To The Moon

The past week has been very exciting, with a flurry of earnings reports and actual volatility far exceeding expectations (35% of TMT stocks that have reported earnings this earnings season have seen volatility of more than 10%), and the software sector is particularly turbulent.

Financial reports indicate that the technology industry continues to maintain high growth amid the AI-driven innovation wave, with emerging trends of differentiation across sub-sectors. The gap between AI winners and losers is widening, sparking market concerns about AI's potential to disrupt intermediaries. Meanwhile, ChatGPT5 made its debut over the weekend, though it fell short of expectations (positive for $Google (GOOG)$), the market remains confident that AI could transform the competitive landscape almost overnight.

Last week was relatively quiet on the macro front, while this week is relatively busy.

July CPI data will be released on Tuesday, and July PPI data will be released on Thursday, both of which will set the tone/narrative for Powell's speech at Jackson Hole on August 21 (will the Fed cut interest rates faster?).

The three major macroeconomic issues facing investors today:

1. To what extent will tariffs continue to drive up commodity prices in the coming months?

2. Will most of the inflation related to tariffs be offset by deflation/price declines in housing and non-housing services?

3. Is the July employment report a fluke, or is the job market in a clear downturn?

Following the release of weak unemployment data, there has been increasing discussion in the market about AI replacing jobs. Never before has technological change forced companies to act so quickly or invest so aggressively as artificial intelligence has.

Since AI can change the competitive landscape almost overnight—by optimizing decisions, reducing costs, and opening up new sources of revenue—companies have no choice but to view rapid application as a rule for survival rather than a long-term R&D project. AI deployment is evolving into a typical winner-takes-all situation.

If unemployment caused by artificial intelligence triggers backlash at the reputational, cultural, or policy levels, its second- and third-order effects may become negative: high-profile AI layoffs could lead to public relations and morale issues (see DUOL's public relations crisis earlier this year). More seriously: a significant rise in unemployment rates will begin to impact corporate revenue (we believe short-term cyclical factors will overshadow long-term structural trends, and let’s not forget that companies like META are fundamentally cyclical advertising businesses).

Companies that are potentially affected by AI in the long term/structurally and are worth paying attention to:

• IT Services and Consulting: ACN, CTSH, IT, EPAM, DXC

• Staffing and recruitment: MAN, RHI

• Creative Software and Media: $Adobe(ADBE)$ , SSTK

• Web development: WIX

• Advertising and Marketing: OMC, WPP, IPG

• Travel and reservations: $Expedia(EXPE)$ , $Booking Holdings(BKNG)$

• Education Technology: CHGG, COUR

• Freelance platforms: UPWK, FVRR

• Accounting and Tax Services: $Intuit(INTU)$ , HRB

• Legal and professional information services: LZ, TRI, RELX

• Language Learning: $Duolingo, Inc.(DUOL)$

• Business Process Outsourcing (BPO) and Call Centers: GEN, FIVN, CNXC

• Human Resources and Compensation Services: ADP, PAYX

$NASDAQ(.IXIC)$ $Invesco QQQ(QQQ)$ $Apple(AAPL)$ $NVIDIA(NVDA)$ $Meta Platforms, Inc.(META)$ $Microsoft(MSFT)$ $Tesla Motors(TSLA)$ $Amazon.com(AMZN)$ $ProShares UltraPro QQQ(TQQQ)$ $ProShares UltraPro Short QQQ(SQQQ)$ $Alphabet(GOOGL)$