Markets were mixed Wednesday as investors weighed concerns about the circular nature of the AI industry against optimism from capital spending and monetary policy. Analysts say rate cuts from the U.S. Federal Reserve, alongside resilient consumer activity, could keep equities on an upward track.
BNN Bloomberg spoke with Tyler Ellegard, portfolio manager at Gradient Investments, who said he expects the Fed to cut rates at each of its two remaining meetings this year. He believes rate policy, AI capital expenditures and expanding global growth could support market breadth across sectors.
Key Takeaways
- Fed expected to deliver two more rate cuts this year despite inflation pressures.
- Lower rates could benefit small- and mid-cap as well as capital-intensive companies.
- AI capital spending and M&A activity seen strengthening industrials and financials.
- Data centre buildouts may support utilities given high energy needs.
- European equities could gain as fiscal policy shifts toward expansion.
- Housing market could revive as lower rates help unlock demand, boosting related sectors.
Read the full transcript below:
ANDREW: There is a fear in the market right now that people are bidding up AI stocks, and those companies are spending heavily in turn, adding to the euphoria that keeps pushing up AI stocks. We saw Nvidia with its plan to put money into OpenAI, in return for which OpenAI would spend some of that cash on Nvidia products. Our guest thinks AI expenditures will help push the market higher. We’re joined by Tyler Ellegard, portfolio manager at Gradient Investments. Tyler, thanks very much for joining us.
TYLER: Thanks for having me.
ANDREW: It’s a hard one to assess. But you think this AI spending boom looks intact for now. You think it will keep rolling?
TYLER: Yeah, I do. If you look at the companies that are doing the spending, they are cash-flow kings. They are the hyperscalers, the tech companies that already have cloud businesses, and they’re rolling in cash. They have money to spend, and they’re going to spend it where they think the wave of innovation is going, and that’s AI. Generative AI is the base level we’re at now. What these companies are trying to do — and what they’re spending toward — is the next phase of artificial intelligence.
When you think of AI today, you think of ChatGPT, which has been the clear winner in the generative AI front. But the question is who can get to the next phase first. Whoever does will have that first-mover advantage and will be the winner of the next evolution of AI. These companies will keep spending, and they’ll likely increase their spending again next year and the year after to reach that next phase.
ANDREW: It is fascinating. Right now, AI is basically just a parlour trick compared with the power it could have in a few years.
TYLER: Absolutely. What we have today is pretty generic. But if you start to think about that next phase of AI, of being just as intelligent as human beings, and what that could mean when you think about robotics and transportation, there are a lot of different avenues. We’re only in the first couple of innings of this innovation.
ANDREW: Rate cuts — are you paying a lot of attention to the Fed, or do you think the market has assumed there will be cuts? Is it baked in?
TYLER: At this point it’s baked in. The question is when they get to their terminal rate. Do they do another two cuts this year and the remainder next year to get to three per cent? Do they pause in October and then start cutting again? Much of this is already priced in.
The one thing is that cutting interest rates could help unlock the housing market, depending on what the 10-year Treasury does. Housing makes up a significant portion of U.S. GDP, so if the market unlocks and gets houses moving, that would be good overall for the economy. I’ve been in the camp of three cuts this year. Whether that happens or not doesn’t really matter. It’s just a matter of when and how quickly we get there.
ANDREW: European defence stocks are surging again today. Russia is carrying out aerial incursions into some NATO countries. Do you have exposure there?
TYLER: Yeah, we do. In our U.S.-based portfolios we hold a number of defence stocks. In our international portfolio we favour BAE, which has been a long hold. The Russia-Ukraine war has gone on much longer than most expected. Earlier this year, the EU agreed on a significant spending bill, most of which went toward defence. That created the initial price wave for these companies.
Now, with Russia carrying out aerial shows over United Nations member states and Poland saying it will shoot down any planes crossing its airspace, defence will remain a focus for Europe. More broadly, the EU has shown a willingness to spend fiscally, which hasn’t been the case for a long time. Most of that is defence spending right now, but if they continue to invest in their economies and businesses, it could be a tailwind for years ahead. Maybe we won’t see the same underperformance as we’ve had over the last decade or more.
ANDREW: You have some stock ideas for us. You touched on housing and interest rates — Lowe’s could be a winner here?
TYLER: I think so. Interest rates always help. Even if they don’t directly affect the benchmark rates for credit cards, mortgages or auto loans, consumers feel better when they hear about rates going down. That could unlock additional spending. We’re starting to see that in the data.
Lowe’s reported positive same-store sales last quarter and expectations are positive for this quarter. Professional contractors are driving growth, but retail customers are still shopping. If the housing market unlocks further, Lowe’s could benefit.
ANDREW: And Martin Marietta Materials, a big supplier of mixed concrete, asphalt and other construction materials?
TYLER: When you think back to the big U.S. infrastructure bill passed around 2021, it was designed as a 10-year plan and hasn’t fully made its way through the system yet. Martin Marietta has that as a backdrop. On top of that, there’s the boom in AI and the data centres being built with concrete and asphalt. Add in the trade war — companies are committing capital to the U.S. to get around tariffs, which requires infrastructure buildouts.
So Martin Marietta, in the cement business, is positioned well. In our international portfolio we also like CRH. Both names are attractive right now as alternatives to the traditional AI tech plays.
ANDREW: And finally, Uber Technologies — possibly with AI implications?
TYLER: Uber is like Kleenex, synonymous with ride sharing. The company is seeing mid-teens growth, Uber Eats is performing well, and when you think about autonomous vehicles and the data Uber has on transportation, it sets them up well for the future.
ANDREW: Thanks very much, Tyler.
TYLER: Thank you.
ANDREW: Tyler Ellegard, portfolio manager at Gradient Investments.
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This BNN Bloomberg summary and transcript of the Sept. 24, 2025 interview with Tyler Ellegard are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
