Three Things (4/10)

AI IPO rumor mill

Several artificial intelligence startups are looking into the process of going public, according to an executive at the New York Stock Exchange, as the market for tech listings gains momentum. Recently, there has been clear demand for public offerings and AI-related ventures, specifically. Reddit soared in its public debut after pitching investors on how it could profit from licensing its data to help build AI models and Astera Labs, a semiconductor connectivity company, also had a strong public offering.

Pure play AI companies are few and far between in public markets so the idea that investors can gain access to more options would be a welcomed event for public market participants. It appears that private markets can still finance the necessary capital required but there will be a tipping point when some of these deals become too large to stay private. Public markets are the truest barometer for fair value so we’re excited to see what various buyers and sellers would value revenues associated with AI ventures in an efficient marketplace.

Important inflation report

A closely watched Labor Department report due Wednesday is expected to show that not much progress is being made in the battle to bring down inflation. The consumer price index, which measures costs for a wide-ranging basket of goods and services across the U.S. economy, is expected to register an increase of 0.3%. The ‘core’ inflation gauge, which excludes the volatile price changes of food and energy, is expected to increase by the same amount.

The reports are important as the inflation prints for March and April will play an outsized role in determining whether the Fed proceeds to cut rates in June. Markets have grown nervous about the state of inflation and how it will affect rate policy. Moving towards the Fed’s 2% target doesn’t just mean hitting 2% for one month – it means hitting 2% or less for several months in a row and the Fed needs to be certain this is under control ahead of pivoting monetary policy.

Commodities surge

An index of global commodities prices, the S&P GSCI, has advanced 11% this year, outpacing the S&P 500’s 9.2% climb. Gold is posting fresh records and the likes of copper and oil have moved double digits to start the year. The rally can be attributed to expectations that economic growth will increase demand for raw materials across the global supply chain.

The rise in commodity prices could complicate the Federal Reserve’s inflation fight when investors are already beginning to doubt if the central bank can trim interest rates later in the year. The fight against inflation is most certainly a broader mosaic but a rise in commodity prices won’t help the cause. Although the rally may be partially intensified by speculators and short interest, and not fundamentals, it’s something to monitor as we enter crunch time for decisions surrounding interest rate cuts.

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