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September 11, 2025 – The California gold rush began in 1848, when gold was found at Sutter’s Mill in Coloma, California. While many gold prospectors failed to find gold, suppliers of picks and shovels to gold miners garnered the majority of wealth creation. The current gold rush in the artificial intelligence space continues to benefit the picks and shovels equipment suppliers, although the AI “miners” may not all see a similar return on their massive investments.

//  by Tower Bridge Advisors

There’s Gold in Them There Hills
During the California gold rush, the news of gold brought approximately 300,000 people from the rest of the U.S. and abroad to California, and helped to fuel the growth of San Francisco. The gold rush peaked a year later in 1849 (the “49ers”), although some say the sudden influx of gold into the money supply helped invigorate the American economy. Also, the sudden population increase allowed California to grow rapidly into statehood in 1850, and the effects are still being felt today.

While many gold prospectors in California failed to find gold, the gold rush resulted in economic growth overall and significant wealth creation for suppliers. Every miner needed equipment, creating a lucrative market for suppliers of picks, shovels, pans, food and lodging to gold miners. We all know that Levi Strauss built a fortune by selling durable denim work pants to miners. In its latest incarnation, the artificial intelligence gold rush is on, with spending on semiconductors, computer servers, and related data center equipment and software continuing to ramp up. Massive wealth has been created by the AI suppliers to the industry. However, many companies on the other side of the robust AI capital spending equation are still hoping for a return on their investment.

One “picks and shovels” provider, Oracle#, reported a dramatic increase in its backlog this week, driving a 36% gain in the stock yesterday. Oracle is a major player in cloud computing software and hardware for AI training and inferencing. The company noted a $317 billion increase in its backlog due to a number of AI contracts that were signed recently. As a result, Oracle meaningfully increased its cloud infrastructure estimates out to 2030 with a pipeline of additional large deals that could push its backlog toward $500 billion. Broadcom# also recently reported significant growth in its AI equipment and software business serving the AI ecosystem. Broadcom’s AI-related semiconductor business grew 63% over the prior year as its hyperscaler customers continue to invest large sums of capital. The rush is on to spend, for now, although the after effects will be far reaching.

Producer and Consumer Price Reports Are Mixed
The producer price index (PPI), a gauge of costs at the wholesale level in the U.S. economy, posted an unexpected 0.1% decline in August. For the third time this year, the PPI showed outright deflation in what is generally considered a measure of pipeline price pressures. Economists had been looking for a 0.3% increase. The core PPI, which strips out food and energy, also fell 0.1%.
The services sector, which drives about 80% of GDP, saw outright deflation, falling 0.2%. Even goods prices, which are much more heavily impacted by tariffs, rose just 0.1%.

The PPI report provided good news on inflation fundamentals, although today’s CPI reading will get more attention. Consumer prices were reported this morning up 2.9% in August from a year earlier, according to the Labor Department, hotter than July’s gain of 2.7%, but in line with expectations. Prices excluding food and energy categories, the core measure, rose 3.1% over the past 12 months, also matching forecasts. About four-fifths of the CPI and PPI numbers feed into the Fed’s preferred inflation gauge, the personal consumption expenditures price index. The CPI is the final big data point before the Fed’s rate decision next week. The 10-year Treasury yield is now down to around 4% in response while stock futures are indicated slightly higher on the in-line inflation report.

Don’t Fumble The Ball
Corporate earnings reports have been good in the aggregate so far this quarter. Looking ahead, earnings for S&P 500 companies are expected to increase about 11% this year and 14% in 2026. The second half of this year could be a bit weaker than the 10% earnings growth of the second quarter as companies are still managing through tariff changes. If earnings are the gold nuggets that drive market valuations, interest rates and money supply fan the campfire flames. The Federal Reserve holds its next meeting September 16-17 where it will have the opportunity to lower interest rates further. The labor market has clearly weakened, which is the other side of the Fed’s dual mandate. The inflation data, along with a large downward revision in jobs created over the past year and this morning’s report on jobless claims ticking up, will provide cover for the Federal Reserve to lower interest rates gradually.

It is interesting that for the 2025 football season, NFL teams will allocate an average of 54% of salaries to the offensive side of the ball compared to 46% for defense. 24% of salaries on offense are allocated to quarterbacks compared to just 7% for running backs. Wide receivers and tight ends account for 32% of offensive salaries, while the offensive line earns 36%. In the field of investing, it pays to focus offensively on investment opportunities, but also to have a healthy defense to weather the euphoria in the market when the gold rush of AI spending slows down.

Actress Taraji P. Henson turns 55, actor/rapper Ludacris turns 48, and singer Harry Connick Jr. turns 58. Hopefully the San Francisco 49ers have a better season this year than last.

Christopher Crooks, CFA®, CFP® 610-260-2219

Tower Bridge Advisors manages over $1.3 Billion for individuals, families and select institutions with $1 Million or more of investable assets. We build portfolios of individual securities customized for each client's specific goals and objectives. Contact Nick Filippo (610-260-2222, nfilippo@towerbridgeadvisors.com) to learn more or to set up a complimentary portfolio review.

# – This security is owned by the author of this report or accounts under his management at Tower Bridge Advisors.

Additional information on companies in this report is available on request. This report is not a complete analysis of every material fact representing company, industry or security mentioned herein. This firm or its officers, stockholders, employees and clients, in the normal course of business, may have or acquire a position including options, if any, in the securities mentioned. This communication shall not be deemed to constitute an offer, or solicitation on our part with respect to the sale or purchase of any securities. The information above has been obtained from sources believed reliable, but is not necessarily complete and is not guaranteed. This report is prepared for general information only. It does not have regard to the specific investment objectives, financial situation or the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed in this report and should understand that statements regarding future prospects may not be realized. Opinions are subject to change without notice.

Filed Under: Market Commentary

Previous Post: « September 8, 2025 – Friday’s employment report was a stinker, confirming an obvious slowdown in the labor market. The unemployment rate is the single most important indicator in America, a legacy of the Great Depression. The simple fact is our workforce drives growth. Without a growing work force the only tailwind is improved productivity. The Federal Reserve, always data dependent and therefore backward looking, is now set to start a series of cuts to the Fed Funds rate beginning next week. Hopefully, those cuts will abort any slowdown and get the economy back on course. Until evidence appears, stocks could experience higher volatility.

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  • September 11, 2025 – The California gold rush began in 1848, when gold was found at Sutter’s Mill in Coloma, California. While many gold prospectors failed to find gold, suppliers of picks and shovels to gold miners garnered the majority of wealth creation. The current gold rush in the artificial intelligence space continues to benefit the picks and shovels equipment suppliers, although the AI “miners” may not all see a similar return on their massive investments.
  • September 8, 2025 – Friday’s employment report was a stinker, confirming an obvious slowdown in the labor market. The unemployment rate is the single most important indicator in America, a legacy of the Great Depression. The simple fact is our workforce drives growth. Without a growing work force the only tailwind is improved productivity. The Federal Reserve, always data dependent and therefore backward looking, is now set to start a series of cuts to the Fed Funds rate beginning next week. Hopefully, those cuts will abort any slowdown and get the economy back on course. Until evidence appears, stocks could experience higher volatility.
  • September 2, 2025 – Equilibrium means balance but doesn’t define the size of a market. A steady unemployment rate, stable housing prices and a steady 10-year bond yield all suggest equilibrium, but beneath the surface, there are warning signs that require investor attention.
  • August 28, 2025 – The July jobs report signaled a cooling labor market, with slowing growth and a slight rise in unemployment, yet consumer spending remains resilient despite retail price hikes caused by new tariffs. This mixed economic data creates a conundrum for the Federal Reserve as it balances its dual mandate amid political pressure and inflationary headwinds. Given this uncertainty and the S&P 500 trading near all-time highs, investors should brace for potential market volatility post Labor Day, as the Fed’s next policy moves will depend heavily on upcoming inflation and jobs data.
  • August 25, 2025 – The Fed’s shift in policy, as stated by Jerome Powell last Friday, moves away from a focus on inflation and more toward insuring full employment. Such a shift suggests more short-term rate cuts and a willingness to tolerate some inflation as long as it stays below 3%. A willingness to tolerate a bit more inflation may sound innocuous but it could lead to unanchored long-term inflation expectations and keep 10-year Treasury yields elevated. If so, the euphoria expressed in Friday’s market rally may have been a bit too exuberant.
  • August 21, 2025 – This Friday we will receive commentary from the Federal Reserve after its annual gathering in Jackson Hole, Wyoming. The central-bank gathering has sometimes been a venue for marking shifts in Fed policy. Last year Fed Chairman Powell used it to signal that rate cuts were coming, and followed through the next month. The Snake River, which runs through Jackson Hole, provides an apt backdrop for the Fed’s meeting where the waters can be turbulent and winding. In the meantime, technology stocks have retreated this week and a number of consumer-focused companies have provided both encouraging and uncertain signals.
  • August 18, 2025 – The noise of front-page news doesn’t seem to coincide with record stock prices. War, ICE raids, violent storms and tariffs may be the topics of the Sunday talk shows, but the stock market cares more about earnings and interest rates. Earnings are rising and interest rates are stable. Will that continue? Earnings growth should slow a bit as the full impact of tariffs hits. While the Fed Funds rates should start to decline this fall, markets will focus on changes in the 10-year Treasury yield more than the Fed Funds rate.
  • August 14, 2025 – The market is increasingly divided, with a strong AI-driven rally on one side and a weakening consumer economy on the other. This contradiction creates a significant risk of a sudden economic downturn or stagflation, as soaring tech valuations may be unsustainable without broader economic support.
  • August 11, 2025 – There is an expression that rationality requires separating the wheat from the chaff. In Wall Street, to be a successful investor, it is necessary to separate hype from reality. That is particularly important as speculative fever rises. Some of the hype is real; some is nonsense. Don’t simply follow consensus. As investors you invest in companies, not hype, not single products, hot today but cold as ice tomorrow. Think rationally and you will be a successful investor.
  • August 7, 2025 – Football is considered a game of inches. Consider the “Brotherly Shove,” popularized by the Philadelphia Eagles, which is a play used to gain very short yardage and advance down the field. In order to counter this offense, defensive opponents have employed various tactics, but without much success. Two consumer-focused companies, McDonalds and Disney, recently reported quarterly earnings, and are slugging it out on the field as consumer preferences change and these companies try to adapt.

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