Finding AI "Picks and Shovels:" What Makes MSFT & CAT Stand Out

Morning Movers and Dancing Hall live from the floor of the New York Stock Exchange. The AI story is evolving from excitement about spending to scrutiny on returns. So what should investors be looking for in earnings? As we sit near record highs on the S&P 500 and at a record for the Russell 2000. We want to welcome in Tiffany McGee, CEO and CIO of Pivotal Advisors. Joining us here at the big board. Tiffany is always good to sit down with you. So let's start out with where we stand on a broad level. We're at or near record highs, whether we're talking about the S&P 500, Russell 2000 at a record for investors who feel like I missed out. What's your message to them? Oh well, no. You snooze, you lose. No. Absolutely not. So listen we really remain constructive on stocks. I think that this is a great story. You know, with all that's going on in the world, like policy, you know, like political policy, monetary policy, this market just keeps hitting highs, right? And so this is a really great place to be. But for investors that think that, you know, has it already have they missed that run? Absolutely not. You know, there's there's, there's a lot of opportunity, I think that this is a market that really rewards selectivity. So now it's about really looking at your portfolio, looking at where you are looking at what, what, what holes you have, what areas you need to cover and rebalancing accordingly. Okay. All right. So there's opportunity. It's time to get selective. Before we dive into that, let's talk about the inflation picture because we got CPI this week that came in in line with expectations. So it's kind of a Goldilocks reading for the market. We've got PPI coming up. When you think about the next reading and where inflation stands. Everyone's trying to guess what the Fed's next move is. What's your guess. Yeah. Well you know the the the CPI was, you know, pretty benign. Right. And when you couple that with last week's job report for July, I think that that gives that that gives it takes a lot of pressure off the fed. So and I think what we saw yesterday with markets moving up is that the market was really pricing in the expectation of of the fed not hiking in September. So that's what we saw Treasury yields going down. And so you know we'll see what happens with PPI. But I think for now it's it's safe to be to be in the water. Okay. All right. Safe to be in the water. The sharks are not in the water. Well maybe in a different respect because we think about selectivity. So I want to ask you about AI. The conversation around AI is evolving. Investors don't want to hear just about the billions spent. They want to see what the return is. You like the picks and shovels approach to AI? Tell us a little bit about that. Yeah. So, you know, I think in the beginning of the story, it really was all about the spend. And we're seeing that momentum. But as we start to look at, you know, earnings reports, you know, this, this story is really evolving from this excitement of the spend to, you know, kind of like, show me the money, right? Show me the money and show me the timeline. Right. Like, how long is it going to take to monetize? So, you know, I know, I know that we'll get into, into picks a little bit later, but I think Microsoft is a really good is a get right into it. Now. I think Microsoft is a really good example of this, right? And so, you know, when we think about AI monetization, it's becoming really visible with with Microsoft, it really kind of gives clearly gives investors exposure to AI without really requiring them to kind of bet on this like single application model. And so when we look at the fact that like, you know, this, this past earnings, Azure growth has been exceptionally strong. And it really kind of answers that question. Like, you know, is AI spending, like actually kind of producing results. And so that that's really why we like it. And so that's kind of like the formula that we're looking for, right? So as we're thinking about kind of carving out, rounding out our AI trade, you know, what, you know, what, what kinds of things do these companies actually delivering versus promising? Yeah. Listen, and over the past month, it's made quite the run for Microsoft. Like what a recovery when you think about where it was this year throughout the year. And so, you know, we've come back a little beyond level year to date. Still, some improvement needs to come on a year over year basis. But I hear you in terms of the camp joining that there's still opportunity here. You like caterpillar as well. That one's been so interesting to me because it's become an AI story. This was once just an industrial story. You would see it. You know, the big diggers, the you knew that there was construction happening. But this is now an AI story. You still like it from here? I do. Right? So again, thinking about how, how we diversify that AI trade. Right. And so for me, it's not an AI trade. It's an AI portfolio, kind of like a core satellite approach. I really do like AI infrastructure, right? So it is that, that, that kind of picks, picks, picks and shovels trade. And so truly right. Oh yeah. Exactly. Right. So AI, you know, really requires an enormous amount of physical infrastructure and electricity. And so kind of creating demands for like the generators, turbines and equipment and to kind of like, you know, support the data centers. I really like how caterpillar here. Right. Okay. And I want to get into Schneider Electric. We, I know we don't have a lot of time left because we're going to get to that PPI data. You like this one has, you know, year to date outperformed the S&P 500. Tell us a little bit about your views on Schneider Electric. So so as I think about kind of like broadening investors, kind of broadening their, their equity portfolio, I like industrials as an AI play. And Schneider Electric is one of them, right? So it's a global leader in energy management electrification. And you know, really that's kind of supplying these data centers. So just easy. Okay. That's an easy one there. So Schneider Electric Caterpillar is on your list. Microsoft we didn't get to the financials. Goldman's on Tiffany's list. You can check out Tiffany. You can follow her on Twitter online as well. Thank you Tiffany. Thank you so much. Appreciate it. Tiffany McGee, CEO and CIO