Episode 55 | CPI, Tariffs, and AI Disruption: Navigating Market Shifts in August 2025

In Episode 55 of “Market News with Rodney Lake,” Professor Lake, director of the GW Investment Institute, opens a conversation on broader market trends. The episode begins with CPI data showing a modest 0.3% inflation increase, which boosted market sentiment and heightened expectations for Federal Reserve rate cuts. The discussion extends to AI investment trends, infrastructure needs, and derivative plays such as energy suppliers. Lake also explores AI and robotics’ transformative impact on portfolios, pointing to opportunities in autonomous transportation, humanoid robots, and enterprise software, while cautioning investors about potential disruption risks to companies like Adobe, Wix, and Shutterstock. He underscores the importance of evaluating business models, management positioning, valuations, and balance sheet strength to navigate both opportunities and risks in the evolving AI-driven market.

Chapters

• 0:00 Introduction
• 1:43:00 CPI, Tariffs, and Inflation
• 8:35:00 AI Spend and Impact
• 10:23:00 Real-World AI and Robotics
• 20:19:00 Conclusion

Transcript

Thank you for joining “Market News with Rodney Lake.” This is a regular program for the GW Investment Institute where we talk about timely market topics. I'm Rodney Lake, the director of the GW Investment Institute. Let's get started.
Welcome back to “Market News with Rodney Lake.” I'm your host, Rodney Lake. We're coming to you from the GW, George Washington University School of Business. Duquès Hall, Duquès family studio right here in the heart of Foggy Bottom. Welcome back to our viewers who have tuned in before. And welcome to any new viewers. If you're watching on YouTube, if you're listening on Apple, Spotify, Amazon, welcome and welcome back.
All right. We're jumping into some broad market by popular demand. This episode will be not about an individual company, but about what's happening in the market. And I'm going to date this episode so that you know, as of when. So today is August 12th, 2025, and there's tons of news to cover. And this is what we do at the beginning of our classes.
This is a GW Investment Institute podcast, and we cover student investment funds at the Investment Institute. And our students manage those funds and we train them to do that every class. What we kick off with is market news, hence the name Market News with Rodney Late. So today's episode is going to be a little bit about what we do at the beginning of a class with today's news.
And there is a lot of news. And as an investor, as a business person, as an analyst, you should be doing this all the time. Digesting news, see what's going on, setting up different AI agents for yourself to track different parts of the news, different economic indicators. But there is so much stuff going on, there is no shortage of information.
We'll have to decide, as every good analyst, what we should include in today's episode. But at the top of the show for market news today, again, this is August 12th, 2025 has to be the CPI numbers that came out this morning. All right. CPI numbers, you know, goods inflation more subdued services picked up. But really the reaction from the market is pretty positive.
So the market is up. Today the Nasdaq you're hitting all time highs really. But you know overall market is up. And we'll, we'll get into a little bit about where the overall levels of the market, especially with relative to valuation, are right now. But if you look at the CPI numbers, not bad at all. You're certainly not a huge concern.
The consumer price index increased 0.3% from June in line with economists forecast with the pick up really from, from services including airfare, medical care, and recreation. So really not a bad number. And it looks like the market is taking it very much, into stride. So it doesn't seem to be a big issue.
The PPI numbers will come out soon. And so certainly as an analyst, you should be tracking those things, and see what's happening. The consumer price index is really, you know, the focus on the inflation piece here. Obviously the PPI is important, producer price index, but the CPI is looking to that. Now. Why is the market having this reaction?
Well, one of those reasons could be that well inflation certainly maybe not is as low as people would like, but these numbers would increase the probability for the Fed to cut rates. And it looks like, you know, they pause and, and that's something to talk about as well, that the last time they met, in July, there was a pause.
You know, the president, President Trump is obviously, if you've been watching the news at all, has been really pushing for a rate cut and saying that inflation is under control. Any of these tariff concerns are going to be a one time blip. It's not going to be a long term, inflationary problem. You know, they didn't, they stopped short of using the word transitory, because the Fed made a mistake with that verbiage long ago. That said, it looks like inflation is under under control.
The tariffs definitely don't seem to be quite as bad as people made them out is. Certainly if you look back towards what was called Liberation Day when they were first announced and the market really panicked, and thought, well, these these numbers are really, you know, crazy and in some cases and absurd and, and these levels are going to shut down trade, which they did, for a short period of time, for example, on China, effectively.
And that's something to mention today, too, that, the US and China agreed to extend 90 days, the effective truce, to keep negotiating. So that's also good news, for the market in the market is digesting that as well. But the overall sentiment with that, if you account for, what's happening in the CPI level, what people think, then the expectations for the fed lowering rates, in September, which seems to be very high right now.
And more rates possibly to come, which is good news for sectors like housing, for example. So for those first time home buyers who are looking to get lower interest rates, you know, so they can afford more of a house. Right. And then obviously, there is a race there between prices and interest rates. As always, you know, they work inverse, right.
Lower discount rate, higher price, the same as a bond, for example. But in the short term, if you can get lower interest rates and people, you know, get some affordability, that's priced in to that, that's good to unlock the housing market. So what does that do that unlocks other sectors? Construction, lumber, all the things.
If you think about, you know, as an analyst, you think about what goes into a house, copper, plastic, wood construction, you know, labor, all these things, concrete, have to go in to build a house. And so that those are all good things. Right? And people working to do that and people getting homes and people investing in their homes.
And so those those are all good things to drive the economy forward. And it's a it's a big part of it. And it can be even a bigger part of the, of the overall, economy. But with these interest rates where they are, you know, if you're getting a 30 year mortgage and you're touching 7%, you know, that's, you know, historically not terrible if you're talking about versus the 80s.
But from the recent past, that's not great. And certainly that affordability, gets more challenging when you already had higher prices. And so, you know, fewer and fewer people can afford, the loans to cover those, those prices. And so I think the goal is to get those interest rates down. You know, four and a quarter, four and a half is the target right now from the Fed.
And again, the president's been leaning on the Fed and the Fed Chairman Powell to reduce those interest rates. But again the CPI numbers came out. They certainly look mostly in line. And it's certainly not a concern right now for the market. So the market is taking them into stride. The market is up today. If you look at just the broad base numbers the Dow's up over a percent.
The S&P is up 71 basis points. And the Nasdaq is up 78 basis points. And so all good. And this is kind of in the morning on April sorry August 12th 2025. And so those things could change by the close to mark when we're recording this, earlier in the day. But again, the market has had time already to react to these numbers.
They came out this morning at 8:30. It's 11:00 now. And so, the market does seem to be taking these CPI numbers into stride. You also have the announcement, for China and the US saying that we're going to pause right now for another 90 days. Let's continue to negotiate. That's generally good news. It seems like cooler heads prevailing, on the tariff talks between the two countries.
So that is good. While we're here with China, you also got a deal from the White House to let, both Nvidia and AMD to sell later generation chips, H20s, for example, for, for Nvidia, to China, paying basically a tariff effective tariff tax on those chips of 15%, which some people are unhappy with.
Now China's pushing back a little bit, saying, you know, that there's backdoors in those. And Nvidia is releasing statements that there's not. And so there's a little bit of back and forth. Right now happening with this. We'll see where the dust settles from that. The H20 chips are a later generation chip. The Blackwells, you know, not not the same as the Blackwells, but certainly very good chips and probably still better than many of the chips that China can produce on its own.
And so even a later generation is probably still worth having, and you're probably going to have good sales associated with with those chips. Both, you know, the later generation AMD and certainly from the H20s, from Nvidia, because AI is the name of the game. And so when we talk about AI, we'll stick with that.
Obviously Nvidia has been the story. We've covered Nvidia on the podcast and we'll continue to cover Nvidia by the way. So we will have more episodes coming up. About Nvidia specifically. It, it it is and continues to be the largest holding for the GW Investment Institute. So it's something that we watch, a couple of our summer interns, shout out to Paige and Victor this summer, thank you for doing work on Nvidia for us.
And so it's something that we're we have to pay attention to. It's something that we have to watch, and be ready to always, you know, understand how things are changing. What is the situation again, it's a big holding. Stan Druckenmiller at, for example, is that, you know, you concentrate your bets. You, you put you know, you put your eggs in one basket and you watch that really closely.
And that's the case with a few of our positions, Nvidia being the largest. So we're watching that very closely. So in the AI world that continues to be a big push. The training, the amount of money that's going in. If you look at the CapEx budgets for people like Meta, Amazon, Microsoft, they're continuing to put big numbers up, tens of billions of dollars that's going into the AI spend and the AI build out, including data centers.
Power, is becoming an issue. You saw if you follow the program here that we did, an episode on Emerson, you know, a supplier into the electric market. And so you got to you got to think about, other derivative ways to play this AI game. And power is going to be, you know, maybe a constraining point for this world that we're building out.
That's all AI. So some things to think about there are, you know, are there other derivative plays? Obviously people are already on to the data centers, and people are certainly, already thinking about what it means for electricity supply and nuclear and other things. Constellation comes to mind there. So what else is happening in AI? You have also the real world.
AI you know, Tesla comes to mind here. You have Waymo and now Tesla running, you know Tesla's version is called robotaxis. Waymo's is the autonomous taxis that are running in different cities. Waymo's in San Francisco and Phoenix and other spots and now, Tesla has the robotaxis running, now in Austin and in the Bay Area.
Now, they they're not fully autonomous. They do have the safety drivers or the safety riders that are not necessarily driving the car. And in the case of Austin, they're sitting in the passenger seat. So still testing it. Their geofence to the location is is not as big as it can be. It's not unlimited. Both for both companies right now.
The solutions are different, though. That's something as an analyst to think about and watch is the solution for Tesla is a camera based system, not LiDAR and ultimately not a geo fenced area. Where is with Waymo, which is owned by Google, is a geo fenced area with LiDAR. And so making the equipment on the car is very expensive.
And so, with Tesla, they're looking to drive the cost down. Any production car, the, the model Y, is what they're using right now for those robotaxis. So that is an example of real world AI. And I think this is going to continue to be the case. And as analysts, business people, investors are going to have to continue to watch.
And what are the implications for this real world AI. Now, obviously, for a company like Uber, that's a big shot across the bow. And as an analyst, you got to be thinking about that. We don't own shares in Uber. As part of the Investment Institute. It's, a reminder this is educational and entertainment purposes only, not investment advice. We don't own shares of Uber and if we did, we would be really paying close attention even closer than we are now of what's happening here.
What are the impacts now? Uber recently has announced and now it's pretty good data. And Lyft, if you owned either one of these companies, we don't own either one. You should be thinking about that, right? What are the implications for this real world AI? For those companies, obviously. Maybe they can take advantage of that. Maybe they can pivot.
And, you know, one of the, you know, most expensive parts of their equation are the drivers. Maybe they can be in the autonomous business. They certainly already have. You know, for example, Uber with the combination with Waymo. And in some locations, that's how you actually book the ride with Waymo is through the Uber app. So they can have these partnerships.
They can be figuring that out. Certainly they control less of the economics. They control less of their destiny. If they don't have their own solution. Long ago, you might remember that Uber was building out their own, autonomous driving, with, with a lot of scientists out of Carnegie Mellon as an example, in Pittsburgh. And so we'll have to see how this goes.
But you should be paying close attention to all this real world. The other part of that is the robotics piece, the real world AI, Optimus, obviously from from Tesla. But you're also having, you know, robots. Lots of Chinese companies have their humanoid robots. And so I think that's going to be a competitive market. And certainly if you can buy an autonomous robot that can do your laundry, clean your floors, clean your house, and do all these things for 30k and you can finance it.
Lots of people are going to have an autonomous robot to help them out, with all those types of choice. And obviously, if you can have an autonomous car that can go pick up your kids, can be on the network, you, drives you to work and then does rides and is becomes a cash flow generator. That's a very different model than what happens right now with cars.
And so the world you can see is likely going to change as a result of how these things play out. And again, as a business person, as an analyst, as an investor, you really have to think through, not just what's happening today, but what are the implications for these things? Both today, tomorrow, and really a year from now, five years from now, how do we think these things are going to play out?
And then how do we position our portfolio to make sure that one, we take advantage of those, but also that we get out of the way, of some of these things. And so when you look at, for example, Bank of America has started to put out a list of companies that are at risk. You know, what?
What are the companies at risk? Companies like Wix and Shutterstock and Adobe. So if you if you look at those types of companies where AI is maybe, for example, in Adobe, we did a recent episode on Adobe, if really they're at risk and you're going to have AI be deployed where you have all these tools and you just really type in, you know, like for example, in the large language model.
But on the creative side where you really don't need Adobe, to help create things. You don't need people, that are experts in that software. You just need people to describe what they're looking for. Well, certainly there's still going to be a market for designers and people that have an eye for design. But there. But the tools that they use are likely to change.
Figma, for example, went public recently, ticker’s FIG. We don't own that. But that's obviously a big threat for Adobe. And Adobe tried to buy it, previously, but that can be a big threat. And so again, I encourage you to also watch, not not just Bank of America's list, but any, you know, what do you think some of these enterprise software companies people talk about to like Salesforce and ServiceNow, which we've done episodes on those and we own those companies.
So you have to really think about what are the implications, where are the opportunities. But we're also are the risks, and especially for the companies that you own. So if you own these companies like we own ServiceNow and we own ticker CRM, which is Salesforce, what's the future? Marc Benioff the the CEO of Salesforce, has been pushing back and saying, well, you know, there's still going to be at the enterprise level room for a company for Salesforce.
Now he's talking his book, obviously, but we have to figure out whether we agree with him on that or whether we disagree and where we disagree. You know, how is it going to show up? Maybe he's generally right, but maybe not even for the right reasons. Who knows? Or for the reasons rather that he says it's not right or wrong.
So as an analyst, what's happening in the AI? We got to figure that out. And that's something I think that's going to be a fundamental shift, in many of our portfolio companies. And we really have to pay close attention to those companies that are at risk that we own. And we really have to pay close attention to the companies, that continue to provide opportunities.
At the top of that list, obviously, has been Nvidia, but you also have companies like Microsoft, that we'll just talk about for a moment that's been driving really hard in the AI game. They own a big stake in OpenAI. That continues to be a complicated situation. And we'll see how that plays out. And there's possibly I don't know if it's friction, but, you know, we'll see how, these two effectively competitors in some areas, how this works out between OpenAI and Microsoft, Microsoft's Azure, which is their cloud business has been growing.
It grew 30%, if you saw the last quarter, and it's already a very big business, not as big as AWS, but very big in AWS for Amazon also grew, almost 18%. And it's a huge business. And so these cloud providers who can deploy, you know, things at scale. And so they really if you think about, okay, well, who can deploy AI at scale?
Well, you know, CRM, ticker, Salesforce could but if it really doesn't help their business model and lots of people figure out ways around it, you know, are they going to be able to, you know, charge as much for their products? Well, maybe not. And so something to consider is also, well, there could also be a shift.
In the way that these things are priced and you're you're already seeing that in a company like Adobe, which we talked about. And you look at the the multiple on Adobe where it is now obviously that's come down. They have super high gross margins. But the market perceived that this is under threat. And if it is okay, well maybe they're going to continue to have earnings.
Maybe they'll continue to find a way forward. But the multiple on their business and you're already seeing it has started to come down. And maybe that's the market has already started to anticipate that. And saying that those earnings are not worth as much as they were five years ago because because they're going to be disintermediated and maybe we don't know the reason or the way, rather how, but they're going to be disintermediate.
So the multiple on those companies needs to come down. And so you got to be careful about that, right? The Davis double play is you make money by growth in earnings and a, you know, rerating upward on the multiple, the same, you know, the reverse can happen to you on the negative, which is, you know, earnings flat or decline.
And you get a rerating downward which means losing money. And you get a rerating downward. And it's, you know, becomes a permanent or at least semi-permanent, meaning, you know, it's over a few years, you're getting towards permanent loss of capital, if that's if that's the case, if you're not nimble enough to move in and out of those positions.
And so you got to be careful about that. We're long term investors who are not trying to time the market to be super clear. We're looking for long term investments who are looking for fantastic companies. So we talk about, you know, the model that we use, the framework, business, management, price valuation and balance sheet. We've been talking a lot about how AI impacts the business.
Then clearly management needs to figure out how to better position those companies that are at risk and continue to for the companies that are doing well, how do they continue to be in the right place? That valuation that we mentioned, those companies like Adobe that are getting that rerating downward, we got to be at least aware of that.
What's going on? And of course, what's the risk on the balance sheet at the investment Institute at GW where equity investors, we don't, own debt in these companies. And so we have to think about what's the capital structure, who's ahead of us, you know, in the legal stack there, the equity is at the bottom, and debt would be ahead of us.
And so net cash always makes us help helps us sleep better at night. It makes us feel good. And so we need to think about all those things. And again, just to wrap up for this episode of a general market overview, CPI numbers, not, you know, maybe not as low as people want, but certainly the market taking those in stride and effectively in line with with expectations.
The market again, this is kind of towards midday. On August 12th, 2025. The markets absolutely taking those numbers in stride. And you know generally taking it as good news moving forward. You know, the China-U.S. truce continues 90 days to keep negotiating on the tariffs. The tariffs don't seem to be a huge impact again on the CPI numbers PPI coming tomorrow.
And watch what's happening on the AI front. The AI game make sure you know the companies that are best positioned to take advantage and make sure you're watching. The companies are that are at risk. We certainly will be in the semester will be starting very soon, and our analysts will be getting to work on our portfolios. Until the next time.
We'll see you back here on Market News with Rodney Lake. Thank you.
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