Most people don't think about infrastructure unless it fails. A train stalls, a bridge collapses, or storm drains overflow, and your basement floods. We take this infrastructure for granted, but the rise of artificial intelligence is forcing a closer look.Training large AI models requires city-sized amounts of power. And by 2028, data centers are expected to consume up to 12% of all US electricity. That's up from just 4% last year.Last winter, the country faced elevated blackout risks. These systems pull hu ...

Core Viewpoint - SiTime Corp (SITM) is recommended as a hold rating due to its strong position in the semiconductor industry, benefiting from structural tailwinds from AI infrastructure and data centers, although this strength is already reflected in its current pricing [1] Group 1: Company Analysis - SiTime Corp is identified as a high-quality business within the semiconductor sector [1] - The company is experiencing clear structural tailwinds driven by the growth of AI infrastructure and data centers [1] - The current market strength of SiTime is considered to be already priced in, indicating limited upside potential in the short term [1] Group 2: Investment Strategy - The investment approach focuses on long-term investments while also incorporating short-term shorts to identify alpha opportunities [1] - The analysis is based on a bottom-up approach, examining the fundamental strengths and weaknesses of individual companies [1] - The investment duration is aimed at the medium to long-term, targeting companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]

Group 1 - Vistra Corp. is recognized as one of the 15 Dividend Stocks with low payout ratios and strong upside potential [1] - Morgan Stanley analyst David Arcaro raised the price target for Vistra Corp. to $228 from $225, maintaining an Overweight rating, highlighting that utility performance will be significantly driven by data centers, with growth potential expected in 2026 [2] - S&P Global Ratings upgraded Vistra Corp. to investment grade, indicating a positive shift in the company's perception since its spinoff from Energy Future Holdings Corp. nearly a decade ago [3] Group 2 - Approximately 35% of Vistra's generation capacity is located within the PJM Interconnection grid, which is experiencing strong demand from data centers, and about 96% of the expected generation for 2026 is hedged against fluctuating wholesale power prices [4] - Vistra's shares have more than quadrupled since the beginning of last year, reflecting increased investor interest driven by the demand for power plants that support energy-intensive data centers [4] - Vistra operates as an integrated retail electricity and power generation company, supplying essential power resources to customers [5]

Core Insights - The utility sector has benefited significantly from the AI boom, with major companies securing substantial contracts with hyperscalers, leading to billions in investments in the coming years [1] - Recent concerns about an AI bubble have tempered bullish sentiment, causing investors to question the realization of these promised investments [2] - Despite outperforming the market for most of the year, the utilities sector has recently experienced a pullback, with the S&P Utilities index up 12.41% since the beginning of 2025, compared to a 15.44% gain in the overall S&P 500 [3] Company Highlights - **Dominion Energy, Inc. (NYSE:D)**: - Serves 3.6 million homes and businesses in Virginia, North Carolina, and South Carolina, and provides natural gas service to 500,000 customers in South Carolina [8] - Morgan Stanley reduced its price target from $65 to $62, maintaining an 'Equal Weight' rating, indicating a potential upside of 4.5% [9] - JPMorgan also lowered its price target from $62 to $59, keeping an 'Underweight' rating [10] - Holds a strong position in Virginia's 'Data Center Alley', with 450 data centers connected and over 25% of sales from these facilities; has approximately 47 GW of data-center supply in contracting stages, up from 40 GW [11] - **Eversource Energy (NYSE:ES)**: - Operates New England's largest energy delivery system, serving customers in Connecticut, Massachusetts, and New Hampshire [12] - JPMorgan lowered its price target from $72 to $71, maintaining an 'Underweight' rating, indicating almost 4% upside potential [13] - BofA raised its price target from $72 to $75, maintaining a 'Buy' rating after discussions regarding the utility's regulatory roadmap [14] - Reaffirmed a 5-year capital plan of $24.2 billion through 2029, with additional investment opportunities of $1.5 billion to $2 billion; declared a quarterly dividend of $0.7525 per share, with an annual dividend yield of 4.43% [15]

Inflation Analysis - Inflation is moving in the right direction, but perhaps not as fast as indicated in the report [5] - Shelter costs, a significant component of the consumer basket, are trending lower, supported by Zillow rent indices [2][3] - Imports account for 16% to 20% of goods, while goods excluding food and energy represent only about 20% of the consumer basket [3] - Inflation remains an issue, still a positive number and above the Federal Reserve's target [5][6] Investment and Market Outlook - The market anticipates 2026 to be a good period for the economy, influenced by various factors including starting valuations [7] - The focus is on whether firms can grow into their valuations, leading to a preference for small and mid-cap companies and value stocks [7] - A key aspect for the coming year is the return on invested capital, especially for investments in artificial intelligence and data centers [8] - The tax incentives in the "one big beautiful bill" are expected to drive significant investment spending in areas like data centers, buildings, computers, and machinery [8][9] - The market may react differently to economic news than expected, as seen in 2018 after the 2017 tax bill, where small caps underperformed despite initial expectations [10][12] - The next chapter in AI is about use cases and specific areas where a decent return on investment can be achieved, such as healthcare, the service sector, industrials, and logistics [16][17]

Core Insights - The rise of artificial intelligence (AI) has significantly impacted the tech industry, leading to major shifts in company strategies and investments [1][2]. Industry Overview - The AI boom encompasses various aspects, including consumer applications like ChatGPT, substantial investments in data centers and cloud infrastructure, and the demand for high-performance hardware from companies like Nvidia [2]. - Data centers are crucial for AI, requiring vast amounts of data storage and processing capabilities, with estimates suggesting that an AI query consumes ten times more electricity than a standard Google search [5]. Company Focus: Taiwan Semiconductor Manufacturing Company (TSMC) - TSMC is positioned to benefit from the anticipated data center build-outs, with major companies like Alphabet, Amazon, and Microsoft planning to invest billions in this infrastructure [3][6]. - TSMC dominates the advanced AI chip manufacturing market, holding over 90% market share, and is essential for companies like Nvidia and AMD that design AI chips [8][9]. Financial Performance - In Q3, high-performance computing (HPC) represented 57% of TSMC's revenue, amounting to $33.1 billion, a significant increase from 39% three years prior [10]. - The shift from smartphone revenue to AI chip demand is favorable for TSMC, as AI investments are expected to be more stable compared to consumer electronics [10]. Competitive Advantage - TSMC's chips are not only faster but also more power-efficient, with the new A14 manufacturing process expected to yield chips that are 15% faster and consume 30% less power [11]. - This efficiency is appealing to data center operators, potentially leading to significant cost savings in maintaining data centers [12]. Valuation - TSMC's stock is currently trading at 28 times its projected earnings for the next 12 months, which is relatively inexpensive compared to competitors like Nvidia and AMD, while still showing strong earnings growth [13]. Long-term Outlook - TSMC is expected to benefit from the projected data center investments, and its business model is vital across the technology sector, making it a solid long-term investment [15].

And speaking of risks, here comes a new one for the AI trade from Washington. Dearraosa has more in today's tech check. Hi Deerra.So Kelly, this is why it's a risk. It's because political pressure can raise costs very quickly. States, they can require more upfront.They can lock in longer power contracts, even create special rate classes that shift more of the cost back to big tech. And that pressure is building. Three Democratic senators, Elizabeth Warren, Chris Van Holland, and Richard Blumenthal.They sent ...

Market Trends & Economic Data - Investors are preparing for more information on the US economy, with stocks, bonds, and the dollar wavering [3] - The week will bring economic data releases, including inflation and jobs reports, influencing future Fed policy [4] - The US Treasury market is debating the extent of Federal Reserve interest rate cuts [12] - Delayed announcements of monthly employment and inflation figures due to the US government shutdown are creating a void [13] - There's a debate on whether the economy is transitioning from deleveraging to re-leveraging [40] M&A and Corporate Strategy - The pursuit of Warner Brothers Discovery by Netflix is ongoing, with concerns about job losses and theatrical releases [5] - Netflix co-CEOs are trying to reassure employees about the company's bid for Warner Brothers Discovery, reiterating no business overlap and studio closures [59] - Global M&A activity has been strong, with volumes at $45 trillion, setting up for 2026 to potentially exceed the record year in 2021 [78] - A potential Netflix acquisition of Warner Brothers could be a $827 billion deal [60] - iRobot filed for bankruptcy, with its common stock to be wiped out under the proposed Chapter 11 plan, listing between $100 million and $500 million in assets and liabilities [118][120] Energy & Utilities - National Grid is spending billions of dollars to prepare New York's electric grid for a generational shift, including data centers [93] - National Grid serves over 4 million customers in New York, delivering natural gas and electricity [97] - Cumulative power needs from companies wanting to connect to the New York grid over the next five years are estimated at about 10 gigawatts, tripling in size in one year [99][100] - West Texas Intermediate crude oil (WTI) is down 13%, at $5674 a barrel [92] Cryptocurrency - MicroStrategy acquired almost $1 billion in Bitcoin for a second straight week, despite the cryptocurrency falling [124] - Bitcoin is down 23%, at $86,432 [10][92] - Bitcoin is down about 30% from an all-time high of just over $126,000 in early October [126] Financial Markets Performance - The Dow, S&P, and Nasdaq are all in the red [8][55][56][91][115] - The Bloomberg Mag Seven index is holding onto a gain of 4/10 of 1% [8] - The S&P 500 index is down 1/10 of 1%, lower by six at 620 [9] - The NASDAQ composite index is down 3/10 of 1%, while the Dow Industrials are down 2/10 of 1% [9] - The ten-year Treasury yield is currently at 417%, with the two-year at 350% [9] - Gold is up 4/10 of 1%, at $4314 the ounce [10] - The Russell 2000 index is declining, down 6/10 of 1% [55] - Gold is up $13 the ounce, at $4312, up 3/10 of 1% [56]

Fed Policy & Economic Outlook - Potential Fed chair candidate's willingness to discuss Fed plans with the President raises concerns about Fed independence [2][3] - An independent Fed chair is crucial, even if it goes against political interests [4] - Supreme Court emphasizes the need for Fed independence [5] Tariffs & Trade - Supreme Court's decision on tariffs could significantly impact the economy, potentially requiring paybacks or halting tariffs [5][6] - The uncertainty surrounding tariffs is a major concern for businesses [7][21] - Tariffs can protect domestic industries, such as the automobile industry, from foreign competition [22][23][24] AI & Economic Growth - The current administration is increasingly focused on being known as the "AI president" [8] - AI investment is significantly boosting the US economy, potentially masking flat GDP growth if removed [14][15] - AI-related investments are benefiting various sectors, including construction, energy, and real estate [15] - A significant portion of stock market returns, particularly in the NASDAQ, is driven by a few AI-related companies [17] - The AI boom and the current administration's policies are closely linked, potentially creating a "bubble" [18] Political Implications of AI - There is a lack of coherent messaging from the White House regarding AI, leading to public concerns about data centers, electricity bills, job displacement, and children's exposure [11][12] - Politicians are starting to recognize the potential downsides and political risks associated with AI [13]

Market Overview - The stock market is experiencing a pullback from record highs, with the Dow down 204 points and the NASDAQ down 1.5% for the week [1][2][3] - The S&P 500 is down about 0.5%, while the Russell 2000 has seen a gain of 1.5% over the last five days [3][4] - The bond market has shown significant movement, with the 10-year yield at 4.19% and the 30-year yield at 4.86%, the highest level in three months [4][5] Sector Performance - Consumer staples and discretionary sectors are showing limited gains, while technology and energy sectors are underperforming, with XLK down 2.7% [5][6] - Broadcom is a major drag on the NASDAQ, down 11.8% after failing to meet high expectations [6][7] Company Highlights - Oracle has denied reports of delaying data center projects for OpenAI, maintaining that all milestones are on track [29] - Wealthfront made its public debut on NASDAQ, raising approximately $485 million with an opening share price of $14 [30] - Costco reported better-than-expected earnings, with comparable sales climbing 6.4%, although membership fees saw a slight decrease [31] Investment Insights - Carvana, Robinhood, and Coinbase have made significant recoveries and are being added to the S&P 500, with Carvana's stock up 11,000% from its lows [13][15][18] - The Fed cut rates by 25 basis points, with expectations for one or two more cuts by the end of the year [20][21] - Analysts suggest that the market is currently focused on the Fed's actions and the implications for inflation and employment [21][22] Future Outlook - Rivian is focusing on developing custom self-driving chips as part of its AI strategy, aiming for a significant shift in transportation technology [33][34] - The bond market outlook for 2026 suggests a potential increase in yields, with a focus on the 5-30 year yield curve [68][70] - Concerns about credit dispersion in the corporate market are rising, with some sectors expected to struggle in 2026 [75][76]