One thing that’s moving markets 

… is the ongoing AI enthusiasm heading into the first quarter earnings season. 

Between December 15, 2023, and March 14, 2024, 179 companies in the S&P 500 mentioned “AI,” second only to the record of 181 companies set in the second quarter of 2023.¹ Among those 179 companies, the average number of times “AI” was mentioned was 13, while nine companies mentioned it more than 50 times. NVIDIA alone mentioned the term a whopping 114 times, the most of any company. 

Since March 15, companies mentioning AI on earnings calls averaged a more than 28% return, while companies that didn’t averaged just under 17%.¹  

There’s a long list of companies currently expanding their involvement in AI, though no sector has benefited quite as much as the semiconductor industry, driven by demand for technology known as graphic processing units. 

Growing need for GPUs 

Graphic processing units (GPU) are fundamental to AI because of their ability to perform advanced computations, drastically reducing the time for training and inference in AI models. Some liken the GPU’s role in AI to the picks and shovels of the gold rush: No matter who strikes gold with AI, they will likely need GPUs to do it. 

This essential role in the AI industry is why semiconductor companies like NVIDIA, AMD, and Super Micro Computer have seen their stocks push to record highs in recent months, as established tech companies like Microsoft, Meta, and Amazon purchase them for a competitive edge in this emerging space.^{2, 3, 4, 5, 6} 

The advancements stemming from AI models trained with these GPUs are still in the early innings, and outside the major chipmakers, AI has yet to make a meaningful impact on company earnings. But with some of the biggest businesses in the world exploring AI’s potential, that moment may come sooner than later. 

AI catalysts on the horizon 

With the first quarter earnings season already underway, investors will be paying attention as executives, particularly those in big tech, lay out plans related to AI.  

Amazon has invested heavily in the technology, most recently providing $4 billion in funding to the startup Anthropic, the Everything Store’s largest venture investment to date.⁷ Meanwhile, Meta recently launched its latest chatbot Llama 3, which it plans to integrate into its social media products like Instagram and Facebook.⁸ Google has also newly entered the space in full swing, with a string of new features powered by its chatbot Gemini. Tesla is now bringing years of AI development to the public with robotaxi, which it’s expected to announce in August.⁹ 

With most major tech companies investing in AI, this earnings season and subsequent summer will likely be filled with announcements of the progress of these investments. 

And a few top headlines 

The number of Americans aged 100 and older is expected to increase from approximately 101,000 in 2024 to around 422,000 by 2054, according to the U.S. Census Bureau.¹⁰ 

• This growth marks a significant rise from just 2,300 centenarians in 1950, and will have significant implications for financing retirement, especially if older Americans stick to the traditional retirement age. 

The IRS extended the waiver on required minimum distributions (RMDs) for some heirs of inherited retirement accounts through 2024.¹¹ 

• Prior to the Secure Act of 2019, heirs could make withdrawals over their lifetime, but new RMD rules shortened that timeline. The waiver postpones penalties for missed RMDs, but heirs will still have 10 years to empty inherited retirement accounts.  

Mortgage rates hit a new 2024 high in April at 7.5% – the steepest since last fall.¹² 

• Analysts late last year predicted that rates would drop by spring, incentivizing prospective buyers to enter the market. Regardless of elevated rates, sales of newly built homes in the U.S. rose by nearly 9% month-over-month in March, logging the biggest increase since December 2022.¹³ 

What to be on the lookout for next week 

Next Thursday, the Treasury will make its quarterly refunding announcement. This event could have major implications for Treasury yields, including longer duration Treasuries like the U.S.10-year, the basis for most borrowing throughout the economy.

When the Treasury refunds itself, it decides the composition of bills, notes, and bonds it wants to issue. Generally, there is ample supply for short-duration Treasuries, like 3-year bills, because there is less duration risk, so the long end is the area of interest. However, the more longer-duration Treasuries (like 10-year notes or 30-year bonds) the Treasury uses to fund itself, the more the market has to absorb. 

If the Treasury issues more notes or bonds than the market is willing to absorb, interest rates will move higher to attract the necessary buyers. As an example of how this can impact the market, a previous refunding announcement on November 1, 2023, worked in the opposite direction: The Treasury issued fewer longer-term securities than expected and yields fell dramatically.¹⁴

With that in mind, investors will be watching this refunding announcement for its potential impact on the yield curve.