In the age of AI, 'neo-cloud' providers are expected to expand their market share, reshaping the technology investment landscape.
With growing demand for high-performance computing, especially among AI model developers, specialized cloud providers like CoreWeave and Nevius are seeing a rebound. Securing hardware performance has now emerged as a core competitive advantage for businesses.
AI startups' increasing need to secure thousands of GPUs drives greater demand for high-performance computing resources. While hyperscalers cannot replace all services, neo-cloud providers are expected to capture market share in specific segments.
The Producer Price Index (PPI) met expectations and is not considered a significant negative factor. The key lies in how much of the price burden producers have passed on to consumers. However, indicators that could influence inflation show a worse trend than expected, increasing caution about the Fed's potential for further interest rate hikes. There is also hope that a drop in energy prices will positively impact inflation indicators.
The US 10-year Treasury yield surpassed 4.95%, increasing market interest rate pressure. Diesel prices surged over 24% in a month, largely driving the overall PPI increase. In contrast, service prices rose only 0.1%, and retail margins actually decreased. The Russia-Ukraine war and Middle East logistics disruptions led to refining capacity issues, impacting energy prices.
UBS, known for its accurate CPI predictions, expects the next CPI to be around 0.2% month-over-month. Core CPI is projected to drop from 2.48% last month to 2.38%. If these forecasts hold true, expectations for easing inflationary pressure would grow, potentially becoming key to future bond yield stability.
The possibility of a benchmark interest rate hike has intensified following the PPI announcement. There is a market sentiment that prefers a quicker rate hike to resolve uncertainty.
I think it's right for the market to view it with a mindset of, 'If you're going to raise it, just raise it in September.'
With the war continuing for six months, oil price uncertainty has increased. Analysts suggest that a rapid surge to $120-$130 is unlikely unless specific infrastructure is hit.
Rising consumer price indices and other inflation indicators could slow the economy, raising the possibility of a decline in US retail sales. It is necessary to closely monitor the trend of month-ahead oil futures contracts.
With 10-year Treasury yields nearing 5%, a strong competing product guaranteeing a 5% annual return has emerged. For investors, the question arises whether to invest in volatile risk assets as currently. A personal expected return of over 10% is needed for stock investments, and excess returns compared to Treasuries are considered more important than absolute returns.
Historically, market volatility tends to increase three months before midterm elections due to political uncertainty. However, once elections pass, uncertainty often dissipates, and markets focus on fundamentals and corporate earnings, leading to shifts in sentiment. From 1950 to 2022, the S&P 500's performance from after the midterm elections to year-end was mostly positive, with an average gain exceeding 20%.
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