Weekly Investment Update (08/15/2025)

U.S. equity markets posted modest gains this week as equities weathered numerous policy headlines, geopolitical developments, and inflation data that offered insights into the effects of tariffs. Most U.S. indexes remained at or near all-time highs, supported by solid earnings, with the S&P 500’s blended second-quarter earnings growth at 11.7%, surpassing the 4.9% expected at the end of June. Alongside news that the U.S. government is exploring taking a financial stake in Intel, reports of a revenue-sharing deal — where Nvidia and AMD would provide up to 15% of sales in select artificial-intelligence chips to China to the U.S. government — caught headlines. Both proposals highlight the administration’s focus on revamping U.S. industrial policy in an economic landscape increasingly dominated by AI.

On the inflation front, the July CPI report was largely in line with expectations, but an unexpected uptick in PPI, a measure of wholesale inflation, was not enough to derail equity markets. Meanwhile, the yield on the benchmark 10-year bond edged higher but remains near the 4.3% level, where it began the week. The growing optimism over a prospective September interest-rate cut was amplified with vocal support from inside and outside the Federal Reserve, with Vice Chair Michelle Bowman and Treasury Secretary Bessent both calling for several rate cuts this year. 

The Trump-Putin summit in Alaska today could lead to progress toward a resolution of the Russia-Ukraine war. However, without agreements on any territorial concessions or input from Zelensky and other European leaders, optimism for a significant deal appears muted.

Consumer Prices Hold Steady in July While Wholesale Prices Accelerate

What is happening: The July CPI report met expectations, with the headline figure rising 0.2% month-over-month, keeping the 12-month rate unchanged at 2.7%. Meanwhile, core CPI rose to 0.3% on the month, lifting the 12-month rate to 3.1% from 2.9% in June. The uptick in core CPI was primarily driven by the core services component, with airfare prices rising 4% in July after five consecutive monthly declines, and medical care services posting their largest increase since 2022. That said, airfare prices tend to be volatile, while the shelter component — less noisy due to gradual lease turnover and holding the largest weight in the index — continues to moderate.

The report also showed some evidence of tariff-related price pressure in core goods, though the impact was not broad-based. Prices rose for motor vehicle parts and household furnishings and supplies, while appliance prices fell, and apparel prices were unchanged. Separately, July’s PPI report — which tracks wholesale prices — rose a higher-than-expected 0.9%, indicating companies are raising prices to offset tariff impacts.

Why it matters: The July CPI and PPI reports suggest that tariff-related price pressures are emerging in the broader economy but have yet to be fully passed on to consumers. With cost increases more evident at the wholesale level, this indicates companies are absorbing more of the tariff burden, reflecting a hesitancy to pass higher prices on to consumers. Still, rising wholesale prices are likely to squeeze company margins, and we anticipate that continued margin pressure will eventually lead to higher prices for consumers. That said, core goods, where most of the tariff-related price pressure is expected, account for only 18.5% of CPI, while shelter holds a 36.3% weight. Ongoing moderation in the shelter component should help offset upward price pressure in core goods.

Bessemer portfolios continue to focus on high-quality companies with resilient business models capable of navigating shifting market cycles. While signs of tariff passthrough into consumer goods prices are emerging, we believe the Fed’s focus remains on the gradual softening of the labor market. As the Fed balances its dual mandate, we believe the cooling labor market helps counterbalance inflationary pressures and provides room for the Fed to resume interest-rate cuts later this year.

ChatGPT-5 Achieves Leading Scores in Benchmark Tests, Supporting AI Investment Momentum

What is happening: OpenAI released ChatGPT‑5 (GPT-5) last week, highlighting substantial improvement in factual accuracy and reasoning compared to previous versions. The company also claimed the new model had faster responses and better code generation. 

Early analysis confirms the ChatGPT-5 model offers cutting-edge reasoning abilities and demonstrates continued U.S. leadership in AI innovation. According to Scale AI, ChatGPT-5 has achieved the highest ever score in a popular model benchmark test. However, Chinese AI models are rapidly catching up while often being more cost efficient. Current analysis suggests China’s generative AI models trail U.S. counterparts by only three to six months. For instance, Alibaba’s Qwen3 and DeepSeek’s R1 underperformed GPT-5 on the same benchmark test but outperformed popular Meta and Amazon models.

Why it matters: The release of GPT-5 reinforces OpenAI’s strategic momentum and likely sustains high capital investment in AI infrastructure. Importantly, meaningful revenue generation from technology capital expenditures (CapEx) takes time. For example, it took 10 years for Microsoft’s successful cloud platform Azure to generate annual revenues that surpassed its cumulative CapEx. While valuations and future revenue uncertainty remain elevated for many big tech companies, most companies have been able to exceed analysts’ expectations so far. Moreover, Microsoft’s AI-related revenue growth has exceeded that of its cloud platform during the same stage of their respective CapEx buildouts. 

GPT‑5’s release occurs amid fierce AI competition between the U.S. and China, as both nations strive for dominance in innovation, talent, and infrastructure. While GPT-5 appears to be the best model at the moment, China is close behind with lower-cost models aided by open source frameworks and cost‑efficient engineering. The U.S. continues to restrict the export of Nvidia’s best chips, such as the H100 and H200, to China due to national security concerns, and recent developments suggest that the export controls are making a tangible difference in the AI race.  On Thursday, DeepSeek delayed the release of its latest R2 model due to technical difficulties with using Huawei’s Ascend chips. This highlights the impact of U.S. trade policy on both its geopolitical and commercial competition with China.   

From a long-term standpoint, GPT-5 and related milestones reinforce the importance of diversifying across geographies, technology sub-sectors, and business models. OpenAI’s innovation leadership via GPT-5 supports exposure to U.S. AI infrastructure and firms benefiting from its ecosystem, such as Bessemer holding Microsoft. At the same time, China’s AI momentum also presents potentially compelling investment opportunities. For investors, this confluence of tech and policy underscores the importance of thoughtful stock selection and the likely need to blend investment in dominant tech incumbents with cost-effective challengers.