The AI boom is supposed to be a tech story. Larry McDonald thinks it’s a commodities story. On this episode of In the Money with Amber Kanwar, the Bear Traps Report founder and best-selling author explains why surging demand for copper, uranium, oil, natural gas and gold could create some of the biggest investment opportunities of the next decade.
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We are going to the Calgary Stampede again this year! We will have a feature interview with Enbridge CEO Greg Ebel and I’d love for you to be part of our audience if you will be in town. The taping is on July 8th in the morning. If you would like to be part of it please email stampede@inthemoneypod.com and we will get you on the list!
Here are five things to know today:
Settling down: Stocks are recovering after selling off yesterday following the first Federal Reserve rate decision under Kevin Warsh. Even though the Fed maintained rates as expected, more than half of voting members see rates going higher. A rate hike is now fully priced in for October with a 50% chance of a second rate hike after that. Warsh made his mark in two major ways: the statement was just seven sentences long and Warsh declined to provide his forecast for rates. Both are a major departure from how things were done under Fed Chair Powell but are a follow through on promises by Warsh to reduce communication with the market. He is also going to form several task forces to examine things like Fed communication going forward and how the Fed uses its balance sheet. Even though Warsh was brought in presumably to lower rates, inflation has proved a formidable foe. And it is not just because of energy prices. Apple announced it was forced to raise prices for its iPhones because of the surge in memory prices. Apple recently printed gross margins of 48% – a record high, so clearly they want to defend that with the price hikes. These days they also have to defend their multiple – trading near 10x sales which is also a record high.
With a little help from my friends: Intel is soaring 8% and poised to open at a record high after US President Donald Trump announced it would be working with Apple to design chips in America. Remember, the US government now owns a stake in 10% of Intel. Trump posted on Truth Social he “decided to help Intel” which needs external customers for its chip production business. “This is the right time to do this deal with Apple looking to diversify its manufacturing footprint with demand for advanced chips higher driven by AI chip developers and reducing reliance on TSMC, Apple’s major overseas provider,” wrote Dan Ives of Wedbush. I own Intel and Apple.
Sticker shock: Empire reported mixed results in which profit beat and the dividend was raised more than expected, but the margins were slightly below expectations and sales were a miss. The profit beat at the owner of Sobey’s and Farmboy grocery stores was due to lower taxes and investment gains. On the conference call they said they expect profit to be at the high end of their long term framework. Same-store sales grew 1.7% which is a deceleration from the same time last year and e-commerce only grew 6% which is below the 20% growth we’ve seen at rival grocers.
Maple AI: BCE, Cohere, Hypertec, and HIVE are teaming up to build AI infrastructure in Canada. Shares of HIVE are up 12% on the announcement. Not that long ago, HIVE was a crypto miner but with all that compute power they have now pivoted to powering the AI sector. Bell will be providing the data centre capacity, HIVE will provide the compute power, and Cohere will be the platform that sits on top of it all. The release bills itself as a Made in Canada solution to the growing push of sovereign AI. The push for a Canadian solution comes right from the top. “We are highly dependent on foreign suppliers for the infrastructure that powers AI – from compute to cloud to data storage,” said Prime Minister Mark Carney in early June, “That creates real risks that foreign entities could access Canadian data, deploy AI products that shape Canadian lives without reflecting our values, and tilt the playing field against Canadian firms while Canada lacks the leverage to push back or the ability to control.”
Headaches continue: BHP is warning it will take a $2.3 billion writedown on its Jansen expansion potash project on cost and time overruns. This has long been a source of angst for the company and shareholders. Phase 2 expansion of the project is now going to be $6.9 billion, up from the $4.9 billion previous forecast. BHP greenlit the expansion in 2023 – when potash prices were surging post Ukraine invasion by Russia. Prices have since come down, but costs are only going up.
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