‘Given AI’s massive data processing requirements … today’s winners are pretty clear’: Wells Fargo strategist

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Wells Fargo strategist Christopher Harvey detailed the incredible speed with which AI is being adopted by corporate America,

“We recall a generation ago how some firms resorted to fuzzy metrics and logic when trying to explain their ‘internet strategy.’ By contrast, even though AI seemingly exploded on the scene just a few minutes ago, Kraft Heinz has already discussed how its AI platform is responsible for $30-million of incremental annual sales … AI deployment has taken many forms. Visa uses AI to rapidly detect fraudulent transactions. Best Buy and UDR use AI to make customer service more efficient while seemingly more personal. Ralph Lauren and Host Hotels have discussed using AI to model pricing and demand. In fact, HST noted that its AI platform outperformed all other third-party forecasts and its own internal predictive analytics when it came to modeling RevPAR during the pandemic … Given AI’s massive data processing requirements, unlike the 1990s, today’s winners are pretty clear: uber-cap semiconductors, cloud computing, and data center firms … We count about eight companies in the SPX as the main AI beneficiaries: AAPL (Hey, Siri… write my term paper on The Great Gatsby, please), AMD, AMZN, GOOG/ L, IBM, MSFT, NVDA, and ORCL. This octet accounts for over 95 per cent of the SPX’s 8.9-per-cent year-to-date price return”

“WF: “Given AI’s massive data processing requirements, unlike the 1990s, today’s winners are pretty clear”” – (research excerpt) Twitter

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BMO economist Robert Kavcic wonders if the Bank of Canada has raised interest rates enough,

“The resilience of the Canadian economy through early spring begs the question: Is policy restrictive enough? The Bank of Canada’s 425 bps of tightening to date has just lifted real policy rates into positive territory. Depending on the exact inflation metric and the timeframe used, the real BoC rate looks to be roughly 0.5-to-1 per cent at this point (based on short-term underlying core inflation of around 3.5-to-4 per cent). At the end of the past cycle (leading into the pandemic), that was arguably tight enough, but it was also an era of low inflation and suppressed interest rates globally. If that regime is over, past cycles such as that in the mid2000s needed real rates north of 2 per cent. For the record, getting to that level (a big if necessary) could be some combination of more BoC tightening and inflation easing further.”

“BMO wonders if the BoC has tightened enough” –(research excerpt) Twitter

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The Economist poked the bear a little bit with “Australia and Canada are one economy—with one set of flaws,”

“Weather aside, they have a remarkable amount in common. Both are vast land masses populated by comparatively few people and dangerous wildlife. Both are (mostly) English-speaking realms of King Charles III. Both export their rich natural resources around the planet. And both are magnets for immigration… But the main thread that connects Ozanada Inc is less fetching. As Rod Sims, former head of Australia’s competition watchdog puts it, his country’s firms have “forgotten how to compete”. So have their Canadian counterparts… Many hands have been wrung in recent years over oligopolies in America. Yet next to Ozanada, the world’s largest economy looks like a paragon of perfect competition… Of the 38 members of the oecd, only three—Iceland, Mexico and New Zealand—are less open to foreign investment … Ozanada Inc’s limitations are particularly acute at the cutting edge of technology. Products deemed “high-tech” by the World Bank, such as computers and drugs, represent more than 7 per cent of the combined exports of oecd members, but only 4% for Canada and less than 2 per cent for Australia”

“Australia and Canada are one economy—with one set of flaws” – The Economist

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Diversion: “NASA Learns the Ugly Truth About UFOs” – The Atlantic

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