economy without runaway inflation. This has led analysts to price out an October rate hike and increase the probability of a November cut. The shift is driving a rally in equities and a decline in Treasury yields, reversing the previous pressure from multi-decade high yields. This macro pivot supports growth stocks and reduces the cost of capital for capital-intensive sectors like AI infrastructure.
The demand for AI infrastructure continues to outpace supply, particularly in networking components required to connect GPUs in data centers. Celestica is rallying on reports of a critical bottleneck, while HPE has raised its FY27 networking revenue guidance. Microsoft is also seeing bullish upgrades from Piper Sandler, citing billions in potential revenue from its E7 chip and AI services. This trend reinforces the 'picks and shovels' narrative in the tech sector, benefiting hardware and networking suppliers over pure software plays.