Five interesting things that Hodges Capital research analysts discovered this week...

#1 Let’s Get Physical: Agentic AI refers to advanced artificial intelligence systems capable of autonomously solving complex, multi-step problems through sophisticated reasoning and iterative planning. This contrasts with natural language-based AI like ChatGPT, which is built on large language models (LLMs). Recently, Nvidia introduced the World Foundation Model (WFM) platform, which is similar to an LLM but tailored for the physical world. The WFM enables developers to train robots and autonomous vehicles digitally before deploying them in real-world environments. This concept is already becoming a reality, with early implementations of robots appearing on warehouse floors, in surgical operating rooms, and as autonomous taxis.

#2 Rates Are Not Yielding: This is a rare occurrence. Historically, during a Federal Reserve rate-cutting cycle, the 10-year Treasury bond yield typically declines. Since 1963, there have been 12 such rate-cutting campaigns. The current cycle began 117 days ago, yet the 10-year yield has increased—a phenomenon only seen once before, in 1984.

#3 Penalty Box: The U.S. has added Tencent and CATL to a Pentagon-backed blacklist over alleged ties to China’s military. Tencent, a major investor in gaming giants like Epic Games and Activision, denied any military links, stating that the designation would not impact its business. The blacklist now includes 134 Chinese companies.

#4 Bye Bye Dye: Ahead of RFK Jr.’s confirmation hearing, the U.S. Food and Drug Administration (FDA) has officially banned Red Dye No. 3 (Erythrosine) from use in foods, dietary supplements, and ingested medicines. Kennedy, a long-time critic of artificial food dyes, has highlighted that similar products in Europe use natural ingredients for coloring. Erythrosine, derived from petroleum, has faced criticism for potential health risks. The outspoken HHS secretary has stated that banning dyes like Red No. 3 would be a top priority in a second Trump administration.

#5 History Does Repeat: The NFIB Small Business Optimism Index, a monthly survey conducted by the National Federation of Independent Business, measures the economic health and outlook of small businesses in the United States. The index offers valuable insights into the sentiment of small business owners, reflecting trends in hiring, capital investment, and broader economic expectations. Recently, the index recorded its largest two-month jump in optimism since the first Trump election.

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