Hello readers, today's premarket primer is all about inflation, with the consumer-price index due at 8:30 a.m. ET. Stocks rallied Tuesday after soft data on producer prices boosted hopes for a big September rate cut. The big question now is: Will CPI, usually the more important report, do anything to change that soothing narrative? Follow our live coverage throughout the day for the latest news affecting markets. Meanwhile, our columnist Jon Sindreu looks at an emerging risk for the stock market: that it could turn into an AI echo chamber.
Whatever you think of it, generative artificial intelligence has proven adept at something: generating profits for other AI projects. That is risky. AI-related corporations have significantly beaten analysts’ expectations for second-quarter results, yet have lost 5% of their market value since the end of June. Part of this is because of an unwinding of trades using borrowed money, from which the market is already recovering. Digging a bit further into the broad moniker of “AI firms,” however, might also help explain the market’s recent concerns.
“AI infrastructure” providers like Nvidia, which sell chips, data centers and training software, have delivered most of the upside for investors, with profit margins far above what analysts expected a year ago. Downstream of those companies sit businesses more focused on “AI implementation,” which develop tools such as large language models, or run products that can incorporate them. This group includes most of the “Magnificent Seven.”
Charting the Markets
Investors cheered the choice of Chipotle boss Brian Niccol to replace Laxman Narasimhan at the helm of Starbucks. Spencer Jakab looks at why the coffee chain's new chief is worth $20 billion. Beaten down by high interest rates, home-improvement demand has been sluggish for some time. But investors in Home Depot are playing the long game, says Heard on the Street's Jinjoo Lee. This morning's consumer-price index is expected to show prices rose 3% in the 12 months through July, matching June's annual rate. Core price rises are seen decelerating slightly to 3.2%, down from June's 3.3%.
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