by Louis Navellier
August 11, 2026
The short selling community is always looking for ways to scare into selling some good investments. Lately, some nasty short sellers have spread a rumor about how Chinese AI will undercut American AI – like OpenAI, Anthropic (Claude), Grok and other products – which will be undercut by Chinese outfits.
These unscrupulous short sellers have also been spreading rumors that DeepSeek is gearing up to defeat American AI by building a massive data center in Mongolia! (If you remember the initial DeepSeek rumors posted over a year ago, they said China’s AI was better that ChatGPT, but that was a false narrative). It is imperative we avoid such fake news, which anonymous short sellers constantly propagate.
Speaking of fake news, Palantir Technologies has been down this year due in large part to false narratives about AI replacing all the major software companies. Well, Palantir Technology’s second-quarter revenue surged 93.5% to $1.935 billion, and the company’s operating earnings rose 156.3% to $1.062 billion or 41 cents per share vs. 16 cents a share last year. The analyst community was expecting revenue of $1.812 billion and operating earnings of $0.34, so Palantir posted a 6.8% revenue surprise and a 20.6% earnings surprise. The company also raised its guidance above analysts’ estimates. This was Palantir’s third-straight quarter of great results and guidance, so many traders who shorted Palantir may have had to run for cover.
Why were some AI stocks down? On last week’s Navellier Market Buzz, we discussed a lecture at Stanford titled: “The Economics of the AI Supercycle,” delivered by two industry experts who said AI has hit a computing “wall,” until OpenAI, Anthropic (Claude), Grok and other AI software applications can get more computing power. For example, Microsoft was finally able to get access to more computing power and they finally started to monetize their ChatGPT investment. However, the computing power AI developers need seems endless, which may explain why there is such a big order backlog for data-centers.
If you use AI, you have probably noticed you get some initial AI tokens with some AI software. This is part of their marketing plan. Essentially, AI sends you an initial answer which lacks depth, clarity or key details. That’s in order to prompt you to keep asking AI more questions to undergo a deeper dive into your area of interest, but after you run out of AI tokens, AI software can start charging you for future queries.
A Rising GDP and Other Key Economic Indicators Released Last Week
Earlier this year, I said the GDP this quarter would far eclipse the first half and reach my predicted level of 5% growth. Sure enough, the Atlanta Fed now estimates a 5.8% annual GDP growth rate for the third-quarter, well above the 5% annual pace that I predicted back in December on Fox Business.
Furthermore, to demonstrate how second-quarter GDP growth was stronger than reported (under the surface), purchases rose at a 5.7% annual pace (up from 3.6% in the first-quarter), plus real final sales rose at a 3.9% annual pace (up from a 1.7% annual pace in the first-quarter) in the second-quarter.
Another good sign that GDP growth is accelerating now comes from the Institute of Supply Management (ISM) manufacturing index, which surged to 55.6 in July, up from 53.3 in June. The ISM manufacturing index has now risen for seven-consecutive months and is at a four-year high. The new orders component rose to 56.7 in July (up from 56 in June), while the production component soared to 58.5 in July (up from 52.2 in June). Also encouraging is the backlog of orders component, rising to 55 in July (up from 50.5 in June). And all but one of the 16-manufacturing industries ISM surveyed reported expanding in July.
Then, on Wednesday, ISM announced its non-manufacturing (service) index rose to 54.1 in July, the 25th straight month the ISM service index has been over 50 (expanding). The business activity component surged to 59.1 in July (up from 55.4 in June) and the new orders component rose to 57.2 in July (up from 55.1 in June). Fully 13 of the 17-service industries ISM surveyed reported expanding in July.
In other economic news, the Labor Department announced productivity rose 1.4% in the second quarter, up from a revised 0.8% in the first quarter. Fed Chairman Kevin Warsh said at his Senate confirmation hearing that productivity improvements over time will be “structurally disinflationary” as technology costs ultimately get cheaper. Productivity gains are good for GDP growth and suppressing inflationary pressure.
Turning to jobs, ADP reported only 44,000 private payroll jobs were created in July, well below the economists’ consensus estimate of 65,000 net new jobs. Most private sector jobs created in July were in education and healthcare, with 36,000 jobs, while leisure and hospitality lost 11,000 jobs in July.
The big shocker came on Friday, when the Labor Department reported 23,000 fewer payroll jobs in July, far below the economists’ consensus expectation of 83,000 net new jobs. Also, the May and June payroll totals were revised lower by a cumulative 103,000 jobs. The other shocking statistic was that the unemployment rate declined to 4.1%, due to a shrinking labor force (fewer people seeking work).
There were some seasonal reasons for the decline. First, a drop in 53,000 government jobs appears to be related to the end of the school year. Second, a 40,000 decline in leisure and hospitality jobs may have been related to the fact that the World Cup is over. Average hourly earnings only rose 0.1% to $37.62 per hour. Treasury yields declined in the wake of this payroll report, taking pressure off the Fed to raise rates.
The Bond Vigilantes Are Attacking Europe’s (and some of America’s) Financial Policies
The bond vigilantes have been focused on Japan’s budget lately, as they have substantially weakened the Japanese yen. However, Treasury Secretary Scott Bessent recently intervened to help shore up the yen after it hit a 40-year low. Bessent said, “The Trump administration delivers for America’s trusted partners,” adding that, “Economic security is national security, and the US-Japan alliance is built on both.”
Europe is also in trouble. Retail sales in June declined 0.3% in the eurozone, which means many countries in the EU are faltering. The retail sales drop was the most dramatic in Germany (a 1.1% decline) and France (-0.5%), which are the two largest economies in the EU. A heat wave has not helped the EU, since many citizens are miserable due to a lack of air conditioning there. Also, many key rivers are running low, which means nuclear plants in France, Hungary and Romania may have to shut down. Until the heatwave breaks, likely in September, it may not be evident just how much EU retail sales have been curtailed.
The bond vigilantes – most of them big institutional bond investors – have been laser focused lately on Japan, Britain and France for their reckless fiscal policies, but the U.S. has not escaped their attention.
J.P. Morgan’s CEO Jamie Dimon warned of a bond market reckoning coming. Specifically, Dimon is worried about long-term Treasury bond yields as the cumulative U.S. debt approaches $40 trillion. Dimon said, “Debt and deficit figures are hitting startling levels even as the economy, and broader equity markets, continue to outperform.” He added we usually must see a “depression or war to have numbers like that.”
I should add that under Treasury Secretary Scott Bessent the Treasury auctions and bid-to-call ratios are back to normal, so there is no problem at the moment. Also, the velocity of money, or how fast money changes hands, is accelerating, so that also helps to contribute to healthy bidding at the Treasury auctions.
Lately, bond vigilantes have pushed long-term Treasury bond yields higher, which has upset some fixed income and dividend investors. President Trump, after relentlessly bombing Iran’s Islamic Revolutionary Guard Corps (IRGC), is seeking a diplomatic solution to keep the Strait of Hormuz open. Whether this latest quest for a diplomatic solution was sparked by our allies in the Middle East, political advisors, or the mid-term elections does not matter. What matters is crude oil prices are moderating for the time being.
One last thing. As the mid-term elections approach, many in the mainstream media like to bash America, but the attack is even fiercer in Europe, particularly in England. I force myself to read the British press and I’d say the Financial Times is downright depressing. The Economist (based in London) interviewed Elon Musk, who called out the editor for spreading false narratives. The truth of the matter is the news media and most of the political elite in Europe despise President Trump, so they strive to undermine him and America. The irony is America is an oasis for the world: Immigrants flock here and many are now in the billionaire class. The U.S. dollar has also been rising this year, since the U.S. is viewed as an oasis.
Navellier & Associates; own Palantir Technologies Inc. Class A (PLTR) in managed accounts. Some accounts own Microsoft Corporation (MSFT) per client request. Louis Navellier and his family own Palantir Technologies Inc. Class A (PLTR) via a Navellier managed account. They do not own Microsoft Corporation (MSFT) personally.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Short Sellers Attack U.S.-Based AI Stocks
Income Mail by Bryan Perry
Expect a Fed Pivot After Friday’s Job Market Gut Check
Growth Mail by Gary Alexander
55-Years of Floating (or Sinking) Currencies Fueled Chronic Inflation
Global Mail by Ivan Martchev
Last Week’s Market Rallied As if the Iran War Were Over
Sector Spotlight by Jason Bodner
When a Long-Suppressed Market Suddenly Explodes
View Full Archive
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