1. Watching the shoppers…
US Retailers had a strong week. We saw solid results from the likes of Abercrombie, Burlington, BestBuy, The Gap, Birkenstock and Nordstrom. Meanwhile Costco said customers seem to be back to spending on optional purchases, with the highest comps coming from non-food categories, toys, tires, lawn and garden, and health and beauty.
It seems like it’s a different story in Australia. Retail sales for April came in softer than expected. And CBA’s cost of living report is showing consumers are trading down to QSR (quick service restaurants) at the expense of eating out. Interestingly, we are seeing QSR holding share rather than losing customers who are trading down further to eating at home – which bodes well for High Conviction and Absolute Return Fund holding Domino’s.
Source: CBA (May 2024)
2. Interest in interest…
US government interest costs have surpassed defence and Medicare spending, as we continue on a higher for longer interest rate trajectory.
US Government outlay ($bn)
Source: Evans (May 2024)
3. The power of technology…
It’s no secret that generative AI uses a lot of power. While a typical Google search consumes ~0.3Wh of electricity, an AI-powered Google search consumes ~7-9Wh. The electrical systems are also the greatest cost component when building a data centre, making up around 50% of the total cost according to Southern Cross Electrical.
In addition, Bloomberg New Energy Finance forecasts net-zero would require annual investment to triple from US$274 billion in 2022 to US$871 billion by 2050, with a key driver expected to be the exponential power demand provoked by generative AI.
Energy consumption for different search types
Source: Alex de Vries (May 2024)
Cost components to building a data centre (USD per square foot)
Source: Southern Cross Electrical Engineer (May 2024)
Power consumption per server
Source: Uptime Intelligence (May 2024)