Analysis: CHPT NVDA

In today's Action Alerts PLUS Daily Rundown, Chris Versace gives the club's latest thoughts on inflation and what to watch for the rest of the week.

He also discusses potential catalysts for portfolio holding ChargePoint (CHPT) and Nvidia's (NVDA) recent outlook cut.

CHRIS VERSACE: Good morning and happy Monday, Action Alerts PLUS members. It's August 8. We've got a busy week ahead of us. And here's what we're starting as we kick the week off.

Even though we have a quiet start to the week ahead in terms of little fresh economic data, we continue to have a blistering pace in terms of earnings reports to be had over the coming days. As we chew through those reports, we'll be updating our inflation expectations, prospects for the economy, and whether we're likely to see a soft landing for the economy. Shaping those views, we've got several key pieces of inflation data to be had this week, including the July readings for the CPI and the PPI, which are

going to put inflationary pressures and the Fed's expected monetary policy response in the spotlight.

We in the market will be looking to see not only if inflation has peaked, but the magnitude of the decline, should there be one. Now we know the drop in gas prices over the last several weeks suggest headline inflation should ease. But the hotter than expected wage data in the July employment report paired with continued inflationary pressure signals contained in the July data from ISM S&P Global suggest that we aren't likely to see a very sharp or pronounced drop in either the CPI or PPI data for July.

At stake, it's what the market sees as the Fed's next likely interest rate hike following its September FOMC meeting. Current expectations call for a 75 basis point rate hike, but we've seen these expectations flip-flop over the last several weeks based on the latest economic data, both for the speed of the economy as well as inflationary pressures. Our view is that until we have a clear-cut signal with more data providing it, we're likely to see this flip flopping continue.

We'd remind members it takes more than one data point to draw a line or to draw a conclusion. In terms of the market and its technical setup, it remains clearly overbought. And we continue to see strong resistance at the 4,170 level for the S&P 500. This is going to lead us to remain on a steadfast, but cautious path with the AAP portfolio.

Moving to an individual name, we have our eyes on the shares of ChargePoint this week for several reasons. First, the Senate passed the Inflation Protection Act, which should be voted on by the House later this week. Tucked inside the bill is a positive for EVs, as well as overall clean energy. We think that's going to have market watchers circle back, as we like to say, to ChargePoint shares.

Also this week, we've got several ChargePoint competitors in the form of Blink Charging in EVgo reporting their quarterly results as well. We also have EV company Rivian reporting. And the takeaway from all of this should really reinforce our positive stance on ChargePoint shares. Remember, the more EVs that are sold, the greater the pain point and need for EV charging stations. But when we listen to what Blink and EVgo have to say, we're going to really want to pay close attention to how they're altering their forward guidance based on the expected spending for EV charging stations that's tied to the infrastructure spending bill.

Now one other stock we want to talk about this morning is Nvidia. The company did negatively preannounce its quarterly results, citing greater than expected weakness predominantly in gaming. Now the shares are down modestly today. And when we compare-contrast these two things, we have to remember that the comments recently from Microsoft, Intel, and, to a lesser extent, AMD pointed to weakness in the low-end PC market as well as in gaming.

I think the market here is taking the news on Nvidia's guidance cut relatively in stride. However, we are going to downgrade Nvidia's shares to a two rating for a one largely given that uncertainty for the gaming market. Remember, we've heard about a lot of inventory destocking for gaming. So we're not exactly sure when we're going to see a resurgence in that business.

It is still a rather hefty one for Nvidia, even though Data Center is now, by a modest margin, it's largest end market. We continue to like the Data Center business over at Nvidia given continued growth there. But in the near term, the weakness in the gaming market is going to temper that view, hence the downgrade to a two rating.

And that's a wrap for today's rundown. Thanks for joining us.