Investors say "aye aye, sir" to AI

Summary

Marketplace Morning Report: Investors Say "Aye Aye, Sir" to AI
Release Date: July 31, 2025

In the July 31st episode of Marketplace Morning Report, host David Brancaccio delves into the burgeoning impact of Artificial Intelligence (AI) on the investment landscape, examines recent inflation data, and explores the current state of China’s economy. This comprehensive summary captures the essential discussions, insights, and conclusions from the episode, enriched with notable quotes and timestamps.

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Surge in AI-Driven Investments

David Brancaccio opens the discussion by highlighting the positive market reactions to AI advancements. Early trading for the Nasdaq Index shows a 1.1% increase, with significant gains in major tech stocks:

• Microsoft is up by 5.7%
• Meta (Facebook) surges nearly 13%

Susan Schmidt, Portfolio Manager at Exchange Capital Resources, provides insights into the drivers behind these gains.

Susan Schmidt [01:28]: "They are, and it's making investors very happy. Both Meta and Microsoft reported last night they talked about the AI impacts on the business and those concerns investors had about infinite spend and no return can be alleviated. Because now we're hearing from these companies that AI is actually coming into play and making them more productive and making them more money."

Schmidt emphasizes that the integration of AI is transitioning from mere promises to tangible revenue increases:

Susan Schmidt [01:54]: "And not just sort of promises and forecasts and guidance, but actual cash on the barrel head, more money, actual revenue."

Furthermore, Schmidt notes the strategic financial moves by these companies:

Susan Schmidt [02:02]: "Being driven by the implementation of artificial intelligence. And so that's very comforting for investors also because in both cases, while Meta Facebook held their capital expenditures plan steady at the top end of the year, Microsoft increased them and that money's going into more research and more spend on AI infrastructure."

Brancaccio also touches upon the anticipation surrounding upcoming earnings reports from Apple and Amazon, suggesting that the positive momentum from Meta and Microsoft is setting high expectations.

Nvidia and Microsoft Join the $4 Trillion Club

The episode marks a significant milestone as AI chip maker Nvidia becomes the first public firm valued at $4 trillion, with Microsoft following as the second company to reach this esteemed league. Brancaccio provides a brief market overview:

David Brancaccio [02:56]: "This month, AI chip maker Nvidia became the first public firm worth $4 trillion, stock price times the number of stocks in the last few minutes. Microsoft became the second company in that league."

Rising Inflation Concerns

Shifting focus, Brancaccio discusses the latest inflation data, which presents a more challenging picture than anticipated. Diane Swonk, Chief Economist at KPMG, elaborates on the implications:

Diane Swonk [03:33]: "Those core increases are now at 2.8% in May and June. That's above where we thought they were and that's reversing the narrative that inflation was cooling for much of the quarter. In fact, it looks like it re-accelerated and sure enough, the biggest increases on a year-over-year basis came in durable goods."

Swonk draws parallels to 2022, noting the similarity in price acceleration due to supply chain issues, a comparison that underscores the current economic unease.

Diane Swonk [04:00]: "That's an uncomfortable comparison."

She warns of continued price pressures from various sectors, including imported goods like baby items and cleaning supplies, raising concerns for the Federal Reserve.

Diane Swonk [04:39]: "Is this a one-time bump with yet more tariffs in the pipeline starting on Friday? Or is it something more sustained?"

Federal Reserve’s Stance on Interest Rates

Following the inflation discussion, Brancaccio reports on the Federal Reserve's recent briefing. Nancy Marshall Gensler explains why the Fed has decided to maintain current interest rates:

Nancy Marshall Gensler [06:09]: "Inflation is still stubbornly above the Fed's target of 2%. Fed Chair Jerome Powell says the majority view yesterday was the Fed needs to leave interest rates where they are because cutting them prematurely could feed inflation."

She also highlights internal dissent within the Fed:

Nancy Marshall Gensler [06:09]: "Fed governors Michele Bowman and Christopher Waller dissented. We haven't seen that many Fed governors dissenting since 1993."

Powell underscores the Fed's cautious approach, emphasizing reliance on incoming economic data before making further decisions.

Nancy Marshall Gensler [06:09]: "There are no guarantees the Fed will lower borrowing costs at its next meeting on interest rates. What it does depends on the data."

China’s Economic Measures and Consumer Behavior

The episode shifts to China’s economic strategies amidst a slowing economy. Jennifer Pak, Marketplace’s correspondent in Shanghai, provides an on-the-ground perspective:

China's government is injecting vitality into its economy through measures like cutting interest rates and offering subsidies to stimulate consumer spending on big-ticket items. However, consumer caution persists.

Jennifer Pak [07:08]: "Spending on services, including Entertainment, was up 5.3% in the first half of this year, slightly higher than for goods at the Lego driving school, two boys tell me the ride was fun."

Despite increased spending in certain areas, many Chinese consumers are tightening their budgets elsewhere. Cai Tian, a commodities exporter, reflects this trend:

Cai Tian [08:00]: "We won't hire nannies if we can manage."

Economic pressures are evident as households grapple with decreased earnings and significant drops in property prices, which have fallen by at least 20% since 2021. This has led to reduced consumption and increased savings among consumers.

Jennifer Pak [08:22]: "Now that property prices are falling, people are hanging onto their money to increase consumption."

Pak also touches upon the social challenges, such as inadequate healthcare support, exemplified by Youying’s struggle with lung cancer and the financial burden it imposes on her family.

Youying [08:37]: "Since I got sick, my illness has crushed my family."

This situation underscores the need for a stronger social safety net in China to support vulnerable populations.

Trade Tensions and Commodity Markets

Brancaccio briefly addresses recent developments in trade policy, noting the Trump administration’s announcement of a 50% tariff on copper products starting the following day. However, this move has not bolstered copper prices, which plummeted by 22%.

David Brancaccio [09:29]: "And the Trump team has surprised copper markets, announcing a 50% tariff on copper products starting tomorrow. But not copper, the raw material, the price of copper, plain old metal, the commodity has collapsed, down 22% today."

Celebrating a Milestone: Kai Rysdal’s 20-Year Anniversary

The episode concludes with a celebratory note on Kai Rysdal’s 20-year anniversary as a trusted voice in economic news. Brancaccio reflects on Rysdal’s contributions and invites listeners to share their appreciation.

Kai Rysdal [09:55]: "Kai is always there to help you make sense of the economy. So to mark this milestone in his career, we're asking listeners to show their appreciation."

Listeners are encouraged to send their thoughts via e-cards by August 1st.

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Conclusion

This episode of Marketplace Morning Report offers a multifaceted exploration of the current economic climate, emphasizing the transformative role of AI in driving investor confidence, the persistent challenges of inflation, and the complexities of China’s economic revival efforts. Through expert insights and on-the-ground reporting, the episode provides listeners with a nuanced understanding of the forces shaping today's markets.

Transcript

[Marketplace Host]

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[David Brancaccio]

Investors say Aye Aye sir to AI. I'm David Brancaccio in Los Angeles and early trading for the Nasdaq Index, which hosts many technology stocks, it's up 1.1%, Microsoft stock up 5.7%. Meta Facebook up nearly 13%. Susan Schmidt is portfolio manager at Exchange Capital Resources. It's about software getting smarter and companies making actual money off of it.

[Susan Schmidt]

They are, and it's making investors very happy. Both Meta and Microsoft reported last night they talked about the AI impacts on the business and those concerns investors had about infinite spend and no return can be alleviated. Because now we're hearing from these companies that AI is actually coming into play and making them more productive and making them more money.

[David Brancaccio]

And not just sort of promises and forecasts and guidance, but actual cash on the barrel head, more money, actual revenue.

[Susan Schmidt]

Being driven by the implementation of artificial intelligence. And so that's very comforting for investors also because in both cases, while Meta Facebook held their capital expenditures plan steady at the top end of the year, Microsoft increased them and that money's going into more research and more spend on AI infrastructure.

[David Brancaccio]

And the letter of Today Thursday is going to be a the letter A Apple and Amazon report their quarterly results after the market closes. I'm sure you'll be glued to your screens.

[Susan Schmidt]

Investors are going to look at these two companies now and anticipation is high that they will also have positive reports given the good news they just had last night from Meta and Microsoft.

[David Brancaccio]

Susan Schmidt, Portfolio Manager to Exchange Capital Resources. Thank you so much.

[Susan Schmidt]

Thank you.

[David Brancaccio]

This month, AI chip maker Nvidia became the first public firm worth $4 trillion, stock price times the number of stocks in the last few minutes. Microsoft became the second company in that league. S&P is up 7. 10%. Now the Dow is up 2. 10%, 87 points. The central bank's favorite measure of inflation, the core rate of personal consumption expenditures, it's called, just came in hot for June, undermining the narrative a month earlier that inflation was somehow tamping down. Diane Swonk is the chief economist at the audit, tax and advisory firm KPMG.

[Diane Swonk]

Those core increases are now at 2.8% in May and June. That's above where we thought they were and that's reversing the narrative that inflation was cooling for much of the quarter. In fact, it looks like it re accelerated and and sure enough, the biggest increases on a year over year basis came in durable goods. Durable goods, those big ticket items that are most susceptible to tariffs. They increased at their fastest pace on a year over year basis since December.

[David Brancaccio]

2022 when we were coming out of COVID and prices started to accelerate because of the supply chain stuff. That's an uncomfortable comparison.

[Diane Swonk]

It is an uncomfortable comparison and we know there's more to come. We've heard a lot of price increases on everything from baby items, diaper, anything that gets imported, but also cleaning supplies that have a lot of imported content in it. All of those things are going to be pushing up prices in the months to come and that's what the Fed is concerned about. Is this a one time bump with yet more tariffs in the pipeline starting on Friday? Or is it something more sustained?

[David Brancaccio]

KPMG economist Diane Swonk.

[Marketplace Sponsor]

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[David Brancaccio]

This Marketplace podcast is supported by Mercury. Mercury offers banking and financial software to help businesses send money, create invoices, pay bills, and more all in one place. Learn [e-mail] now to our Nancy Marshall Gensler, back from yesterday's Federal Reserve briefing to explain why the committee chose to keep interest rates unchanged for now.

[Nancy Marshall Genser]

Inflation is still stubbornly above the Fed's target of 2%. Fed Chair Jerome Powell says the majority view yesterday was the Fed needs to leave interest rates where they are because cutting them prematurely could feed inflation. Fed governors Michele Bowman and Christopher Waller dissented. We haven't seen that many Fed governors dissenting since 1993. They wanted a quarter percentage point rate cut. Powell stressed there are no guarantees the Fed will lower borrowing costs at its next meeting on interest rates. He says the Fed doesn't make decisions in advance, and what it does depends on the data. There will be two employment and two inflation reports released between now and the September meeting. I'm Nancy Marshall Genser for Marketplace.

[David Brancaccio]

China's government has been shoving more life into its becalmed economy, cutting interest rates and giving subsidies so that people buy fridges, furniture, phones and more. But consumers are still being careful. Marketplace's Jennifer Pak is in Shanghai.

[Jennifer Pak]

China's first Legoland opened this month with a big roller coaster, boat ride and castle. Tickets cost nearly nearly $80. 60 for children. That's double the price of some local theme parks, but the thrilling rides are worth it, says Liao Zuyu with his six year old When I was growing.

[David Brancaccio]

Up in the countryside, we didn't have much to play with, so I want to give my son all the fun I didn't have growing up.

[Jennifer Pak]

Spending on services, including Entertainment, was up 5.3% in the first half of this year, slightly higher than for goods at the Lego driving school, two boys tell me the ride was fun. Their father, Cai Tian, says the budget today is limitless, though he's pulling back in other areas.

[David Brancaccio]

We won't hire nannies if we can manage.

[Jennifer Pak]

We won't buy things if we can make it. Because Cai Tian says he's earning less. He does commodities export, and his business has been hit with U.S. tariffs. And like many Chinese homeowners, he's feeling poor. Property prices have dropped at least 20% since 2021.

[David Brancaccio]

Now that property prices are falling, people.

[Jennifer Pak]

Are hanging onto their money to increase consumption. Some experts say China should strengthen its social safety net. That would help factory worker Youying.

[Diane Swonk]

From.

[Jennifer Pak]

A hospital in central China. She tells me she was diagnosed with advanced lung cancer last year. Although China is a communist country, it does not have a single payer health care system.

[Marketplace Host]

Since I got sick, my illness has crushed my family.

[Jennifer Pak]

The family has gone into debt to pay for her treatment. What little is left you Ying spends on tutoring courses for her children at Legoland. Wang Buguang from nearby nearby Hangzhou City says he spent hundreds for today's family trip, but says he's becoming more thrifty.

[David Brancaccio]

Now. When we travel, we compare prices, which we didn't before. This is a form of cutting back.

[Jennifer Pak]

And after this trip, his family has no plans to travel again this summer. In Shanghai, I'm Jennifer Paak for Marketplace.

[David Brancaccio]

And the Trump team has surprised copper markets, announcing a 50% tariff on copper products starting tomorrow. But not copper, the raw material, the price of copper, plain old metal, the commodity has collapsed, down 22% today. In Los Angeles, I'm David Brancaccio. Marketplace MORNING Report from apm, American Public Media.

[Kai Rysdal]

Marketplace listeners know that voice.

[David Brancaccio]

I'm Kai Rysdal from Marketplace. Let's do the numbers.

[Kai Rysdal]

This August marks 20 years of Kai Rysdal as a trusted voice in economic news from interviews with sitting presidents.

[David Brancaccio]

Mr. President, good to talk to you again, sir.

[Jennifer Pak]

Great to be here.

[Kai Rysdal]

To conversations at local trampoline parks.

[David Brancaccio]

The thing that makes the high concentration of trampoline parks here in Utah County a relevant economic indicator, though it's what it tells you about how demographics affect the economy.

[Kai Rysdal]

Kai is always there to help you make sense of the economy. So to mark this milestone in his career, we're asking listeners to show their appreciation. Tell him how much his reporting means to you by sharing your thoughts in our ecard. Visit Marketplace. Org. Thank you by August 1st to share your appreciation.