☎️ Google's AI Smartphone Released

MARKET UPDATE

Good Morning Investor! On Wednesday, shares of Kellanova ($K) popped like a fresh batch of Rice Krispies, surging 7% after news emerged that biscuit-making behemoth Mars has struck a deal sweeter than a galaxy of chocolate bars. Mars will be acquiring the business for a mouth-watering $36 billion, in what can only be described as the culinary world's hottest hookup since peanut butter met jelly.

Additionally, In a move that's sure to raise more eyebrows than a push-up bra, shares of lingerie maker Victoria’s Secret ($VSCO) spiked 13% after announcing it’s successfully poached chief exec Hillary Super from rival Savage X Fenty as its new CEO. (Perhaps the folks over at Starbucks mentioned that this does wonders for the share price).

TODAY’S BIG HEADLINES

Google Releases its First AI-Powered Phone

US & UK Inflation Signals it’s Time to Cut

Musk’s War with the EU and Britain

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MEGA CAPS & ARTIFICIAL INTELLIGENCE

Google Releases its First AI-Powered Phone☎️

The AI Phone Lands (With a Thud): After months of increased capital expenditures and a release of the company's LLM Gemini that was about as smooth as a porcupine's back, Google ($GOOG) has finally launched its new AI-powered software update and range of smartphones. The Google Pixel 9 and 9 Pro will come with the new Gemini AI Assistant out of the box, promising to be smarter than your average bear (or fruit-themed competitor).

Just Another Pixel in the Wall?: This marks Google's first big win in the AI wars, as the company has managed to get its AI software into the hands of millions of users, months before its biggest competitor in the smartphone space, Apple ($AAPL), can take a bite out of the market. Despite the Pixel phones' popularity, Google actually doesn't generate much revenue from selling smartphones. The company is hoping to change this with the introduction of its new Gemini AI subscription program, because nothing says "innovation" like convincing people to pay monthly for something they didn't know they needed.

• If there's one thing that shareholders love more than their morning coffee, it's predictable, high-margin, subscription revenue. Many case studies of this exact business model exist with companies such as Salesforce ($CRM), Adobe ($ABDE), or even Netflix ($NFLX) on the consumer side.

AI-Powered Makeover: Google's new AI feature set is actually quite impressive, with the company providing an example use case where a user uploads a photo of a concert list and asks Gemini to check their calendar. If the user has availability, Gemini offers to create a reminder to check ticket prices later that night.

• The company also said a user might ask the Gemini assistant to draft an email and "create an image of a cake for someone who loves space." — just hope it doesn't come with freeze-dried ice cream frosting.

• Or, in YouTube, a user might ask Gemini a question about the content in a video, finally giving you someone to discuss those 3 AM conspiracy theory binges with. "No, Gemini, I don't think the moon landing was faked, but can you check if my tinfoil hat is on straight?"

MACROECONOMICS

US & UK Inflation Signals it’s Time to Cut✂️

Rate Anxiety: Much of this week, the markets have been going nowhere but sideways, as if they're playing a retro platformer with a sticky joystick. Investors have been waiting patiently for the economic data, largely due to the implications of both a positive or negative report. Will it be chocolate sprinkles or Brussels sprouts on our financial sundae?

Rate Cuts on the Horizon: Fortunately, US CPI came in lower than expected at just 2.9% for the month of July, slightly below the consensus estimate of 3% — marking the first time we've seen inflation below 3% since March of 2021. It's like inflation finally went on a diet and lost those pandemic pounds!

• Core CPI, which excludes the index's more volatile food and energy components (because who needs to eat or drive anyway?), was 3.2% in July, matching estimates of 3.2% and June's 3.2%. Talk about consistency.

• The slightly better-than-expected inflation reports presumably confirms the Fed will lower rates at its September meeting, the first cut in 4.5 years. It's like the financial world's version of "Dry January" is finally over.

The Saviour of Markets: Why would rate cuts boost stock valuations? Think of it this way: the "cost of capital" is like the cover charge at the hottest club in town. If that charge drops, more people can get in and party (i.e., borrow and spend). This increases the likelihood that companies will do so, thus accelerating growth and spending across the economy. It's like giving the entire market a shot of espresso and a fistful of dollar bills.

British Exuberance: The good news didn't just stop there, however. The UK followed suit, reporting that CPI rose to 2.2% in July, coming in slightly below economists' expectations of 2.3% but above the Bank of England's 2% target. This is slightly higher than the 2% reported in May and June of this year, with the Office for National Statistics attributed the increase to housing and household services.

• Core-CPI – which excludes food, energy, alcohol and tobacco prices (or as the Brits call it, "all the fun stuff") – came in at 3.3% in July, down from the 3.5% print of June. It's sobering up, but still feeling a bit cheeky.

• Meanwhile, services inflation, which is closely watched by the Bank of England, eased to 5.2% in July, compared to the previous month's 5.7% reading.

• It's important to note, however, that the Bank of England jumped the gun and began cutting rates with an initial 25 basis point cut earlier this month.

GEOPOLITICS & SOCIAL MEDIA

Musk’s War with the EU and Britain⚔️

Musk Goes to War: Elon Musk's X (formerly Twitter) has had to endure more drama since the billionaire’s takeover than a soap opera marathon. From mass layoffs that left the office emptier than a programmer's social calendar, to advertiser boycotts, and now, a spicy tango with Europe.

• On Tuesday evening, Musk was set to live stream an interview with US presidential candidate Donald Trump, and prior to this stream, Musk received a written letter from the EU's internal market commissioner Thierry Breton. The letter effectively threatened the "full use" of sanctions under the DSA if Musk failed to curb "illegal content".

The EU’s Shiny New Bill: The EU recently passed a new law known as the Digital Services Act (DSA), which has emboldened them with overarching powers to regulate and control tech giants operating within the European bloc. The penalty that one official who worked on the rules called a "nuclear weapon" involves removing access to a social network across the region. The real question is, would the EU ban X? Or is this just a game of digital chicken?

How to Make Enemies and Influence People: Musk faced more scrutiny than a teenager sneaking in past curfew earlier this month for directly calling out the British government and its leader Keir Starmer. Musk lovingly labelled him "Two-Tier Kier", implying that the country's police force are operating a two-tiered policing system which disadvantages the local ethnic Caucasian population. Musk has also faced backlash over allowing misinformation to spread on his platform during the nationwide riots, which took place over several weeks. The tech exec even went as far as to tweet that "civil war is inevitable"

• The UK has since backed down from its threats of banning the platform entirely, but has begun cracking down and arresting users for publishing or even reposting anything deemed to be "inciting violence" — a topic very subjective in nature.

• It's like playing hot potato, but the potato is a tweet and if you're caught holding it, you might end up in the slammer. Britain appears to have gone fully Orwellian in its operations, leaving many to wonder if Big Brother is now accepting friend requests.

MORE NEWS

Additional market-moving events🌎

Subscription Travel: Flight company Wizz Air launches $550 ‘all you can fly’ annual subscription pass, in a bid to undercut its rivals. (Mirror)

Intel’s Woes Continue: Intel sells stake in UK chip designer Arm amid company-wide restructuring and cost cuts. (Reuters)

Swiss Banking Revival: UBS smashes second quarter profit expectations as Credit Suisse consolidation boosts revenue. (CNBC)

Airbus Fails to Capitalize: No one’s having fun making planes, as Europe’s Airbus suffers its own workforce and supply chain issues. (WSJ)

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “superperformers” stock pick which we believe will provide significant outperformance compared to the S&P 500. Then on the 14th of June we released our next stock selection. Lastly, on August 6th, we initiated a position in Celsius holdings.

Here’s how the stocks have performed since:

• Hims & Hers Health: $15.49 (📈+7.05%)

• PayPal: $66.17 (📈+9.14%)

• Celsius: $39.69 (📉-1.71%)

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