What to watch in the week ahead

• Underlying US inflation slowed in July, while earlier labor market data pointed to cooling demand. Producer prices were unchanged in July. This week's Fed minutes and business surveys will help determine whether policymakers can remain patient.
• Company results continued to point to robust demand for artificial intelligence computing and cloud infrastructure. However, a financing package of more than USD 500bn has increased scrutiny of whether growing AI investment is becoming increasingly dependent on circular financing arrangements within the ecosystem.
• US electricity consumption is expected to reach successive records in the coming years, based on official forecasts, while Germany is planning a more expansionary investment path. We see opportunities across power and resources, industrials and utilities, and select infrastructure assets.

Will incoming data allow the Fed to remain patient?

Inflation pressures in the US showed further signs of cooling last week. The core consumer price index, which excludes food and energy, rose 0.2% in July and 2.5% from a year earlier, matching its slowest annual pace since 2021. The report suggested that the inflationary effects of the earlier energy shock were continuing to fade, which reduces pressure on the Federal Reserve to raise rates imminently. Producer prices were unchanged in July, below expectations for a 0.2% monthly increase, while the annual rate slowed to 4.7% from 5.5% in June. Data released the previous week also showed a decline in payrolls in July and downward revisions to prior months, pointing to a moderation in labor demand. The data reinforced evidence that the earlier energy shock has, so far, not produced broad second-round price pressures.

Investors will now turn to the minutes from the Fed’s latest meeting for evidence of how policymakers are balancing moderating inflation and employment growth against remaining upside risks ahead of their September meeting. UK inflation and the price components of global purchasing managers’ index surveys will also indicate whether price pressures are easing across major economies without a marked deterioration in activity. Attention will then shift to the July personal consumption expenditures price index on 26 August, which should provide the next direct test of whether underlying inflation continues to cool. The Reuters survey expects core prices to rise 0.1% from the previous month and 3.3% from a year earlier.

Our base case is that the Fed keeps rates unchanged for the remainder of 2026. We believe markets have been too aggressive in pricing sustained monetary tightening, although policy paths will vary across economies. This supports our Attractive view on bonds. Elevated yields offer an income cushion against moderate further increases in rates and the potential for capital gains if inflation continues to cool. We favor quality bonds with short and medium maturities.

Will strong AI demand continue to outweigh financing concerns?

Company results continued to point to robust demand across the artificial intelligence value chain last week. Major US cloud providers reported average second-quarter revenue growth of 48%, accelerating from 40% in the first quarter, while semiconductor shares in the US and South Korea rebounded. Results from CoreWeave added to indications of strong demand for artificial intelligence computing. These developments helped investors refocus on expanding cloud use, backlogs, and supply constraints after earlier concerns over capital spending and monetization.

The improvement in sentiment came despite renewed questions about how the buildout is being financed. NVIDIA has partnered with six major financial institutions to assemble a package of more than USD 500bn for investment in artificial intelligence infrastructure, including dedicated pools of capital for its customers. While the initiative could broaden access to computing capacity, it has also raised questions about circularity when suppliers help finance purchases within their own ecosystem. Investors will assess whether such arrangements accelerate adoption and broaden demand, or whether they increase dependence on continued capital flows into the sector. NVIDIA’s results on 26 August will provide a further indication of the strength and breadth of demand as the US earnings season draws to a close.

We believe robust demand remains more important for the outlook than the financing structure alone. Strong cloud growth and advance orders indicate that monetization is progressing, while near-term capital spending should continue to support earnings across the artificial intelligence value chain. Even so, concentrated demand and limited visibility beyond 2027 mean selectivity is increasingly important. We favor diversified exposure across computing, semiconductors, networking, software, and power infrastructure. Investors with excessive exposure to the largest US technology stocks should use periods of strength to diversify.

Can infrastructure investment keep pace with record power demand?

Evidence continues to mount that gains from the development of AI are spreading beyond the technology sector. US electricity consumption is expected to reach record levels this year and next, according to a forecast last week from the US Energy Information Administration, with data centers representing an important source of demand. Germany has meanwhile outlined a more expansionary investment path through 2030, with increased spending planned for infrastructure and climate neutrality funds. Together, these developments highlight the scale of capital required to expand power capacity and modernize physical infrastructure.

The focus for investors in the coming weeks will be how quickly rising power demand and public spending commitments translate into projects, orders, and cash flows. Electricity supply and grid connections remain important constraints on data-center construction. Germany’s regional governments will also play an important role in converting fiscal allowances into construction and orders. The pace of implementation will determine how quickly the economic and investment benefits become visible.

We believe these trends strengthen the case for diversified infrastructure exposure. We project USD 32tr of cumulative electrical-infrastructure spending over the next decade, supported by artificial intelligence adoption and the need to upgrade aging power grids. In private markets, we favor selective core and core-plus infrastructure assets in noncyclical sectors, which can offer relatively predictable and, in some cases, inflation-linked income. Quality industrial and utility companies can provide additional exposure to the same investment cycle. Risks from leverage, illiquidity, regulation, delays, and cost overruns reinforce the need for selectivity.