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[music] >>Hello I'm Greg Bonnell and welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day I'll be joined by guests from across TD, many of whom you'll only see here.
We'll take you through it's moving the markets and answer your questions about investing.
Coming up on today's show will discuss whether heavy electricity will demand and a slowing the pace of AI development with epics Kevin Hebner.
MoneyTalk's Anthony Okolie will give us a preview on what to expect from this Wednesdays Bank of Canada right decision.
And in today's WebBroker education segment, Megan Henricks will show us where you can find out Anna what analysts are saying about stocks on WebBroker.
Here's how you can get in touch with us, email us@moneytalkliveatd.com or Phil at that viewer response box under the player on WebBroker.
The TSX Composite Index not a great start to the trading month, you see a sizable pullback right now in the price of American benchmark crude. West Texas intermediate is pulling back almost 4%. Of course OPEC had its meeting and standing by production cuts right now but talking about ramping up production into the fall.
Definitely an impact on the price of crude and all those names on the TSX that are tied the price of crude. 22,000, down 180 points, almost a full percent.
Among most actively traded names, not surprisingly are those oil and gas companies including Cenovus. Pulling back more than 4%. Now BlackBerry, last time was getting a bit of a modest bid, your seeing the meme's stock theme coming back the market today. BlackBerry pushed around by some of the activity right now though on some of those earlier gains, up just of a percent of this our you have some modest, very modest weakness in the S&P 500 pulling back eight points, a little more than 1/10 of a percent, aluminum upside for the tech heavy NASDAQ, right now you're seeing Nvidia on the move again today so you have the NASDAQ up 62 points, about 1/3 of a percent.
Given video, let's show you Nvidia. They announced a new AI chip over the weekend perhaps a little quicker than the market was expecting. You of the stock at $1139, up almost 4%.
And that's your market update.
There's been a lot of excitement around the potential for artificial intelligence, from applications in the workplace to changes in our daily lives.
But according to our featured guest, all that computing power is going to require a lot of energy. Joining us now to discuss his Kevin Hebner, global investment strategist with TD Epoch.
>> Good to be here Greg.
>> AI and what it can do for us, starting to be a realization there that electricity demand is going to peak as well.
It's been stagnant for a while. This will be a big change.
>> And that is a big change change.
Electricity demand from 2007 until 2022 and now we are seeing an increase in electricity demand. Quite significant. And there is three drivers for that. One is AI, particularly the number of data centre as we are seeing for example, Microsoft set up a new data centre every three days.
They are bigger, they need cooling. A second driver has been EV's.
Electric vehicles and electrification of everything. On the third driver is home shoring and were seeing this occur particularly with electronic facilities, or semiconductors, you're mentioning Nvidia before. So increase demand for electricity, this is I think all three parts of this trend are real.
And quite a departure from what we saw in the previous 15 years.
>> We have some competing interests there as well, electric vehicles, onshoring manufacturing's, power-hungry and AI will be power-hungry.
Is there a threat here to the AI development?
Could we actually slow down the pace of AI based on energy demands?
>> I think that is a risk. If you think of AI, as with work pillars, one is the models behind AI… There is a lot of elements going there. A second is data, and their concerns about data, particularly the quality of Tech Data but we are moving into images of video, sound and so forth. So data continues, compute, you are mentioning Nvidia. That's a critical part of the development of AI.
We've known about those three for quite a while but the new in this year's really electricity.
Data centre's are, they are very hungry caterpillars.
A lot of electricity. And this is surprised. Really I think the whole energy infrastructure chain over the last six months. I don't think that's something people were prepared for.
> Obviously over the past decade we've become very aware of climate issues and you know, there's been a huge efforts by governments and corporations to try to address those climate issues.
Artificial intelligence being so hungry for energy and resources, is climate change actually being thought of is not a positive?
>> I think in the short term, I think what's happening with AI and data centre's is going to be a bit of a negative.
We have for the last 15 years or so, been reducing CO2 emissions and most of the developed world. That will continue but maybe on a slightly decreased pace with increased demands from AI and so forth.
Then immediately, if we need more electricity, it eases its way to the easiest way to generate it is natural gas and that doesn't require much thought. The second way would be solar wind but there is intermittency problems which are big issues for data centre's until we get battery technology to store electricity from 2 to 4 hours to 2 to 3 days. That's going to continue to be an issue. People talk a lot about nuclear. But that's not every part of the solution.
Probably for the next decade.
Beyond the next decade I think it's very promising but it's a technology that we've ignored for quite a long time.
So that means at least in the short term, the easiest thing to do is natural gas and unfortunately that does mean something with CO2 emissions and for climate change.
I guess the one thing I would say about this though is the big hyper scale is the big tech companies, Google Microsoft, Facebook and so on, there are very serious about their environmental commitments.
They want to be net zero. This is part of the evaluation and renumeration of all top executors of this company.
Word chewing forcing some very big deals from Amazon, for Microsoft, to get clean energy driving the data centre's. So I think short-term it's an issue but it's something that the tech sectors are is very serious about. With that will take some time to come through.
>> Interesting to see how that involve how that evolves at the same time we know if we are using much more energy, you still have the infrastructure that we know in North America, it sold and some challenges there to updating it.
What challenges are there? Why do we just updated?
>> I think this reflects the hollowing out of capabilities to make stuff in North America that we've seen since 1990.
This is across the manufacturing spectrum but for example, with electricity, we need the data centre's, the cooling systems, the transformers, we need to build up the grid. There's a lot of components to that.
Specialized still. There's only one company in the United States to make that specialize deal.
It has ignored the manufacturing capabilities for so much and made ourselves so reliant on overseas economies and in many cases that means China.
I think there's a realization, whether it semiconductors, energy, electricity and the infrastructure for electricity, that we do need to home sure that and develop it. And this is something which is caught a lot of people by surprise. And so I do think it's going to take and ultimately, this is where the world, will be think about AI, the world of atoms, the world of bits can move very quickly. The world of atoms, building the energy infrastructure, it can take a long time, certainly 5 to 10 years.
> Were just to show the audience a graphic that you provided for us in terms of the average age of infrastructure and it's definitely gone up dramatically the path a while.
I don't think were talking about risks here Kevin. Risks to the AI trend, energy being at the centre of it, how can some of this play out?
>> One risk is that we don't have the energy to feed the data centre's and that's what goes down with the progress of AI. This is bad in the sense that AI holds a lot of promise for sectors like education, healthcare and beyond.
That is definitely a good core for society. That is a risk. Maybe it's not even a risk.
Maybe that's a likelihood, an alternative risk is we are in the midst of this AI boom Boom. The three big hyper scalars, promising to invest $150 billion this year.
This is the crazy amount of money and there is the chance that we are replaying the 1990s, the amount of investments unsustainable and there will be a pullback.
So that says that if we do increase the electricity where we are generating and transmitting, to quickly, we could overshoot. I think five, 10 years from now there definitely will be a demand.
But there is a two-sided risk here. About the balance of probabilities, definitely we won't have the capabilities and this will slow down the progress of AI.
>> We put all this together Kevin. What's the implication for investors?
I think it's pretty clear that the first round of all this from an investment point of view has been about the semis.
What we think going forward?
>> Beyond that if you look at the sectors within the S&P 500, the number three performing sector this year is actually utilities. We have tech, we have commercial services and that includes a number of the big hyper scalars aims but number three is utilities.
So this sector does look interesting, more so than it has the last couple of years.
Secondly, one of these energy infrastructure names, in fact if you look up at the top 10 performers within the S&P here today, four of those 10 our energy infrastructure names. Nvidia, everybody likes to mention but even beyond Nvidia there are companies that aren't household names that look very interesting given this theme. Then I think the third interesting idea for investors is we are going to need a lot of real investment in energy infrastructure, broadly in infrastructure and so these are real assets, real bonds and there is a lot of interest in this. The government will be able to fund this because governments both in Canada and the United States and other places are pretty cash-strapped.
Ultimately it will be investors.
I think ultimately that's an opportunity for say, 8% returns, pretty stable and an ice pick up on what you're getting from government bonds.
> Fascinating stuff and always great insights with Kevin Hebner.
We'll get to your questions about artificial intelligence with Kevin and just moments time.
A reminder that you can get in touch with us any time by emailing moneytalklive@td.com or Phil at that viewer response box under the video player and WebBroker.
Now let's get you updated on some of the top stories in the world of business and take a look at how the markets are trading.
Shares of game stop on the move today about 20% so pulling a little bit back from we saw earlier in the session.
This latest surge follow us on social media post from "roaring Kitty" suggesting he holds a substantial stake in the videogame retailer. Roaring Kitty was considered a key figure in the Mimas stock frenzy during the pandemic.
Use extreme I bought a fire is also in the spotlight, raising the price of its premium subscription service in the United States, saying it needs to invest in its product feeder teachers and innovation, the Swedish-based company last hike prices for the US market in the Summer of 2023.
Now about three quarters of a percent.
Try to find information about Canadian subscriptions, my own personal inbox, I have notifications about Canadian pricing and we will keep an eye on that for you.
Also an acquisition today in the waste industry.
Waste management says it's buying medical waste disposal firm Stericycle.
Valued at $7.2 billion US. The company says the deal is the sport of both boards and is expected to close as early as the end of this year.
Quick check on the market, OPEC+ meeting on the weekend is weighing on the energy sector pretty substantially here on Bay Street we have a 200 point deficit on the TSX Composite Index, almost a full percent, south of the border to start off the trading month of June, the S&P 500, that broader read of the market pulling back about 15 points, you do have the NASDAQ's I was slightly in positive territory so a nice picture on Wall Street back now with Kevin Hebner taking your questions about artificial intelligence.
First one for you Kevin, >> AIA is being very disruptive to the labour market.
We are already seeing that in some occupations, for example encoding papered people have market copy, people who do translation work, people and call centre is. Highly disruptive.
Then for most of sectors which includes healthcare education, finance, legal services, AI is going to be a very important tool to improve productivity so people can do a lot more things. That's gonna result in higher wages, I think great improvements in productivity sectors. So definitely highly disruptive to liberal markets.
When I sleep when I speak with clients privately, the question is always if AI is going to take their job. We try to emphasize that in many cases, in most cases it's a tool, it's complementary, it increases the things in the productivity of the you can do. Which means your wages should go up.
But there is an enormous amount of worry from the very most senior people about the impact of AI on the liberal market.
>> What I find so interesting in past tech revolutions you've seen blue-collar jobs you had to do with your hands go by the wayside because you know, an auto plant becomes more automated and has robots.
Robotics… This seems like it almost has an intellectual kind of job that's a threat.
>> Yes and if we have this discussion two years ago and wanted to go sector by sector, which ones are be most disruptive, we would have said blue-collar work and then white-collar worker than creative work. But we've learned in the last two years that it's been exactly reversed.
Creative work, because it generates content. That's disrupting many content creators and that's across the board. I can be companies like Pixar and Sony, Disney and so forth.
Certainly people to do writing for a living, coding which is often a very creative process.
So yes we've had this real switch from what we would've thought two years ago and what is normal when we have a new disruptive technology.
>> Another question now sort of in a labour front in terms of AI.
Can it boost productivity levels?
>> One way to think about this is very narrowly. We've seen a number of studies saying for coding, it increases productivity by 50%.
Narrow markets can increase productivity by over 15%. Call centre's, dramatic increases in productivity, translators and so on.
So we know in these narrow specific roles that it's having a big impact on productivity.
But typically, when you have a purpose technology like AI or things like computers, Internet electricity, the real impact they have is when they change how people do work and they come up with new jobs, new sectors, new products and new services and were not at that point yet so were seeing lots of narrow issues that is improving productivity but were really moving the needle, that's always impossible and that typically takes years and years to occur.
But I guess the short answer is yes, it's going to improve productivity then probably similar to the productivity boom we saw in 1995 with the Internet.
>> Will all economies feel that productivity in the states has been going along quite well, we are concerned here in Canada productivity has been stagnant for quite some time.
I always feel it there are winners and losers in these scenarios.
Our countries positioning themselves crew properly to capitalize like in a country like Canada?
>> I think the diffusion of technology is very important the more regulated the sector, the more difficult it is to have innovation and to change things, the way things are being done. You have a place like Europe which just decided to take a very hands-on approach to regulating AI.
In many cases that make sense when it comes to antitrust or privacy concerns but they've gone too far.
And I think as a result, the effect of this, they won't have productivity or growth going forward.
That raises enormous concerns. I think places like Canada and the United States, they are much more pro-innovation and recognize the safety concerns but much more pro-innovation and I think that arbors well for the growth outlook going forward.
Certainly in Canada, as well as the United States, there are some real concerns about productivity not being what it once was.
But the diffusion of AI is important and making sure that regulation doesn't get in the way. And I think so far, can of the United States, if anything the United States is airing too far on being pro-innovation. In Canada, often doing a better job being somewhere between the United States and Europe and having a good balance between innovation and safety.
>> Interesting stuff and perhaps in productivity gains for us here in this country in the years to come. As always at home make sure you do your own research before making any investment decisions.
We'll get back to your questions with Kevin Hebner on it AI adjustable months time. You can get in touch with us any time on MoneyTalk Live ATD.com.
Now let's get to education segment of the day.
If you're looking to find out how analysts are viewing different stocks, WebBroker has tools which can help.
Megan Henricks, Senior Client Education Instructor with TD Direct Investing has more.
>> So for a lot of investors, part of the research is going to see what the analysts are saying about a specific company.
Let me show you in WebBroker, where you can find that information.
So in WebBroker if we use our main menu and go under "research" under "markets unquote will find the analysts centre.
From this page, what you'll see is our analysts centre which will show some of the most recent updates from our analysts.
So let me just show you what this page looks like.
So a lot of these have come from today.
It'll show the specific company, what the analyst rating is for this company, the analyst name and also their ranking.
So their ranking is going to be based on a five-star scale.
The more stars they have, the better they've been at rating, the lower stars, the less accurate they've been.
And finally, we have our price target which is a projection of where they believe the company can be in the next 12 months.
On the left, will also be able to filter.
So if you are looking for a specific company and you wanted to search based on an analyst that has a high ranking, so we can start the filter at five-star, if I was interested in buying, I can change my rating to "buy" and so on.
So there is actually more filters such as country, market Sector, for now I just want you to see it in our most recent, you can use those filters to narrow down your search.
The last thing I wanted to show you is we do have, based on popular companies, which is going to be our trending stocks.
So from here you'll see the companies that have been the most rated, you'll see their ratings so for instance if you look at Nvidia, and the last 90 days, 36 have said Tobiah, three have said to hold and none have said to sell. We can see their average price target, the percentage upside and finally their overall consensus in the last 90 days. Just like before, on the left you would also be able to filter so we are currently looking at most rated but we can look at best rated, worst rated, change the time period, the country and market Just like before.
So that is how you could use our analysts centre in WebBroker.
>>but first a reminder of how you can get in touch with us.
> Do you have a question about investing or how to get in touch with us?
Our guests are eager to answer what's on your mind.
You can send us your questions two ways: you can send us an email anytime at moneytalklive@td.
com or use the question at the box at the bottom of the screen and hit send.
We will see if one of our guests can get you the answer you needed MoneyTalk Live.
>> We are back with Kevin Hebner taking your questions for artificial intelligence.
Here's one near and dear to my heart, how does artificial intelligence affect media companies?
>> Okay.
Certainly any type of creative company, I think I AI is going to affect a lot.
Ultimately it is generating content.
Whether that is text, images videos and so forth.
So anything in the media space is going to be disrupted in I'd affected.
So it's important to run with that, use it as a tool, use it as a… I think for roles like yours Greg I think it's important because we are getting inundated with a lot of deep fakes, a lot of hallucinations, it's very difficult to tell truth from falsehoods.
So to have respected quality journalists like yourself and Kim who are helping us to understand the world, I think there's a real premium on that so it's people like you, I think Wall Street Journal, New York Times, that's going to be very important and we are certainly going to get inundated.
We are getting inundated with nonsense today.
So stories, truth that will resonate with us as people, I think becomes a real, I think it's even more important in the digital economy as AI accelerates.
> Alright Kevin I appreciate that vote of confidence.
In my and Kim's abilities. When I think about the media I think of the intersection that it can do in terms of helping other jobs but also the creativity, human creativity.
Even a little bit of humanity when you mix these things together.
It seems if all goes well they can mesh together.
>> I think that's true.
Before the start the show started you and I were chatting a little bit.
You like to play guitar and jam with your friends.
So the tools you're going to be having tools you have with AI to jam and produce music, is very similar what happened 30 years ago in the music industry began to become digitalized.
So that opens a lot of room for creative impulses for people like yourself and all of us, music is very intrinsic to who we are.
So there's going to be a lot more sharing, a lot more creation of music.
There will still be the superstars of the world and we love and appreciate those people is much as ever but there will be a bit of a different content of music, of writing, of a host of different creative activities.
So I think this is one of the positive stories about AI. Not just into creative sect in the creative sectors.
Also in education how that's changed and later, sections like healthcare.
>> Remember women CHAT GPT first capture the public imagination?
I said "write me a hit song" and it wrote me "this is a hit song, this is a hit song, yea, yea, yea".
So I thought they still have a way to go.
>> Yes. It can be a tool to help collaborate with your friends and then disseminate that and try to find an audience.
> Interesting stuff there. You touched a little bit about this topic earlier. If anyone wants to… (Greg reads the question) > There are a lot of areas where we do need roof regulation, antitrust is important because the big companies keep gobbling up other companies. On average they do each of them buys one company and that is a real concern of the US is not done nearly enough about that. A secondary is privatization and this is something which Europe is leading relative to North America. Nielsen social media, this is important to address. But we've known out about that for over a decade.
And almost nothing is been done.
I think that's a real worry.
There are lots of areas where we do need regulations occurring both in the United States and Canada.
But very little is happening.
And if you think about the environment after November, if we do get a trump administration which we think is 60% likely, I think it's very low probability that we get any form of regulatory progress.
And if we do get abided administration, probably Congress and I will be extremely difficult to agree on legislation.
So at least in the United States, I think the probability of legislation including laws that we really do need on coming to fruition is unfortunately quite low.
>> Is part of the challenge Kevin here to technology and government agencies and governments trying to wrap your head around it, they are not the experts. The try to regulate a space that perhaps they don't fully understand.
So it's hard to even know where to point the water if you don't over the fire is.
>> I think that's true. The idea is you want to skate towards where the puck is going.
We don't really know where the puck is going in the amount of expertise, regarding AI, and different levels of government, it's very limited. So I think that's one issue.
But I don't think we should hide behind it so much. For example with the ills of social media, particularly for teenagers, we've known about this for a decade. It really is a question about this, we should be doing it.
The problems with antitrust, we've seen big tech gobbling up companies. We know big companies are anticompetitive and are not very innovative.
We haven't done anything about privatization concerns. They are real regardless of the direction of AI. There is an issue but about not really understanding where the puck is going but we should use that as cover for doing nothing but it's clear they are our social benefits to moving in some of these areas.
> Fascinating stuff on the topic as well.
This one more of a guess about some of the market reaction of the past year and 1/2 to AI. (Greg reads the question) >> Yeah and I think what we learned in Q1, particularly the big three companies, Microsoft Google and Facebook are investing $150 billion this year. That's up about 31% year and year.
And it's up but sixfold from say, eight years ago so were really seeing this enormous amount of investment and number cycle hundred 50 billion, it's hard to know what that means. But for example, the Apollo project, for 13 years that was, in today's dollars, about 130 billion.
One year, three companies more than the entire Apollo project.
It's an enormous amount of money. Because the winner takes the most takes the most dynamics, they want to be first on their not really focused on allocation of capital. So I do think were getting to the point where people are investing too quickly. It does resonate with what happened in the late 90s.
What is it 1996 or is it 1999?
And I think that's very difficult to really understand.
So there will be a retransmission but I don't think it will be as bad as will be sought 25 years ago. But I think that will happen.
Knowing when I think is impossible.
And if you are early in 1996, you missed an awful lot.
So the real dangers to being early on this one as well.
>> I think of spending of that magnitude, obviously you look at Nvidia are other chipmakers that perhaps haven't been at the centre of the story, they're selling the hardware, the data service, therefore the revenue goes up to make sense.
You start talking about an entrenchment.
Do you see the chipmakers? Saying "perhaps it's even the growth is not even is dramatic once you get the infrastructure in place".
>> I think you would see it throughout the semi chain.
For the designers like Nvidia, the equipment companies, (…) Hyper scalars like Microsoft, Google, these sorts of companies as well. Then you would see it in the applications.
But the real issue is we're going to see enormous benefits from AI but likely 1999, the biggest regret, that ideas were correct and it just took 10 years longer to happen that people thought it would in the late 1990s.
So I think it's good to be similar this time. The benefits will be there but it's just going to be slower, my guess is it's going to be slower than people are currently anticipating.
> The next leg up I guess you and I discussed this before on appearances, it will be that killer app is in it? It's one thing about the build up of the infrastructure and the chips in place but we don't know when that killer app is in a common suddenly everybody will get very, very excited.
>> So far the use case, the agents have been quite narrow for coding, call centre's, copywriters, translation and then there is been a bunch of fun things as well. But nothing which we would call "a killer app" like Excel, like with computers, like web browsers and the Internet and so on.
That's always impossible to forecast when that happens. It typically takes longer to occur and then dissipate across the economy than people expect.
>> Interesting stuff. We'll get back your questions with Kevin Hebner on artificial intelligence in just a moment's time.
As always make sure you do your own research before making of any investment decisions and a reminder that you can get in touch with us at any time.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>> Into the first week of June sneaking up on you and the Bank of Canada has a rate decision to be pretty carefully watching this week of course the markets expecting our central-bank to ease rates after a long campaign of hiking and then holding.
Our Anthony Okolie joining us now with what TD Securities thinks about all this and what they think they're gonna do on Wednesday.
>> TD Securities is in line with the markets. They believe the Bank of Canada will cut interest rates 25 basis points currently sitting at the 22 year high and 5% will come down to 4.75% if the Bank of Canada does cut it will be the first time since March 2020. The height of the pandemic with the Bank of Canada had to/rates to near zero. Now the reason they're doing that, there are seeing signs that disinflation is here to stay.
We continue to see progress on core inflation, the Bank's preferred core measures, they have risen 0.1% month over month for four consecutive months.
The annual inflation rate according to stats Canada also came down from 2.9% 2.7% in April and we also saw that downside to Q1 GDP as well which came in at a disappointing 1.7% well below expectations. So they believe that they have, the Bank of can listed of more than enough evidence to cut interest rates.
Looking beyond the Bank of Canada's interest rate decision of course this Friday we will get the latest Canadian jobs numbers for May and TD Securities does see some weakness there. They expect about 15000 New Jobs Created in May.
That's down below consensus estimates for just over 22,000 jobs.
This will be a sharp pullback from the 90,000 jobs that we saw in April where the unemployment rate stood at 6.3% and TD Securities notes that typically when you see such a large gain of, the data is quite volatile. So often, history is shown that you will see aversion to the… And they expect the numbers to come down after that big number that we saw in April. Now, what's can alleviate at TD Securities as the service industry will actually lead of the slowdown in jobs led by professional services as well as accommodation and food services.
They do expect to see a bounce back in construction.
That should support the goods and servicing industry but again I think the big news of course would be the Bank of Canada rate decision this Wednesday. TD Securities is expecting them to cut 25 basis points.
> If we do get that cut this Wednesday, what is the view on the rest of the year?
I'm assuming it's the beginning and not one undone.
>> Exactly. They see this as the beginning. TD Securities is expecting some more cuts in July, October and December to the tune of 100 basis points this year.
So they see… We are looking at by the end of the year, the Bank of Canada policy rate will be around 4%. They do see looking further out into 2025, they do so the Bank of Canada returning to a neutral rate of 2% by the end of the year and of course we will have full coverage of the Bank of Canada rate decision this Wednesday.
We will be interviewing… With TD Asset Management with immediate reaction to the Bank of Canada decision.
>> Will be a big day. Thanks Anthony.
>> My pleasure.
>> MoneyTalk Live's Anthony Okolie.
Now for an update on the markets.
>> We are having a look at TD's advanced dashboard, a platform designed for active traders from TD Direct Investing. This is the heat map function so it gives us a nice picture of the market. The TSX 60 price and volume, OPEC+ had its meeting while they held their production cuts at the current levels. They did talk about starting to ramp up production. Perhaps as early as this fall. That is having an effect on the price of crude. I'm looking at West Texas intermediate, the American benchmark. 7431, a pullback of about three now presents a clearly on the screen you can see it having an effect on the energy names. The option Ovis pulling back almost 5%, Suncor down 3 1/2%, CN… The financials aren't showing us all that much today.
It's not a sizable pullback in a single name but they are pretty big influence on the top line TSX compass at number.
And then you've got maybe a barrack up about a percent but not a lot of green on the screen.
Arc USR, quick service restaurants, parent company of Tim Hortons.
The S&P 500 and NASDAQ down modestly, let's see what's happening here. In video, Nvidia up 3%, AMD is down about 3% from the chipmaking group and you're seeing some moves in the green and the healthcare space including Pfizer.
Pfizer up about one of the half percent.
Back now with Kevin Hebner talking artificial intelligence. Comments on OPEN AI's CHAT GPT compared to Google Bart etc.
I guess this is a question like who's in the lead?
>> Yes and there are five companies producing models.
All of them are good some different strengths and weaknesses in quite different personalities. So products from Microsoft, Google, and others… I think it's important for people to play around with each one, see what the user likes and what personality makes sense to them and resonates with them. But there isn't a winner yet.
In that sense it's very much like in 1999 when we are still in the browser wars.
Company like… If you can remember that. We were sure we would be the winner ultimately it ended up being Google.
Google is had 90% market share for the last 20 years. But at that time we did know who would be the winner. We didn't know what the business model would be whether it will be subscription or micro-payments and ultimately it ended up being adds.
But we didn't know at that time it would happen in the same way today we really don't know who's gonna be a winner.
Will it be "winner takes most" as typically happens with digital economics or something broader? I would typically vote for the first one. And what is the business model going to be?
It looks now that they're moving towards a subscription model. But that often is difficult on the companies are very experienced with ads.
So my recommendation to viewers would be to download a few of the apps and play around with them. I got about half a dozen in my phone.
I use them all on a daily basis and you get a sense for which one is good at watch and in what sort of personality and types of responses resonate with you.
But there are a lot of companies producing reasonably similar products at this point.
>> Are at the very essence of doing your own research. Download the app and see what you think.
On top of AI which is had a very nice robust conversation, looking at big macro trends as well, of course the US and the election (Gregory's the question) Greg reads the question >> The Trump campaign is been very clear that they want to have tariff increases. I think it's important here to take what Trump and the Trump campaign says both literally and seriously whether it's 10% across-the-board or 60% on everything from China or particular sectors coming from China. There are going to be increases in tariffs. There will be more import quotas, there's going to be export quotas, there's gotta be lots of restrictions.
And this is been driven from 2016 by Trump and also by his trade who had a very fascinating book out last year on this topic but this is now a bipartisan priority.
So we can't think that it's going to be quite different whether we have a Democrat administration or a Republican administration.
In both cases, expect higher tariffs, import restrictions and export controls and so forth. This is moving ahead.
It means a lot for the economy because ultimately these things are transfers from consumers to producers.
So it means we are replacing cheap and efficient imported stuff with more expensive domestic stuff.
So it's going to be inflationary, purchasing power, consumers goes down that does mean it helps the production base so there are some producers that will benefit from this.
So it's very important for the structure of the economy and it has important implications for the macro luck and what investors need to be doing. So I think this is important.
It doesn't appear that investors have run the election and made trades on this base but I think it is highly likely we get measures of this nature regardless of who wins in November.
>> Before I let you go Kevin, somewhat election related, we do have someone who is seen as you know, the Republican nominee, with the conviction now.
Does this change any of our ideas on what might happen in November?
>> Some of the early polls have been showing if there's a bit of a 2% point shift from Trump to Biden.
But typically, would we see that we see a little bit of balance for example after conventions and then it goes back.
So my guess is it's not can really change anybody's mind when it comes to voting in November.
Our view is 60% likely the Trump becomes the Pres. And then probably within that, more than 50% likely that he has a sweep, at least for two years with both the Senate and House which means they can pass a lot of legislation.
Biden, we think a 40% chance. But that would be with the dividing government, verily like very unlikely that we get a democratic sweep. So still a long way to go. It's just June.
Another five months before were voting.
Lots can happen. But the poles of been incredibly consistent over the last 8 to 9 months. There haven't been major shifts.
Maybe that will continue but we've got the debates coming up, the first one at the end of the month, then we have the conjunctive the conventions later the Summer and another debate.
So the next 2 to 3 months we are going to learn a lot. But so far it looks like it's playing out the way we were discussing earlier.
>> Kevin, always a fascinating conversation, always appreciate your insights and take the time to join us.
We look forward to the next time.
>> Our thanks to Kevin Hebner, global investment strategist with TD. Always make sure to do your own investment research before making investments and if we didn't have time to get your questions we will get to it and fewer the future shows.
Tomorrow show, Leslie Preston Senior Economist at TD will give us a preview at the Bank of Canada rate decision on Wednesday. Also taking your questions with the economy and interest rates.
So why not get them and had a time.
Just email moneytalklive@td.com.
That's all the time we have for the show today.
Thanks for watching and we will see you tomorrow.
[music]
Every day I'll be joined by guests from across TD, many of whom you'll only see here.
We'll take you through it's moving the markets and answer your questions about investing.
Coming up on today's show will discuss whether heavy electricity will demand and a slowing the pace of AI development with epics Kevin Hebner.
MoneyTalk's Anthony Okolie will give us a preview on what to expect from this Wednesdays Bank of Canada right decision.
And in today's WebBroker education segment, Megan Henricks will show us where you can find out Anna what analysts are saying about stocks on WebBroker.
Here's how you can get in touch with us, email us@moneytalkliveatd.com or Phil at that viewer response box under the player on WebBroker.
The TSX Composite Index not a great start to the trading month, you see a sizable pullback right now in the price of American benchmark crude. West Texas intermediate is pulling back almost 4%. Of course OPEC had its meeting and standing by production cuts right now but talking about ramping up production into the fall.
Definitely an impact on the price of crude and all those names on the TSX that are tied the price of crude. 22,000, down 180 points, almost a full percent.
Among most actively traded names, not surprisingly are those oil and gas companies including Cenovus. Pulling back more than 4%. Now BlackBerry, last time was getting a bit of a modest bid, your seeing the meme's stock theme coming back the market today. BlackBerry pushed around by some of the activity right now though on some of those earlier gains, up just of a percent of this our you have some modest, very modest weakness in the S&P 500 pulling back eight points, a little more than 1/10 of a percent, aluminum upside for the tech heavy NASDAQ, right now you're seeing Nvidia on the move again today so you have the NASDAQ up 62 points, about 1/3 of a percent.
Given video, let's show you Nvidia. They announced a new AI chip over the weekend perhaps a little quicker than the market was expecting. You of the stock at $1139, up almost 4%.
And that's your market update.
There's been a lot of excitement around the potential for artificial intelligence, from applications in the workplace to changes in our daily lives.
But according to our featured guest, all that computing power is going to require a lot of energy. Joining us now to discuss his Kevin Hebner, global investment strategist with TD Epoch.
>> Good to be here Greg.
>> AI and what it can do for us, starting to be a realization there that electricity demand is going to peak as well.
It's been stagnant for a while. This will be a big change.
>> And that is a big change change.
Electricity demand from 2007 until 2022 and now we are seeing an increase in electricity demand. Quite significant. And there is three drivers for that. One is AI, particularly the number of data centre as we are seeing for example, Microsoft set up a new data centre every three days.
They are bigger, they need cooling. A second driver has been EV's.
Electric vehicles and electrification of everything. On the third driver is home shoring and were seeing this occur particularly with electronic facilities, or semiconductors, you're mentioning Nvidia before. So increase demand for electricity, this is I think all three parts of this trend are real.
And quite a departure from what we saw in the previous 15 years.
>> We have some competing interests there as well, electric vehicles, onshoring manufacturing's, power-hungry and AI will be power-hungry.
Is there a threat here to the AI development?
Could we actually slow down the pace of AI based on energy demands?
>> I think that is a risk. If you think of AI, as with work pillars, one is the models behind AI… There is a lot of elements going there. A second is data, and their concerns about data, particularly the quality of Tech Data but we are moving into images of video, sound and so forth. So data continues, compute, you are mentioning Nvidia. That's a critical part of the development of AI.
We've known about those three for quite a while but the new in this year's really electricity.
Data centre's are, they are very hungry caterpillars.
A lot of electricity. And this is surprised. Really I think the whole energy infrastructure chain over the last six months. I don't think that's something people were prepared for.
> Obviously over the past decade we've become very aware of climate issues and you know, there's been a huge efforts by governments and corporations to try to address those climate issues.
Artificial intelligence being so hungry for energy and resources, is climate change actually being thought of is not a positive?
>> I think in the short term, I think what's happening with AI and data centre's is going to be a bit of a negative.
We have for the last 15 years or so, been reducing CO2 emissions and most of the developed world. That will continue but maybe on a slightly decreased pace with increased demands from AI and so forth.
Then immediately, if we need more electricity, it eases its way to the easiest way to generate it is natural gas and that doesn't require much thought. The second way would be solar wind but there is intermittency problems which are big issues for data centre's until we get battery technology to store electricity from 2 to 4 hours to 2 to 3 days. That's going to continue to be an issue. People talk a lot about nuclear. But that's not every part of the solution.
Probably for the next decade.
Beyond the next decade I think it's very promising but it's a technology that we've ignored for quite a long time.
So that means at least in the short term, the easiest thing to do is natural gas and unfortunately that does mean something with CO2 emissions and for climate change.
I guess the one thing I would say about this though is the big hyper scale is the big tech companies, Google Microsoft, Facebook and so on, there are very serious about their environmental commitments.
They want to be net zero. This is part of the evaluation and renumeration of all top executors of this company.
Word chewing forcing some very big deals from Amazon, for Microsoft, to get clean energy driving the data centre's. So I think short-term it's an issue but it's something that the tech sectors are is very serious about. With that will take some time to come through.
>> Interesting to see how that involve how that evolves at the same time we know if we are using much more energy, you still have the infrastructure that we know in North America, it sold and some challenges there to updating it.
What challenges are there? Why do we just updated?
>> I think this reflects the hollowing out of capabilities to make stuff in North America that we've seen since 1990.
This is across the manufacturing spectrum but for example, with electricity, we need the data centre's, the cooling systems, the transformers, we need to build up the grid. There's a lot of components to that.
Specialized still. There's only one company in the United States to make that specialize deal.
It has ignored the manufacturing capabilities for so much and made ourselves so reliant on overseas economies and in many cases that means China.
I think there's a realization, whether it semiconductors, energy, electricity and the infrastructure for electricity, that we do need to home sure that and develop it. And this is something which is caught a lot of people by surprise. And so I do think it's going to take and ultimately, this is where the world, will be think about AI, the world of atoms, the world of bits can move very quickly. The world of atoms, building the energy infrastructure, it can take a long time, certainly 5 to 10 years.
> Were just to show the audience a graphic that you provided for us in terms of the average age of infrastructure and it's definitely gone up dramatically the path a while.
I don't think were talking about risks here Kevin. Risks to the AI trend, energy being at the centre of it, how can some of this play out?
>> One risk is that we don't have the energy to feed the data centre's and that's what goes down with the progress of AI. This is bad in the sense that AI holds a lot of promise for sectors like education, healthcare and beyond.
That is definitely a good core for society. That is a risk. Maybe it's not even a risk.
Maybe that's a likelihood, an alternative risk is we are in the midst of this AI boom Boom. The three big hyper scalars, promising to invest $150 billion this year.
This is the crazy amount of money and there is the chance that we are replaying the 1990s, the amount of investments unsustainable and there will be a pullback.
So that says that if we do increase the electricity where we are generating and transmitting, to quickly, we could overshoot. I think five, 10 years from now there definitely will be a demand.
But there is a two-sided risk here. About the balance of probabilities, definitely we won't have the capabilities and this will slow down the progress of AI.
>> We put all this together Kevin. What's the implication for investors?
I think it's pretty clear that the first round of all this from an investment point of view has been about the semis.
What we think going forward?
>> Beyond that if you look at the sectors within the S&P 500, the number three performing sector this year is actually utilities. We have tech, we have commercial services and that includes a number of the big hyper scalars aims but number three is utilities.
So this sector does look interesting, more so than it has the last couple of years.
Secondly, one of these energy infrastructure names, in fact if you look up at the top 10 performers within the S&P here today, four of those 10 our energy infrastructure names. Nvidia, everybody likes to mention but even beyond Nvidia there are companies that aren't household names that look very interesting given this theme. Then I think the third interesting idea for investors is we are going to need a lot of real investment in energy infrastructure, broadly in infrastructure and so these are real assets, real bonds and there is a lot of interest in this. The government will be able to fund this because governments both in Canada and the United States and other places are pretty cash-strapped.
Ultimately it will be investors.
I think ultimately that's an opportunity for say, 8% returns, pretty stable and an ice pick up on what you're getting from government bonds.
> Fascinating stuff and always great insights with Kevin Hebner.
We'll get to your questions about artificial intelligence with Kevin and just moments time.
A reminder that you can get in touch with us any time by emailing moneytalklive@td.com or Phil at that viewer response box under the video player and WebBroker.
Now let's get you updated on some of the top stories in the world of business and take a look at how the markets are trading.
Shares of game stop on the move today about 20% so pulling a little bit back from we saw earlier in the session.
This latest surge follow us on social media post from "roaring Kitty" suggesting he holds a substantial stake in the videogame retailer. Roaring Kitty was considered a key figure in the Mimas stock frenzy during the pandemic.
Use extreme I bought a fire is also in the spotlight, raising the price of its premium subscription service in the United States, saying it needs to invest in its product feeder teachers and innovation, the Swedish-based company last hike prices for the US market in the Summer of 2023.
Now about three quarters of a percent.
Try to find information about Canadian subscriptions, my own personal inbox, I have notifications about Canadian pricing and we will keep an eye on that for you.
Also an acquisition today in the waste industry.
Waste management says it's buying medical waste disposal firm Stericycle.
Valued at $7.2 billion US. The company says the deal is the sport of both boards and is expected to close as early as the end of this year.
Quick check on the market, OPEC+ meeting on the weekend is weighing on the energy sector pretty substantially here on Bay Street we have a 200 point deficit on the TSX Composite Index, almost a full percent, south of the border to start off the trading month of June, the S&P 500, that broader read of the market pulling back about 15 points, you do have the NASDAQ's I was slightly in positive territory so a nice picture on Wall Street back now with Kevin Hebner taking your questions about artificial intelligence.
First one for you Kevin, >> AIA is being very disruptive to the labour market.
We are already seeing that in some occupations, for example encoding papered people have market copy, people who do translation work, people and call centre is. Highly disruptive.
Then for most of sectors which includes healthcare education, finance, legal services, AI is going to be a very important tool to improve productivity so people can do a lot more things. That's gonna result in higher wages, I think great improvements in productivity sectors. So definitely highly disruptive to liberal markets.
When I sleep when I speak with clients privately, the question is always if AI is going to take their job. We try to emphasize that in many cases, in most cases it's a tool, it's complementary, it increases the things in the productivity of the you can do. Which means your wages should go up.
But there is an enormous amount of worry from the very most senior people about the impact of AI on the liberal market.
>> What I find so interesting in past tech revolutions you've seen blue-collar jobs you had to do with your hands go by the wayside because you know, an auto plant becomes more automated and has robots.
Robotics… This seems like it almost has an intellectual kind of job that's a threat.
>> Yes and if we have this discussion two years ago and wanted to go sector by sector, which ones are be most disruptive, we would have said blue-collar work and then white-collar worker than creative work. But we've learned in the last two years that it's been exactly reversed.
Creative work, because it generates content. That's disrupting many content creators and that's across the board. I can be companies like Pixar and Sony, Disney and so forth.
Certainly people to do writing for a living, coding which is often a very creative process.
So yes we've had this real switch from what we would've thought two years ago and what is normal when we have a new disruptive technology.
>> Another question now sort of in a labour front in terms of AI.
Can it boost productivity levels?
>> One way to think about this is very narrowly. We've seen a number of studies saying for coding, it increases productivity by 50%.
Narrow markets can increase productivity by over 15%. Call centre's, dramatic increases in productivity, translators and so on.
So we know in these narrow specific roles that it's having a big impact on productivity.
But typically, when you have a purpose technology like AI or things like computers, Internet electricity, the real impact they have is when they change how people do work and they come up with new jobs, new sectors, new products and new services and were not at that point yet so were seeing lots of narrow issues that is improving productivity but were really moving the needle, that's always impossible and that typically takes years and years to occur.
But I guess the short answer is yes, it's going to improve productivity then probably similar to the productivity boom we saw in 1995 with the Internet.
>> Will all economies feel that productivity in the states has been going along quite well, we are concerned here in Canada productivity has been stagnant for quite some time.
I always feel it there are winners and losers in these scenarios.
Our countries positioning themselves crew properly to capitalize like in a country like Canada?
>> I think the diffusion of technology is very important the more regulated the sector, the more difficult it is to have innovation and to change things, the way things are being done. You have a place like Europe which just decided to take a very hands-on approach to regulating AI.
In many cases that make sense when it comes to antitrust or privacy concerns but they've gone too far.
And I think as a result, the effect of this, they won't have productivity or growth going forward.
That raises enormous concerns. I think places like Canada and the United States, they are much more pro-innovation and recognize the safety concerns but much more pro-innovation and I think that arbors well for the growth outlook going forward.
Certainly in Canada, as well as the United States, there are some real concerns about productivity not being what it once was.
But the diffusion of AI is important and making sure that regulation doesn't get in the way. And I think so far, can of the United States, if anything the United States is airing too far on being pro-innovation. In Canada, often doing a better job being somewhere between the United States and Europe and having a good balance between innovation and safety.
>> Interesting stuff and perhaps in productivity gains for us here in this country in the years to come. As always at home make sure you do your own research before making any investment decisions.
We'll get back to your questions with Kevin Hebner on it AI adjustable months time. You can get in touch with us any time on MoneyTalk Live ATD.com.
Now let's get to education segment of the day.
If you're looking to find out how analysts are viewing different stocks, WebBroker has tools which can help.
Megan Henricks, Senior Client Education Instructor with TD Direct Investing has more.
>> So for a lot of investors, part of the research is going to see what the analysts are saying about a specific company.
Let me show you in WebBroker, where you can find that information.
So in WebBroker if we use our main menu and go under "research" under "markets unquote will find the analysts centre.
From this page, what you'll see is our analysts centre which will show some of the most recent updates from our analysts.
So let me just show you what this page looks like.
So a lot of these have come from today.
It'll show the specific company, what the analyst rating is for this company, the analyst name and also their ranking.
So their ranking is going to be based on a five-star scale.
The more stars they have, the better they've been at rating, the lower stars, the less accurate they've been.
And finally, we have our price target which is a projection of where they believe the company can be in the next 12 months.
On the left, will also be able to filter.
So if you are looking for a specific company and you wanted to search based on an analyst that has a high ranking, so we can start the filter at five-star, if I was interested in buying, I can change my rating to "buy" and so on.
So there is actually more filters such as country, market Sector, for now I just want you to see it in our most recent, you can use those filters to narrow down your search.
The last thing I wanted to show you is we do have, based on popular companies, which is going to be our trending stocks.
So from here you'll see the companies that have been the most rated, you'll see their ratings so for instance if you look at Nvidia, and the last 90 days, 36 have said Tobiah, three have said to hold and none have said to sell. We can see their average price target, the percentage upside and finally their overall consensus in the last 90 days. Just like before, on the left you would also be able to filter so we are currently looking at most rated but we can look at best rated, worst rated, change the time period, the country and market Just like before.
So that is how you could use our analysts centre in WebBroker.
>>but first a reminder of how you can get in touch with us.
> Do you have a question about investing or how to get in touch with us?
Our guests are eager to answer what's on your mind.
You can send us your questions two ways: you can send us an email anytime at moneytalklive@td.
com or use the question at the box at the bottom of the screen and hit send.
We will see if one of our guests can get you the answer you needed MoneyTalk Live.
>> We are back with Kevin Hebner taking your questions for artificial intelligence.
Here's one near and dear to my heart, how does artificial intelligence affect media companies?
>> Okay.
Certainly any type of creative company, I think I AI is going to affect a lot.
Ultimately it is generating content.
Whether that is text, images videos and so forth.
So anything in the media space is going to be disrupted in I'd affected.
So it's important to run with that, use it as a tool, use it as a… I think for roles like yours Greg I think it's important because we are getting inundated with a lot of deep fakes, a lot of hallucinations, it's very difficult to tell truth from falsehoods.
So to have respected quality journalists like yourself and Kim who are helping us to understand the world, I think there's a real premium on that so it's people like you, I think Wall Street Journal, New York Times, that's going to be very important and we are certainly going to get inundated.
We are getting inundated with nonsense today.
So stories, truth that will resonate with us as people, I think becomes a real, I think it's even more important in the digital economy as AI accelerates.
> Alright Kevin I appreciate that vote of confidence.
In my and Kim's abilities. When I think about the media I think of the intersection that it can do in terms of helping other jobs but also the creativity, human creativity.
Even a little bit of humanity when you mix these things together.
It seems if all goes well they can mesh together.
>> I think that's true.
Before the start the show started you and I were chatting a little bit.
You like to play guitar and jam with your friends.
So the tools you're going to be having tools you have with AI to jam and produce music, is very similar what happened 30 years ago in the music industry began to become digitalized.
So that opens a lot of room for creative impulses for people like yourself and all of us, music is very intrinsic to who we are.
So there's going to be a lot more sharing, a lot more creation of music.
There will still be the superstars of the world and we love and appreciate those people is much as ever but there will be a bit of a different content of music, of writing, of a host of different creative activities.
So I think this is one of the positive stories about AI. Not just into creative sect in the creative sectors.
Also in education how that's changed and later, sections like healthcare.
>> Remember women CHAT GPT first capture the public imagination?
I said "write me a hit song" and it wrote me "this is a hit song, this is a hit song, yea, yea, yea".
So I thought they still have a way to go.
>> Yes. It can be a tool to help collaborate with your friends and then disseminate that and try to find an audience.
> Interesting stuff there. You touched a little bit about this topic earlier. If anyone wants to… (Greg reads the question) > There are a lot of areas where we do need roof regulation, antitrust is important because the big companies keep gobbling up other companies. On average they do each of them buys one company and that is a real concern of the US is not done nearly enough about that. A secondary is privatization and this is something which Europe is leading relative to North America. Nielsen social media, this is important to address. But we've known out about that for over a decade.
And almost nothing is been done.
I think that's a real worry.
There are lots of areas where we do need regulations occurring both in the United States and Canada.
But very little is happening.
And if you think about the environment after November, if we do get a trump administration which we think is 60% likely, I think it's very low probability that we get any form of regulatory progress.
And if we do get abided administration, probably Congress and I will be extremely difficult to agree on legislation.
So at least in the United States, I think the probability of legislation including laws that we really do need on coming to fruition is unfortunately quite low.
>> Is part of the challenge Kevin here to technology and government agencies and governments trying to wrap your head around it, they are not the experts. The try to regulate a space that perhaps they don't fully understand.
So it's hard to even know where to point the water if you don't over the fire is.
>> I think that's true. The idea is you want to skate towards where the puck is going.
We don't really know where the puck is going in the amount of expertise, regarding AI, and different levels of government, it's very limited. So I think that's one issue.
But I don't think we should hide behind it so much. For example with the ills of social media, particularly for teenagers, we've known about this for a decade. It really is a question about this, we should be doing it.
The problems with antitrust, we've seen big tech gobbling up companies. We know big companies are anticompetitive and are not very innovative.
We haven't done anything about privatization concerns. They are real regardless of the direction of AI. There is an issue but about not really understanding where the puck is going but we should use that as cover for doing nothing but it's clear they are our social benefits to moving in some of these areas.
> Fascinating stuff on the topic as well.
This one more of a guess about some of the market reaction of the past year and 1/2 to AI. (Greg reads the question) >> Yeah and I think what we learned in Q1, particularly the big three companies, Microsoft Google and Facebook are investing $150 billion this year. That's up about 31% year and year.
And it's up but sixfold from say, eight years ago so were really seeing this enormous amount of investment and number cycle hundred 50 billion, it's hard to know what that means. But for example, the Apollo project, for 13 years that was, in today's dollars, about 130 billion.
One year, three companies more than the entire Apollo project.
It's an enormous amount of money. Because the winner takes the most takes the most dynamics, they want to be first on their not really focused on allocation of capital. So I do think were getting to the point where people are investing too quickly. It does resonate with what happened in the late 90s.
What is it 1996 or is it 1999?
And I think that's very difficult to really understand.
So there will be a retransmission but I don't think it will be as bad as will be sought 25 years ago. But I think that will happen.
Knowing when I think is impossible.
And if you are early in 1996, you missed an awful lot.
So the real dangers to being early on this one as well.
>> I think of spending of that magnitude, obviously you look at Nvidia are other chipmakers that perhaps haven't been at the centre of the story, they're selling the hardware, the data service, therefore the revenue goes up to make sense.
You start talking about an entrenchment.
Do you see the chipmakers? Saying "perhaps it's even the growth is not even is dramatic once you get the infrastructure in place".
>> I think you would see it throughout the semi chain.
For the designers like Nvidia, the equipment companies, (…) Hyper scalars like Microsoft, Google, these sorts of companies as well. Then you would see it in the applications.
But the real issue is we're going to see enormous benefits from AI but likely 1999, the biggest regret, that ideas were correct and it just took 10 years longer to happen that people thought it would in the late 1990s.
So I think it's good to be similar this time. The benefits will be there but it's just going to be slower, my guess is it's going to be slower than people are currently anticipating.
> The next leg up I guess you and I discussed this before on appearances, it will be that killer app is in it? It's one thing about the build up of the infrastructure and the chips in place but we don't know when that killer app is in a common suddenly everybody will get very, very excited.
>> So far the use case, the agents have been quite narrow for coding, call centre's, copywriters, translation and then there is been a bunch of fun things as well. But nothing which we would call "a killer app" like Excel, like with computers, like web browsers and the Internet and so on.
That's always impossible to forecast when that happens. It typically takes longer to occur and then dissipate across the economy than people expect.
>> Interesting stuff. We'll get back your questions with Kevin Hebner on artificial intelligence in just a moment's time.
As always make sure you do your own research before making of any investment decisions and a reminder that you can get in touch with us at any time.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>> Into the first week of June sneaking up on you and the Bank of Canada has a rate decision to be pretty carefully watching this week of course the markets expecting our central-bank to ease rates after a long campaign of hiking and then holding.
Our Anthony Okolie joining us now with what TD Securities thinks about all this and what they think they're gonna do on Wednesday.
>> TD Securities is in line with the markets. They believe the Bank of Canada will cut interest rates 25 basis points currently sitting at the 22 year high and 5% will come down to 4.75% if the Bank of Canada does cut it will be the first time since March 2020. The height of the pandemic with the Bank of Canada had to/rates to near zero. Now the reason they're doing that, there are seeing signs that disinflation is here to stay.
We continue to see progress on core inflation, the Bank's preferred core measures, they have risen 0.1% month over month for four consecutive months.
The annual inflation rate according to stats Canada also came down from 2.9% 2.7% in April and we also saw that downside to Q1 GDP as well which came in at a disappointing 1.7% well below expectations. So they believe that they have, the Bank of can listed of more than enough evidence to cut interest rates.
Looking beyond the Bank of Canada's interest rate decision of course this Friday we will get the latest Canadian jobs numbers for May and TD Securities does see some weakness there. They expect about 15000 New Jobs Created in May.
That's down below consensus estimates for just over 22,000 jobs.
This will be a sharp pullback from the 90,000 jobs that we saw in April where the unemployment rate stood at 6.3% and TD Securities notes that typically when you see such a large gain of, the data is quite volatile. So often, history is shown that you will see aversion to the… And they expect the numbers to come down after that big number that we saw in April. Now, what's can alleviate at TD Securities as the service industry will actually lead of the slowdown in jobs led by professional services as well as accommodation and food services.
They do expect to see a bounce back in construction.
That should support the goods and servicing industry but again I think the big news of course would be the Bank of Canada rate decision this Wednesday. TD Securities is expecting them to cut 25 basis points.
> If we do get that cut this Wednesday, what is the view on the rest of the year?
I'm assuming it's the beginning and not one undone.
>> Exactly. They see this as the beginning. TD Securities is expecting some more cuts in July, October and December to the tune of 100 basis points this year.
So they see… We are looking at by the end of the year, the Bank of Canada policy rate will be around 4%. They do see looking further out into 2025, they do so the Bank of Canada returning to a neutral rate of 2% by the end of the year and of course we will have full coverage of the Bank of Canada rate decision this Wednesday.
We will be interviewing… With TD Asset Management with immediate reaction to the Bank of Canada decision.
>> Will be a big day. Thanks Anthony.
>> My pleasure.
>> MoneyTalk Live's Anthony Okolie.
Now for an update on the markets.
>> We are having a look at TD's advanced dashboard, a platform designed for active traders from TD Direct Investing. This is the heat map function so it gives us a nice picture of the market. The TSX 60 price and volume, OPEC+ had its meeting while they held their production cuts at the current levels. They did talk about starting to ramp up production. Perhaps as early as this fall. That is having an effect on the price of crude. I'm looking at West Texas intermediate, the American benchmark. 7431, a pullback of about three now presents a clearly on the screen you can see it having an effect on the energy names. The option Ovis pulling back almost 5%, Suncor down 3 1/2%, CN… The financials aren't showing us all that much today.
It's not a sizable pullback in a single name but they are pretty big influence on the top line TSX compass at number.
And then you've got maybe a barrack up about a percent but not a lot of green on the screen.
Arc USR, quick service restaurants, parent company of Tim Hortons.
The S&P 500 and NASDAQ down modestly, let's see what's happening here. In video, Nvidia up 3%, AMD is down about 3% from the chipmaking group and you're seeing some moves in the green and the healthcare space including Pfizer.
Pfizer up about one of the half percent.
Back now with Kevin Hebner talking artificial intelligence. Comments on OPEN AI's CHAT GPT compared to Google Bart etc.
I guess this is a question like who's in the lead?
>> Yes and there are five companies producing models.
All of them are good some different strengths and weaknesses in quite different personalities. So products from Microsoft, Google, and others… I think it's important for people to play around with each one, see what the user likes and what personality makes sense to them and resonates with them. But there isn't a winner yet.
In that sense it's very much like in 1999 when we are still in the browser wars.
Company like… If you can remember that. We were sure we would be the winner ultimately it ended up being Google.
Google is had 90% market share for the last 20 years. But at that time we did know who would be the winner. We didn't know what the business model would be whether it will be subscription or micro-payments and ultimately it ended up being adds.
But we didn't know at that time it would happen in the same way today we really don't know who's gonna be a winner.
Will it be "winner takes most" as typically happens with digital economics or something broader? I would typically vote for the first one. And what is the business model going to be?
It looks now that they're moving towards a subscription model. But that often is difficult on the companies are very experienced with ads.
So my recommendation to viewers would be to download a few of the apps and play around with them. I got about half a dozen in my phone.
I use them all on a daily basis and you get a sense for which one is good at watch and in what sort of personality and types of responses resonate with you.
But there are a lot of companies producing reasonably similar products at this point.
>> Are at the very essence of doing your own research. Download the app and see what you think.
On top of AI which is had a very nice robust conversation, looking at big macro trends as well, of course the US and the election (Gregory's the question) Greg reads the question >> The Trump campaign is been very clear that they want to have tariff increases. I think it's important here to take what Trump and the Trump campaign says both literally and seriously whether it's 10% across-the-board or 60% on everything from China or particular sectors coming from China. There are going to be increases in tariffs. There will be more import quotas, there's going to be export quotas, there's gotta be lots of restrictions.
And this is been driven from 2016 by Trump and also by his trade who had a very fascinating book out last year on this topic but this is now a bipartisan priority.
So we can't think that it's going to be quite different whether we have a Democrat administration or a Republican administration.
In both cases, expect higher tariffs, import restrictions and export controls and so forth. This is moving ahead.
It means a lot for the economy because ultimately these things are transfers from consumers to producers.
So it means we are replacing cheap and efficient imported stuff with more expensive domestic stuff.
So it's going to be inflationary, purchasing power, consumers goes down that does mean it helps the production base so there are some producers that will benefit from this.
So it's very important for the structure of the economy and it has important implications for the macro luck and what investors need to be doing. So I think this is important.
It doesn't appear that investors have run the election and made trades on this base but I think it is highly likely we get measures of this nature regardless of who wins in November.
>> Before I let you go Kevin, somewhat election related, we do have someone who is seen as you know, the Republican nominee, with the conviction now.
Does this change any of our ideas on what might happen in November?
>> Some of the early polls have been showing if there's a bit of a 2% point shift from Trump to Biden.
But typically, would we see that we see a little bit of balance for example after conventions and then it goes back.
So my guess is it's not can really change anybody's mind when it comes to voting in November.
Our view is 60% likely the Trump becomes the Pres. And then probably within that, more than 50% likely that he has a sweep, at least for two years with both the Senate and House which means they can pass a lot of legislation.
Biden, we think a 40% chance. But that would be with the dividing government, verily like very unlikely that we get a democratic sweep. So still a long way to go. It's just June.
Another five months before were voting.
Lots can happen. But the poles of been incredibly consistent over the last 8 to 9 months. There haven't been major shifts.
Maybe that will continue but we've got the debates coming up, the first one at the end of the month, then we have the conjunctive the conventions later the Summer and another debate.
So the next 2 to 3 months we are going to learn a lot. But so far it looks like it's playing out the way we were discussing earlier.
>> Kevin, always a fascinating conversation, always appreciate your insights and take the time to join us.
We look forward to the next time.
>> Our thanks to Kevin Hebner, global investment strategist with TD. Always make sure to do your own investment research before making investments and if we didn't have time to get your questions we will get to it and fewer the future shows.
Tomorrow show, Leslie Preston Senior Economist at TD will give us a preview at the Bank of Canada rate decision on Wednesday. Also taking your questions with the economy and interest rates.
So why not get them and had a time.
Just email moneytalklive@td.com.
That's all the time we have for the show today.
Thanks for watching and we will see you tomorrow.
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