The big news this week is expected to be Nvidia’s second-quarter earnings announcement on Wednesday. The analyst community is forecasting 53.5% sales growth of $46.12 billion and 48.7% earnings growth of $1.01 per share. There have been positive analyst earnings revisions in the past three months, and the company has a strong earnings surprise history. As always, Nvidia’s guidance will be crucial.Due to all the call options written on Nvidia (so market makers can collect option premiums), do not be surprised if the stock does not rally in the wake of its earnings, since sometimes market makers run “mean reversion algorithms” to prevent them from exercising all the call options issued.Nvidia’s ascension to over $4 trillion in market capitalization has been stunning and swift. Nvidia now has a market capitalization that accounts for 3.6% of global GDP, according to Deutsche Bank. Furthermore, according to Deutsche Bank, Nvidia’s market capitalization is now bigger than the entire stock market capitalizations of Britain, France and Germany. Only China, India and Japan have stock market capitalizations larger than Nvidia. So, it is very apparent that Nvidia is overpowering the world with its market dominance of AI chips that data centers increasingly demand for all the AI applications.In the wake of Fed Chairman Jerome Powell’s Jackson Hole speech, the Fed is expected to cut key interest rates at its September Federal Open Market Committee (FOMC) meeting and continue cutting the rest of this year.The stock market is expected to get a “one-two” punch that should further boost stock prices from continued strong earnings growth, as well as key interest rate cuts.These interest rate cuts are desperately needed to stimulate the housing industry, which is struggling with falling home prices. In the past 12 months, median home prices have only risen 0.2% to $422,400 through July, so at least housing inflation is finally cooling off.The primary inflation catalyst has been higher shelter costs based on owner’s equivalent rent and has been cooling in recent months. As soon as owners’ equivalent rent is unchanged or actually declines, inflationary pressures are expected to fall below the Fed’s 2% inflation target.There is typically some seasonal weakness through September 15th, since some investors sell stocks to raise money for their quarterly tax payments. However, the FOMC key interest rate cut on September 17th will help to inspire investors and should spark more buying pressure.By the time October arrives, the rest of the year is seasonally strong, so I am expecting a robust year-end rally fueled by strong corporate earnings, lower interest rates, and AI-led productivity gains.The real risk to the global economy is deflation in the upcoming years. In fact, since May of 2022, China has been plagued by deflation that is now running at a 3.6% annual pace. Why things are so dire in China is their population has been shrinking and they are losing households. This problem exists throughout Asia and Northern Europe, simply due to a low birthrate. At the Kansas City Fed Conference in Jackson Hole, the central bank heads of Britain, the European Union (EU) and Japan said the world’s largest economies will increasingly lack the workers they need to power economic growth due to aging populations. AI and productivity growth can counteract the poor demographics that now plague most of the world. European Central Bank (ECB) President Christine Lagarde said that an influx of foreign workers would play a “crucial role” in countering negative demographic trends.What ECB President Lagarde failed to say is that Europe has done a poor job assimilating foreign workers and that there is a “clash of civilizations” in many European countries. In America, we do not have this problem, since we quickly assimilate foreigner workers. Naturally, the Trump Administration wants legal immigrants with green cards versus illegal workers and is moving fast to make sure the U.S. workforce is legal.I am expecting a resurgence in the U.S. dollar due to (1) stronger GDP growth, (2) the fact that the Fed ss the last major central bank to cut key interest rates and (3) the U.S. has superior demographics, plus better assimilates immigrants. A resurging U.S. dollar is deflationary and should help to offset many price increases from tariffs. Furthermore, what is also putting downward pressure on prices are the many AI advances that originate in the U.S. and China before spreading around the globe. China and the U.S. are in the midst of an AI race with self-driving vehicles being one of the first physical AI battlegrounds.Currently in the U.S, there is a race between Google (via Waymo), Tesla and Uber for who with win the self-driving race. Uber is poised to win longer-term, since they are already using a Chinese self-driving platform outside the U.S. and will be introducing I.D.Buzz vans (VW Group) in Los Angeles in 2026. Most reviews of self-driving believe that Waymo with its lidar system is ahead of Tesla with its camera-based system. The upcoming Uber system with I.D.Buzz vans is also lidar based. Several years from now, I think Uber will become the self-driving leaders due to the fact that it can make an alliance with whatever AI software works the best from China, Waymo, VW Group, etc.The robotics race is a bit more complicated, since the robots themselves will have to be frequently updated via links to AI data centers. Until the Optimus robot at the Tesla Diner in Santa Monica, stops serving just popcorn and starts doing cooking and serving, I think we can conclude that robots will be confined to factory floors before they become our personal servants by doing household chores and walking dogs. Regardless of how the AI race unfolds, we are poised to profit via Nvidia and all the data center related stocks that I recommend.Palantir Technologies is probably implementing AI better than most companies as it strives to revamp the U.S. Defense Department, the CIA, NSA and other federal agencies. The stock has been attracting the attention of short sellers, but I suspect it will “squeeze the shorts” when it announces its next quarterly results. The analyst community is expecting Palantir Technologies to post 50.5% sales growth of $1.09 billion and 68.2% earnings growth of 17 cents per share. In the past month, the analyst community has revised their consensus earnings estimate 21.4% higher. Of course, typically, positive analysts’ earnings revisions precede future earnings surprises, so I remain very optimistic that Palantir Technologies will resurge in the upcoming months.Overall, we are now in a brave new world where our standard of living is increasingly dependent on AI enhancing productivity to boost GDP growth. In the next several years, AI will continue to invade our lives and self-driving will likely become increasingly common. Our home assistant robots are likely more than a decade away and the adoption rate will likely be slow at first. Right now, robots are dominating warehousing as well as the factory floor to help boost productivity. These productivity gains help to reduce inflationary pressures as a stronger U.S. dollar.The fact that the Fed will be cutting key interest rates at the September FOMC meeting will be welcome. Additionally, the “dot plot” of future key interest rate cuts will be carefully scrutinized. There is typically some seasonal weakness through September 15th, since some investors sell stocks to raise money for their quarterly tax payments. However, the FOMC key interest rate cut on September 17th will help to inspire investors and should spark more buying pressure. By the time October arrives, rest of the year is seasonally strong, so I am expecting a robust year-end rally fueled by strong corporate earnings, lower interest rates and AI-lead productivity gains.