PCE inflation matches forecasts… more signs that the AI spending boom isn’t over… the dark side of AI gets darker… playing offense and defense in today’s market VIEW IN BROWSER Before we begin, a reminder that our InvestorPlace offices will be closed on Monday in honor of Labor Day. If you need help from our Customer Service Department, they’ll be happy to assist you on Tuesday when our offices reopen. Have a wonderful long Labor Day weekend! This morning, PCE inflation showed that prices remain elevated The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, came in hot in July – yet, importantly, not hotter than expected. Headline PCE increased 0.2% for the monthly reading and 2.6% on the year. Both these figures matched forecasts. The yearly reading also matched June’s number. Core PCE, which strips out volatile food and energy prices, climbed 0.3% from June to July, matching estimates. On a yearly basis, the figure jumped 2.9%. While that number also matched forecasts, it was up 0.1 percentage point from the prior month and was the highest annual reading since February. Here’s Bloomberg with where we saw the higher prices: The pickup in inflation was driven by higher costs for services, which rose by the most since February. That included a jump in portfolio management fees, reflecting a months-long stock market rally. Recreational services costs including live sports and entertainment also increased. Although the numbers are hotter than Wall Street wanted, they’re not so hot that they’re materially impacting hopes for a September rate cut. We see this by looking at the CME Group’s FedWatch Tool, which shows us the probabilities that traders assign to different fed funds target rates in the future. As I write Friday, the odds of a quarter-point cut in September clock in at 87.1%. That’s even higher than yesterday’s reading of 86.7%. Meanwhile, yesterday evening, Federal Reserve Governor Christopher Waller reiterated his support for a September cut: Based on what I know today, I would support a 25-basis point cut at the Committee’s meeting on September 16 and 17. While there are signs of a weakening labor market, I worry that conditions could deteriorate further and quite rapidly, and I think it is important that the [Federal Open market Committee] not wait until such a deterioration is under way and risk falling behind the curve in setting appropriate monetary policy. With PCE data now behind us, all eyes turn to one week from today when we get the next BLS jobs report. If we see weaker-than-expected data, a September rate cut is a lock, and speculation about 50 basis points of cuts will fill headlines. We’ll report back. | Recommended Link | | | | One company to replace Amazon… another to rival Tesla… and a third to upset Nvidia. These little-known stocks are poised to overtake the three reigning tech darlings in a move that could completely reorder the top dogs of the stock market. Eric Fry gives away names, tickers and full analysis in this first-ever free broadcast. Watch now… |  | | More signs that the AI spending boom isn’t close to over In yesterday’s Digest, we highlighted comments from Nvidia’s CEO Jensen Huang that suggest the AI capex boom has far more room to run. From CNBC: [Huang] said AI has made “tremendous progress” in the last year and that the build-out of AI infrastructure is still in its early stages. “As the AI revolution went into full steam, as the AI race is now on, the capex spend has doubled to $600 billion per year,” he said. “There’s five years between now and the end of the decade, and $600 billion only represents the top four hyperscalers.” Huang projected $3 trillion to $4 trillion in AI infrastructure spend by the end of the decade. “The opportunity ahead is immense,” he added. We saw more evidence Wednesday when Google announced yet another multi-billion-dollar investment into datacenters. Here’s Bloomberg: Google is investing an additional $9 billion in Virginia through 2026 to enhance cloud and AI infrastructure across the state… Google’s commitment to expanding AI infrastructure follows similar commitments from other technology companies, with Microsoft Corp., Amazon.com Inc., Alphabet, and Meta Platforms Inc., expected to spend hundreds of billions this year altogether, much of it on AI-related expenditures. But is AI “Dr. Jekyll” or “Mr. Hyde”? While Google’s datacenter spend is yet another ringing endorsement for the AI buildout and related stocks, a second headline from Wednesday – also involving Google – underscored the shadow side of the boom. From CNBC: Google has eliminated more than one-third of its managers overseeing small teams. “We have to be more efficient as we scale up so we don’t solve everything with headcount,” Google CEO Sundar Pichai said at a town hall meeting. To be clear, that’s not a 33% reduction in headcount. Some of these managers will remain within Google as individual contributors. But the overall trend is clear: Google has been slashing jobs in recent years, funneling the money into AI…which will then likely be used to replace even more human jobs. Here’s a quick recap of the job losses: - In 2023, Alphabet cut 12,000 positions – around 6% of its global workforce – “doubling down on artificial intelligence (AI)” as Reuters put it
- In 2024, another 1,000 cuts hit Google Cloud, Platforms & Devices teams, with the goal being a reallocation of resources to AI investments
- And earlier this year brought more cuts, as Bloomberg reported – “to free resources to invest in the business and artificial intelligence”
The “haves” versus the “have nots” in today’s economy While the net worths of the “haves” keep soaring (in large part thanks to investments in AI leaders), the financial condition of the “have nots” keeps deteriorating. But as AI grows more intelligent and capable, the “have nots” bucket is expanding – exactly as we’ve been warning it would. Let’s go to CNBC from earlier this week: There is growing evidence that the widespread adoption of generative AI is impacting the job prospects of America’s workers, according to a paper released on Tuesday by three Stanford University researchers. The study analyzed payroll records from millions of American workers, generated by ADP, the largest payroll software firm in the U.S. The report found “early, large-scale evidence consistent with the hypothesis that the AI revolution is beginning to have a significant and disproportionate impact on entry-level workers in the American labor market.” Most notably, the findings revealed that workers between the ages of 22 and 25 in jobs most exposed to AI — such as customer service, accounting and software development — have seen a 13% decline in employment since 2022… The study — which hasn’t been peer-reviewed — appears to show mounting evidence that AI will replace jobs, a topic that has been hotly debated. Zeroing in on that “hotly debated” note, so far, we haven’t seen widespread job losses from AI. Some talking heads are concluding that massive AI-related jobs losses won’t materialize. That conclusion is short-sighted. Most AI-related layoffs so far have hit white-collar or tech jobs that are only a portion of the broader workforce. Plus, job losses are being offset by new jobs in areas like healthcare, construction, hospitality, and transportation, which aren't as vulnerable to AI… yet. For example, so far in 2025, service sector job growth has remained solid. Next, many laid-off workers are finding new roles, often in companies adopting AI but needing people to manage, prompt, or train the systems. In other words, for the time being, AI is being used to augment rather than replace workers. So, many companies are restructuring workflows rather than eliminating full positions. But let’s be clear… With AI/robotics rapidly approaching the point at which it will be capable of replacing tens of millions of workers (or more), this is a phase. It’s a temporary evolution point – not an end point. One of the best (and maybe, only) protective steps we can take today… We must align our wealth with the AI companies that will benefit from the transition to an AI/robotic workforce. Here’s how our technology expert Luke Lango puts it: You must invest in the AI economy. And not just any stocks – not “tech” broadly or the old software companies pretending to be AI. You need to own the platforms, infrastructure, and picks and shovels behind the AI revolution. Those are the companies that will capture the productivity gains, own the intellectual property, rent out the models, provide the chips, lease the robots, and keep compounding – regardless of whether 30 million jobs vanish or not. We’re talking: - Foundational AI companies: Think Nvidia (NVDA), AMD (AMD), Broadcom (AVGO), and Marvell (MRVL)
- Applied AI and robotics firms:Tesla (TSLA), Palantir (PLTR), UiPath (PATH), and Symbotic (SYM)
- AI infrastructure plays: Arista Networks (ANET), MP Materials (MP), Constellation (CEG), Cisco (CSCO), Oracle (ORCL), and more
These companies are likely to be the only ones compounding real earnings while the rest of the market flails. (Disclaimer: I own AMD and SYM.) These are just a handful of the stocks that Luke likes. For his official recommendations in Innovation Investor, click here. But what about an AI bust? That’s a real risk not to be dismissed. Luke has gone on record agreeing that AI will eventually hit its bubble phase, ultimately ending in a fiery crash. But not anytime soon: Over the next 12 months — and likely longer — the AI train will keep barreling down the tracks. Earlier this week, Luke presented a fascinating chart that helps illustrate this. It overlays today’s AI bull run with the 1990’s Dot Com bull run. From Luke: AI stocks in the 2020s continue to nearly identically track the path that internet stocks took in the 1990s – implying that the AI Boom still has plenty of runway left. 
As you can see, tech stocks in the AI Boom are following almost the exact same path they took throughout the Dot Com Boom. If this analog holds up, that would put us somewhere around the halfway point of the AI Boom – and the second half could be a lot better than the first half. If you’re still nervous about being in today’s market… Play smarter offense and defense. Beginning with “defense,” if valuations have you worried, you and our macro investing expert Eric Fry think alike. If you’re new to the Digest, Eric is one of our industry’s best kept secrets. Though his name isn’t in the headlines alongside hedge fund managers like Paul Tudor Jones, it should be… Eric won a charity stock picking contest a few years ago, beating out more than 650 competitors, including billionaire hedge fund managers like Bill Ackman, David Tepper and David Einhorn. He’s also dug up 40 different stocks that have gone on to return 1,000%+. Most investors are lucky to get one. With that track record, we take Eric’s market analysis very seriously. Today, due to overvaluation, Eric is urging investors to sell their Amazon, Tesla, and even Nvidia shares. He believes they’re fantastic companies, but not necessarily great investments at today’s prices. This recalls a quote from Howard Marks, co-chairman of Oaktree Capital Management: There’s no asset so good that it can’t be overpriced and become a bad investment, and very few assets are so bad they can’t be underpriced and be a good investment. To help investors navigate this tension, Eric just published a “Sell This, Buy That” research package that explains his “sell” recommendations and reveals what he’s buying instead. Here’s more from Eric: I’ve compiled a list of three companies that I believe are “Buys.” These are under-the-radar, early opportunities that can help you protect and multiply your money during make-or-break markets. You can find the details of these companies – ticker symbols and all – in my special broadcast, free of charge. Smarter offense from legendary investor Louis Navellier As we profiled in yesterday’s Digest, Louis believes multiple factors are converging to support a “Trump boom” that could juice specific stocks over the next handful of months – regardless of what the broader market does. We’re running long, so here’s Louis to explain: With every executive order, every tariff, and every proclamation and tweet, President Trump has been setting the stage for the most high-stakes moment of his second term. The administration is pulling out all the stops to unleash what it calls a “stock market boom like the world has never seen.” And come September 30, I believe President Trump will hold a “big reveal” that will drive $7 trillion – right off the sidelines – and into a handful of select stocks. In fact, my system has helped me identify five under-the-radar companies I believe could surge 1,000% in the September 30 aftermath. And because they’re smaller names that most investors haven’t heard about, I believe their stocks could skyrocket as the money starts flowing. Click here now to learn the details and get access to a free stock recommendation I urge you to buy now… the last time I gave out a free pick, it doubled within a week. Wrapping up… It’s been a big week. Nvidia earnings were strong… PCE inflation was hot but not unexpectedly so… and all signs point toward the AI boom continuing – even though it won’t last forever (and will eliminate a great many jobs). Put it all together and there’s one takeaway… Be smart about it, but let’s stay with this bull market. Have a good evening, Jeff Remsburg | 
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