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January PPI & Market Update -2

08:50 27-Feb-26


January PPI numbers came in at +0.5% for the headline and +0.3% for Core.  The former is two tenths of a percent above most estimates, but the latter is a tenth below, reflecting increased service pricing.  Though this delayed report seems unlikely to budge near certainty of a Fed hold on March 18th, it may further undercut confidence in the value of the AI trade that I've been harping on, as increased productivity from AI should be juicing corporate profits.  Some will argue this is just a ramp up spending blip, but our parent CrowdWisers service looked at Nvidia earnings, below, and paints a different picture.  Rising concerns about private equity debt won't help either.  

Next week should be all about the labor market.

On 2/25/26 8:18 PM, Esekla wrote, in part:
This seems like the most appropriate place to comment on this evening's Nvidia earnings, where the company recorded its seventh consecutive quarterly revenue record, 91.5% of which was from data centers.  By contrast, its former core gaming business is suffering due to memory chip shortages, which management expects to persist.  NVDA shares have given back all of today's pre-earnings gains and a little more, despite continued Blackwell traction.  My two takeaways are:
  1. the AI investment boom is still in full stride, but it is hollowing out almost everything else in the investment world.
  2. the resultant resource shortages are driving the megacaps that are hell bent on winning this contest to find alternate avenues of doing so.
#1 is generally accepted by now and the recent pricing caution we're seeing in the market reflects understanding that when this trend finally does top out, it's going to take a lot of the financial world down with it.  #2 is reflected by Google financing cloud startups that will use its TPUs, and the AMD warrants that the company essentially gifted to Meta in their canary deal, below, to help it finance the extended purchases.

All of these stocks have held on to recent gains, yet LUMN shares were down 5% today, in keeping with my commentary below.  Yet I think it's worth noting that Nvidia's networking revenue for the quarter more than tripled to $11b, rivaling Lumen's.  The difference is the balance sheets.  Nine months ago, I referenced the Thucydides trap governments are in when commenting on Nvidia earnings and another tariff blow.  I see big tech in a similar situation, especially in the wake of government interventions.  Ultimately, I don't think this is a race that has a finish line, and thus not one that any of the participants wins.  Yet in a story dominated market with too much available capital, it's viewed as corporate suicide to simply drop out.  Self-directed investors do have better options, though.