Inflation moderated as Intel and Nvidia fueled the AI trade in last week's market
Inflation moderated as Intel and Nvidia fueled the AI trade in last week's market, with the S&P 500 and Nasdaq posting their third straight winning weeks. The S&P 500 rose above 7,800 during Thursday's session for the first time ever, closing at a record. The Dow, however, bucked the trend, falling nearly 0.6% for the week. The market's gains were driven by two closely watched inflation reports, which eased concerns that the Federal Reserve will need to raise interest rates at its September meeting.
Market Performance
The consumer price index on Wednesday showed an increase of 0.1% in July, while the annual inflation rate eased to 3.4%. Both were in line with estimates. Jim called the report "very benign." The following day, the producer price index came in unchanged for the month, cooler than the 0.2% increase economists expected. On an annual basis, the headline PPI increased 4.7%. Together, the reports offered further evidence that inflation is moderating, even as it remains above the Fed's 2% target. Treasury yields moved lower as traders dialed back expectations for a September rate hike. By the end of the week, markets were pricing in a 67% chance that the Fed would keep its benchmark rate unchanged, up from 55% a week earlier, according to the CME Fed Watch tool.
Intel's AI Future
Intel's massive stock sale initially rattled investors, but it was ultimately viewed as another sign of management's confidence in the company's AI opportunity. The chipmaker announced Monday that it planned to sell $15 billion of common stock, sending shares down 4%. Intel then increased the offering to $20 billion Tuesday after strong demand for the initial deal. We used Monday's weakness to buy more shares of Intel as it remains Jim's favorite way to play the AI buildout. Building semiconductor manufacturing capacity is expensive, and we don't think CEO Lip-Bu Tan would raise this much capital unless he had confidence that customers will be there to support the investment. That conviction received another boost Wednesday when a regulatory filing revealed that Tan and one of his family members agreed to purchase a combined $12 million of stock in the offering.
Nvidia's Financing Push
Nvidia announced that it has partnered with six large asset managers on a $500 billion financing push designed to turn AI compute into an investable asset class. The chipmaker signed agreements with Apollo Global Management, Blackstone, BlackRock, Brookfield Asset Management, KKR, and Club holding Goldman Sachs to establish financing platforms for Nvidia customers. Jim called the initiative a "monumentally positive change." Skeptics have questioned whether graphics processing units (GPUs) can support this type of financing because the chips have historically been viewed as rapidly depreciating technology. Nvidia is making the case that its GPUs should instead be treated as long-lived, revenue-generating infrastructure that can be financed against the cash flows it produces. CoreWeave's results this week strengthened that argument, with CEO Mike Intrator explaining that older Nvidia GPUs are remaining useful longer than some investors expected. That could make the chips more attractive to lenders and unlock another major source of capital for the AI buildout.
The week's developments have significant implications for the AI trade, with Intel and Nvidia leading the charge. As Jim put it this week, "The revolution is here." Shares of Nvidia rose 0.5% for the week, while Goldman was flat. Intel and Micron ended the week up roughly 1% and 11%, respectively. The market's reaction to these developments suggests that investors are becoming increasingly confident in the AI trade, and we expect this trend to continue in the coming weeks. As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade, and we will continue to monitor the market's developments and provide updates on our investment strategy.
Source: CNBC · 2026-08-15