November's Consumer Price Index (CPI) reading was released Tuesday showing inflation to be steadying out. While the Federal Reserve has yet to make its target of 2% inflation, it seems many investors are feeling more comfortable with market conditions, but how should they allocate for their portfolio? Alger Director of Market Strategy Brad Neuman joins Yahoo Finance to share the opportunities for investors coming off of this CPI print.

"We think that artificial intelligence is a big user of electricity. In fact, we think it's going to go from about 3% of total electricity consumption in the US to about 10% by the end of the decade," Neuman says. "That along with electric vehicles and other demands on electricity may cause some shortages and need some infrastructure buildout. So, companies like Eaton and Schneider, who work on modernizing the grid and will help provide power to data centers and others we need it as generative AI takes off, we think they'll be in demand."

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Video Transcript

- And so Brad, for you, are you as I was just talking with Julie, are you in that camp that says, OK, when they look at core, it's receding rapidly enough that you think they can cut let's call it March, or May. Or do you think no, it's going to be a bit more, that last mile of 2% is going to be a bit more stubborn. If they do cut it's probably a second half event.

BRAD NEUMAN: I think March, probably a little too early. I think if inflation ultimately comes down to something like 2%, to 3% on a core basis, then I think they'll be able to cut sometime next year just to bring real rates down, and I don't know whether that's second quarter or third quarter or what have you but sometime around then.

- OK, so given all of this then, what do you do with your money right now? And what do you recommend the clients do. I know that you've been looking at this big secular trends right, thematic stuff like AI. But when we talked to you earlier in the year, you talked about some of those names. Has that calculus changed?

BRAD NEUMAN: So when I was on earlier in February this year, we talked a lot about AI and how it's this general purpose technology similar to the internet or electricity and mentioned a lot of those names have done fantastically well. The NVIDIAs, the Microsofts of the world. I guess, I would look for that to broaden out a little bit.

So those stocks were like ground zero for artificial intelligence, meaning they were the infrastructure, the hardware infrastructure, the software cloud computing infrastructure. And I would look for that to broaden out to adjacencies that are maybe a little bit less obvious. For example--

- Would you rotate out of those, or just expand?

BRAD NEUMAN: No, just expand. We still like a lot of those leaders and think that there's more fundamental growth left there. We're just broadening out that theme to encompass adjacencies like power and electricity. So we think that artificial intelligence is a big user of electricity. In fact, we think it's going to go from about 3% of total electricity consumption in the US to about 10% by the end of the decade.

And that along with electric vehicles and other demands on electricity may cause some shortages and need some infrastructure build out. And so companies like Eaton and Schneider who work on modernizing the grid, and will help provide power to data centers and others who need it as generative AI takes off, those companies we think will be in demand. Other companies that provide cooling and efficiencies for data centers like Vertiv, those types of companies we think will be in demand.