Big Picture
💡 Inflation cooled, interesting AI signals.
Are you tired of talking about inflation concerns? I am, but we continue. This week both inflation prints came in soft. CPI which is what consumers see came in at 3.4% Y/Y, PPI which is a input to future CPI came in at 4.7% Y/Y, and both landed below expectations for the second month in a row. We think this pushes the next rate hike further out and gives Warsh room at Jackson Hole to sound patient. One more inflation report lands before the Fed meets in September so not totally in the clear, but good news.
On the AI side, the story we’ve been running with keeps showing up in different ways. First news broke that Anthropic is reportedly getting bid at $2T. That is interesting on standalone basis, but then add in some chaos signals coming from OpenAI, the AI debate is quite interesting.
To top if off labor is entering its seasonal slow period, another good thing for Fed doves, energy is calm (for now), and Meta got a call out.
This week is a little different. Showing not only do we use data, but you have to add a layer of qualitative info to help build your investing mosaic.
Here we go…
[1] Inflation cooled on both sides of the print. Here is inflation section.
Let's kick it off with Consumer Price Index. Of course.
CPI came in at 3.4% Y/Y, down from 3.5%. Producer Price Index or PPI came in at 4.7%, down from 5.5%.
Both measures of inflation and both at or below expectations, and… both moderating for the second month in a row after peaking in the spring. Something we've been talking about since the tariff pass-through started showing up in the goods line a year ago. So underlying inflation is not a concern overall. The main reason we are talking about it is due to the war, which led to oil prices surging which drove headline prices. The Fed historically looks through one off bursts like energy, and Warsh sounds patient so far.
Above we annualize all the key measures of inflation using 1-3-6-12 month figures. The takeaway? All continue to migrate lower with some speed bumps along the way.
Lastly on inflation and I think this is a cool index, so for my stat data nerds, you will like this. Here we split the inflation line items into rate sensitive and non rate sensitive. The point? To figure out whether raising or lowering rates would impact underlying inflation. For example if you raise rates will that stop health insurance prices from going up… probably not. Will it impact credit card spending on consumer items? Yes. Right now rate rate INSENSITIVE (ie energy and insurance) are higher than rate sensitive. Meaning nothing to do from the Fed.
[2] Anthropic reportedly gets bid at $2T.
Ok now we get into some cooler items. The FT is reporting Anthropic is in early talks for a round that would value the company around $2T. WOW.
That’s a step change from the last mark and it puts the frontier model race squarely in the trillion-dollar bucket. Money keeps chasing the frontier, but the compute bill keeps growing right alongside it.
This has two implications.
1. Everyone was all in on OpenAi just 12 months ago. To me calling a winner in such a transformative moment is dangerous. So much capital is flowing here that the winner will likely keep changing, especially as the way to shift from one vendor to the other can literally take 10 minutes.
2. We have exposure to Anthropic. More on this later but if you follow our work, there are interesting ways to get exposure to arguably current most important company in the world today.
[3] Polymarket odds keep shifting on the frontier.
If prediction markets say so, then it must be true right? That is me being facetious, but Polymarket has been a decent real-time read on what the market thinks about who leads next in AI. The odds keep moving as new models drop. We watch this the same way we’d watch positioning data. Not a signal on its own, but useful context when it moves fast. It says Anthropics valuation keeps moving up.
[4] Zoom is getting a sum-of-parts read.
We’ve broke out Zoom into pieces. Core video, contact center, phone, and now the AI-native workflows. That is its core business. Then you have cash. Then you have… drum roll… Anthropic stake. At $2T for Anthropic stake, that squarely puts Zoom’s stake probably somewhere near $6-10B. Some other companies have stakes too, so not the only way to play it, but as a percent of market cap, Zoom is right at the top. Do your own research.
[5] Chaos at OpenAI? COO Brad Lightcap leaving…
Brad Lightcap COO at OpenAI is leaving. He has equity, he knows what is going on there, he knows running frontier is expensive, exhausting, and the returns from each new model are getting harder to earn.
Now some will say hey he is moving on and he made enough money already.
My view is simple: Doesn’t Sam Altman keep saying we are hitting AGI by 2030. Same thing said at Google, and said at Anthropic.
Well if that is true. Who in their right mind would leave the #1/#2 leader up to AGI?
My take: AGI is either not 2030… or OpenAI is not in position to lead. Both can be true. Or maybe yeah he wanted a break. Signal to me.
[6] Then we have the Chief Revenue Officer.
And then this. Whatever OpenAI is going through internally, it’s not a company acting like everything is smooth. The CRO who just took over 8 months ago is leaving also.
More signal. Take it how you want.
[7] Bessent on Meta Muse.
This one is interesting and a signal the other way. Treasury Secretary Bessent flagging Meta Muse this week is not a small thing. When policy voices start naming specific AI products, it’s a signal that the surface area of AI is getting bigger, not just in the market but in DC too. Meta is spending like they know this.
Again interesting since I do not think Bessent is one who would tweet/x things on a fly.
[8] Suhail on the switching cost.
Suhail, one of the youngest YC members ever, had an interesting take. His take on switching between frontier models is worth reading. The cost of moving between them is dropping toward zero (as we have been saying for a while), which is exactly why the value in AI is moving up the stack toward workflow and distribution. Again this is a thesis we’ve been running with for a while now.
[9] ADP weekly hiring pulse stays soft.
Now some jobs data. ADP’s weekly hiring read keeps trending below where we were a year ago. Not falling off a cliff, but clearly cooling. That fits with the inflation prints and gives the Fed room to sit still. We’re watching this weekly, not monthly, because that’s where the real turn will show up first.
[10] Avory at BARR team event.
A great night with the BARR team this past week. Real relationships still matter in this business. We’re grateful for the partnerships and the people showing up in person. We laid out our views of the state of the markets, our views on ai, all data driven. If you want to go through the piece with us, let us know!
Net Net
Inflation is cooling, labor is hitting seasonal slowdown, and the AI dollars keep chasing the frontier while the value seems to be moving up the stack. We stay long the names that turn AI into cash, and we stay patient on the Fed. One more inflation report before Jackson Hole. Chairman Warsh gets his shot to set the tone. Let’s see.
That’s all for this week!
About Avory & Co.
Investing Forward.
Avory specializes in high-conviction equity strategies, emphasizing Secular Growth and Transformation Stories driven by exceptional teams. Data guides decisions. We cater to high net worth investors, family offices, and institutional investors. Note: This information doesn’t constitute a recommendation to buy or sell any mentioned securities. Avory is based in Miami, Florida with clients all across the globe.
Speak to us:
Send us an email: Team@avoryco.com
Want to invest? We are on most platforms.
Want More
🎥 Avory YouTube: Channel
🎙️ Avory: Podcast
Disclaimer: Not a recommendation to purchase or sell any securities mentioned. This is for educational purposes only.