Fed’s Collins says latest US inflation readings are ’mixed’

Nvidia shares rise on bumper earnings and a bullish outlook driven by strong AI demand, supporting risk-on sentiment in tech. Meanwhile, Boston Fed President Susan Collins said the latest PCE inflation report is “mixed”: July PCE ran at a 3.7% annual rate vs the 2% target, but she argued goods/services priced by market forces are near target levels and disinflation remains the modal scenario. She is open to raising rates if inflation doesn’t fall, with bond-yield moves under scrutiny—keeping the rates outlook volatile into Fed leadership comments.

Analysis

The market implication is less about one more Fed move and more about whether rates can stay high without breaking growth expectations. If the inflation impulse is truly narrow, the bigger driver becomes term premium and Treasury supply, which can keep long-end yields sticky even in a "no-hike" regime. That is constructive for cash-flow-rich leaders, but it is still a valuation headwind for anything priced off far-dated earnings.

AI capex remains the cleanest fundamental offset to a higher-rate backdrop. NVDA is still the best levered beneficiary because its revenue visibility is tied to hyperscaler spending rather than the broader economy, and that demand can outrun modest multiple compression for several quarters. Second-order, the stronger the AI buildout, the more it pulls spend away from legacy enterprise software and toward semiconductor/tooling winners such as TSM, AVGO, and AMAT; the losers are the long-duration, no-margin-of-safety names in software and unprofitable hardware.

Contrarian risk: the consensus is treating "no immediate hike" as the main bullish signal, but the real risk is a continued drift higher in yields from supply or a hawkish Jackson Hole tone. That would hit semis first through multiple compression even if earnings remain intact. Falsifier for the bullish NVDA/risk-on trade is a sustained break higher in the 10-year yield combined with any sign that hyperscaler capex growth is normalizing rather than accelerating.

Key Decisions for Investors

• Buy NVDA on any post-Jackson Hole yield-driven pullback over the next 1-2 sessions; use a 6-10 week call spread to capture continued AI capex strength with defined downside. Best risk/reward if the stock holds the post-earnings gap; invalidate on a sustained close below that gap plus rising 10Y yields.
• Pair trade: long NVDA / short TLT for the next 1-3 months to isolate company-specific AI demand from duration risk. This works if yields stay sticky while NVDA fundamentals remain firm; cut if the 10-year yield reverses lower and TLT starts outperforming on a dovish Fed repricing.
• Overweight SMH or AVGO versus a basket of high-multiple software names for the next quarter. The thesis is that AI infrastructure spend is still absorbing budget share, while software multiple support is more vulnerable to any yield backup.
• Set a watch alert on the 10-year Treasury yield: if it breaks to a new 3-month high after the conference, trim broad tech beta rather than the NVDA core long. That would signal multiple compression risk is overtaking earnings momentum.