From AI to CPI

The word unprecedented has appeared often in headlines this year — and for good reason. Breaking news has been in no short supply, and this week brought another wave of significant government and business activity.

To start, Nvidia and Advanced Micro Devices have agreed to pay 15% of their China revenue to the U.S. government in exchange for export licenses — a move that has sparked both interest and debate. While the arrangement gives the companies access to a massive market, some critics are concerned it could set a precedent for turning national security policy into a “pay-to-play” system. Traditionally, U.S. export controls are enforced for security reasons, not negotiated for financial gain. For Nvidia, the revenue exposure is around 2% of total sales, but the potential growth opportunity made the deal worthwhile.

Elsewhere in the tech world, Apple announced plans to accelerate its investments in artificial intelligence. CEO Tim Cook called AI “one of the most profound technologies of our lifetime” and told employees it could be “as big or bigger than the internet or smartphone.” The company’s shares have been performing well in recent weeks, in part due to this renewed AI focus.

The key macroeconomic news this week was the Consumer Price Index (CPI), which reflected steady headline inflation and may be setting the stage for monetary easing. CPI rose 2.7% over the prior year and 0.2% over the prior month, both in line with expectations. While tariffs have been a central talking point, service prices were the main driver of core inflation in July. With softer labor market data and recent downward revisions to employment figures, the odds of a September rate cut are now believed to be close to 100%. Current expectations call for two 0.25% cuts this year and three more in 2026.

While rate cuts are generally a positive for markets, much of the optimism already appears to be reflected in equity valuations, which remain near record highs. Technology fundamentals — particularly those tied to AI and data center investments — continue to be a major driver.

Lastly, U.S. retail sales rose 0.5% in July, marking a second consecutive monthly gain after a spring slowdown. Although the increase fell short of some forecasts, it helped ease concerns about weakening consumer spending. Strong demand for vehicles — especially electric vehicles purchased ahead of a federal tax credit deadline — and promotional events like Amazon Prime Day played a key role. Furniture and clothing saw gains, while spending on building materials, electronics, and dining out declined. Core retail sales, which exclude more volatile categories, also climbed 0.5%, suggesting solid underlying consumer activity.

Takeaways for the Week:

• Tech sector developments — including Nvidia’s export license deal and Apple’s AI investment plans — are driving market momentum

• Economic data points to stable inflation, likely Fed rate cuts ahead, and continued resilience in U.S. consumer spending

Disclosure

*The views expressed represent the opinion of Ferguson Wellman. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections and other forward-looking statements are based on available information and Ferguson Wellman’s views as of the time of these statements. Past performance may not be indicative of future results. Ferguson Wellman, Octavia Group and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational purposes only and not as a substitute for qualified counsel who can determine how this information applies to you. We believe the information provided is from reliable sources but should not be assumed accurate or complete.

Please see additional disclosures.*