Traders work on the floor of the New York Stock Exchange on April 5, 2024.
Spencer Platt | Getty Images News | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Breather from rally U.S. markets fell Tuesday, weighed down by a drop in semiconductor stocks and a 8.1% slide in UnitedHealth. Asia-Pacific stocks were mostly lower Wednesday. Asian chip stocks, like Tokyo Electron and Taiwan Semiconductor Manufacturing Company, retreated on news of ASML’s disappointing forecast and reports of the U.S. possibly imposing export controls on AI chips.
ASML slumps Shares of semiconductor equipment manufacturer ASML plunged 16% on a downbeat earnings report. For 2025, the Netherlands-based company thinks net sales will come in at the lower half of its previous projection. ASML missed expectations on net bookings by 3 billion euros for the September quarter, though net sales beat expectations.
Better than ChatGPT Alibaba updated its artificial-intelligence translation tool, based on a model called Marco MT, on Wednesday. The Chinese e-commerce giant said its product performs better than those by Google and DeepL, according to an assessment by benchmarking tool FLoRes. Fifteen languages are supported by Alibaba’s AI-powered translation tool.
[PRO] Repositioning for slower rate cuts September’s strong jobs report and higher-than-expected inflation reading mean that the U.S. Federal Reserve is unlikely to repeat its jumbo 50-basis-point rate cut at its November meeting. Here’s how strategists are repositioning in view of changing rate cut expectations.
The Dow Jones Industrial Average, which just yesterday was basking in its accomplishment at closing above the 43,000 level for the first time, fell 0.75% to dip into the 42,000 territory again. UnitedHealth’s 8.1% drop dragged down the Dow.
Still, investors are the most bullish in four years, according to the October BofA Global Fund Manager Survey. They’re also optimistic about the economy: 74% investors believe the U.S. will avoid a recession.
Anticipation of more rate cuts by the U.S. Federal Reserve and hopes that Beijing will unleash more stimulus to boost its economy are driving up investor sentiment, according to Michael Hartnett, an investment strategist at BofA.
Indeed, San Francisco Fed President Mary Daly, who’s a member of the Federal Open Market Committee this year, noted that the central bank is “a long way from where [rates are] likely to settle.” That means “the decisions that are really in front of us are ones about how quickly to adjust towards that level” – not whether to keep rates high in light of how strong recent economic data has been.
Another positive sign for markets is how the S&P and Dow hit all-time highs on Monday, but the Nasdaq was still a few percentage points away from its peak. “This subtle divergence is technical evidence that the market has been moving away from the Magnificent Seven mega-caps,” wrote Piper Sandler’s chief market technician Craig Johnson.
– CNBC’s Jeff Cox, Samantha Subin, Yun Li, Lisa Kailai Han and Alex Harring contributed to this story.
Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., May 17, 2024.
Brendan McDermid | Reuters
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Breather from rally U.S. markets fell Tuesday, weighed down by a drop in semiconductor stocks and a 8.1% slide in UnitedHealth. The pan-European Stoxx 600 index lost 0.8% as sectors diverged in performance. Tech stocks fell 6.36%, while telecoms stocks rose 1.97%. Separately, euro zone industrial production increased 1.8% between July and August, according to Eurostat.
ASML slumps Shares of semiconductor equipment manufacturer ASML plunged 16% on a downbeat earnings report. For 2025, the Netherlands-based company thinks net sales will come in at the lower half of its previous projection. ASML missed expectations on net bookings by 3 billion euros for the September quarter, though net sales beat expectations.
[PRO] S&P 500 at 6,400? Stocks seem unstoppable. Two years into a bull market, the S&P 500 has been constantly hitting new closing highs. History suggests the bull tends to stall, or at least trip on itself, in its third year. But UBS thinks the S&P can buck the trend in 2025 and soar to 6,400, implying an upside of 10%from Tuesday’s close.
The Dow Jones Industrial Average, which just yesterday was basking in its accomplishment at closing above the 43,000 level for the first time, fell 0.75% to dip into the 42,000 territory again. UnitedHealth’s 8.1% drop dragged down the Dow.
Still, investors are the most bullish in four years, according to the October BofA Global Fund Manager Survey. They’re also optimistic about the economy: 74% investors believe the U.S. will avoid a recession.
Anticipation of more rate cuts by the U.S. Federal Reserve and hopes that Beijing will unleash more stimulus to boost its economy are driving up investor sentiment, according to Michael Hartnett, an investment strategist at BofA.
Indeed, San Francisco Fed President Mary Daly, who’s a member of the Federal Open Market Committee this year, noted that the central bank is “a long way from where [rates are] likely to settle.” That means “the decisions that are really in front of us are ones about how quickly to adjust towards that level” – not whether to keep rates high in light of how strong recent economic data has been.
Another positive sign for markets is how the S&P and Dow hit all-time highs on Monday, but the Nasdaq was still a few percentage points away from its peak. “This subtle divergence is technical evidence that the market has been moving away from the Magnificent Seven mega-caps,” wrote Piper Sandler’s chief market technician Craig Johnson.
– CNBC’s Jeff Cox, Samantha Subin, Yun Li, Lisa Kailai Han and Alex Harring contributed to this story.
Correction: An earlier version of this report misstated the day of U.S. stock movement.
Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Friday’s key moments. U.S. stocks jumped Friday, with the S & P 500 on pace for its fifth straight week of gains. The government’s producer price index was cooler than expected, one day after a slightly hotter consumer price index. Bank earnings are the star of the show. During the Club’s Morning Meeting, Jim Cramer said Wall Street is “starting earnings season off with a bang.” Club stock Wells Fargo rose more than 5.5% after quarterly profit exceeded estimates. Check your email inboxes and your texts shortly for our full Wells Fargo earnings commentary. Jim said he would like to buy some more Advanced Micro Devices if he weren’t restricted due to the Club’s trading rules. AMD dropped 1% on Wednesday and then another 4% on Thursday following its Advancing AI meeting. Melius Research said the stock sold off because the market wanted to see another cloud giant in attendance. Jim said the AMD slide was a bit unfair because Jensen Huang, CEO of AI chip leader Nvidia CEO, sucked all the oxygen out of the room during a three-day roadshow. Palo Alto Networks stock is having a great week, up 10% through early Friday, and our best weekly performer. Morgan Stanley raised its price target on the cybersecurity stock to $421 per share from $390. That implies 14% upside from Thursday’s close. We battled the stock, buying some on the dip in early August and then taking some profits later in the month. Jim has been considering adding cyber rival CrowdStrike to the portfolio, pointing out that Bullpen name CrowdStrike didn’t lose customers after its glitch caused a worldwide IT outage in July. Stocks covered in Friday’s rapid fire at the end of the video were: JPMorgan , BlackRock , Tesla , Affirm , and Ferrari . (Jim Cramer’s Charitable Trust is long WFC, AMD, PANW. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Friday’s key moments.
AMD launched a new artificial-intelligence chip on Thursday that is taking direct aim at Nvidia’s data center graphics processors, known as GPUs.
The Instinct MI325X, as the chip is called, will start production before the end of 2024, AMD said Thursday during an event announcing the new product. If AMD’s AI chips are seen by developers and cloud giants as a close substitute for Nvidia’s products, it could put pricing pressure on Nvidia, which has enjoyed roughly 75% gross margins while its GPUs have been in high demand over the past year.
Advanced generative AI such as OpenAI’s ChatGPT requires massive data centers full of GPUs in order to do the necessary processing, which has created demand for more companies to provide AI chips.
In the past few years, Nvidia has dominated the majority of the data center GPU market, but AMD is historically in second place. Now, AMD is aiming to take share from its Silicon Valley rival or at least to capture a big chunk of the market, which it says will be worth $500 billion by 2028.
“AI demand has actually continued to take off and actually exceed expectations. It’s clear that the rate of investment is continuing to grow everywhere,” AMD CEO Lisa Su said at the event.
AMD didn’t reveal new major cloud or internet customers for its Instinct GPUs at the event, but the company has previously disclosed that both Meta and Microsoft buy its AI GPUs and that OpenAI uses them for some applications. The company also did not disclose pricing for the Instinct MI325X, which is typically sold as part of a complete server.
With the launch of the MI325X, AMD is accelerating its product schedule to release new chips on an annual schedule to better compete with Nvidia and take advantage of the boom for AI chips. The new AI chip is the successor to the MI300X, which started shipping late last year. AMD’s 2025 chip will be called MI350, and its 2026 chip will be called MI400, the company said.
The MI325X’s rollout will pit it against Nvidia’s upcoming Blackwell chips, which Nvidia has said will start shipping in significant quantities early next year.
A successful launch for AMD’s newest data center GPU could draw interest from investors that are looking for additional companies that are in line to benefit from the AI boom. AMD is only up 20% so far in 2024 while Nvidia’s stock is up over 175%. Most industry estimates say Nvidia has over 90% of the market for data center AI chips.
AMD stock fell 3% during trading on Thursday.
AMD’s biggest obstacle in taking market share is that its rival’s chips use their own programming language, CUDA, which has become standard among AI developers. That essentially locks developers into Nvidia’s ecosystem.
In response, AMD this week said that it has been improving its competing software, called ROCm, so that AI developers can more easily switch more of their AI models over to AMD’s chips, which it calls accelerators.
AMD has framed its AI accelerators as more competitive for use cases where AI models are creating content or making predictions rather than when an AI model is processing terabytes of data to improve. That’s partially due to the advanced memory AMD is using on its chip, it said, which allows it to server Meta’s Llama AI model faster than some Nvidia chips.
“What you see is that MI325 platform delivers up to 40% more inference performance than the H200 on Llama 3.1,” said Su, referring to Meta’s large-language AI model.
Taking on Intel, too
While AI accelerators and GPUs have become the most intensely watched part of the semiconductor industry, AMD’s core business has been central processors, or CPUs, that lay at the heart of nearly every server in the world.
AMD’s data center sales during the June quarter more than doubled in the past year to $2.8 billion, with AI chips accounting for only about $1 billion, the company said in July.
AMD takes about 34% of total dollars spent on data center CPUs, the company said. That’s still less than Intel, which remains the boss of the market with its Xeon line of chips. AMD is aiming to change that with a new line of CPUs, called EPYC 5th Gen, that it also announced on Thursday.
Those chips come in a number of different configurations ranging from a low-cost and low-power 8-core chip that costs $527 to 192-core, 500-watt processors intended for supercomputers that cost $14,813 per chip.
The new CPUs are particularly good for feeding data into AI workloads, AMD said. Nearly all GPUs require a CPU on the same system in order to boot up the computer.
“Today’s AI is really about CPU capability, and you see that in data analytics and a lot of those types of applications,” Su said.
Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Tuesday’s key moments. 1. The S & P Short Range Oscillator signaled a very overbought market even as the S & P 500 tracked modestly lower. We’ll see at the close whether the index’s eight-session winning streak will be broken. This is not a time to buy, Jim Cramer said. “You can only sell.” We trimmed Morgan Stanley after a nice run . On Monday, we exited Estee Lauder . After its recent rally and ahead of a baby formula trial, Jim suggested Abbott Laboratories could be trimmed. That gives us “optionality to buy Abbott if it goes down,” he added. Following solid earnings and a subsequent 8% stock rise, Jim said that trimming Palo Alto Networks might not be a bad idea, given its run higher. 2. Advanced Micro Devices rose another 1% on Tuesday, one day after announcing a deal to buy hyperscaler ZT Systems. The purpose of the deal is to expand its portfolio of AI chips and hardware to compete with fellow Club name Nvidia . “ZT makes it so they’re competitive. It’s a very important deal,” Jim explained. Investors are calling this acquisition an “acqui-hire” since AMD said plans to sell ZT’s manufacturing unit but retain 1,000 of its engineers. “They don’t have good training, meaning they need more data,” Jim added. “They need these engineers really badly.” 3. JPMorgan retail analyst Matthew Boss raised his price target on TJX Companies on Tuesday to $126 per share from $125. But he estimated that the end of TJX’s most recent quarter may not be that great. Jim agrees with Boss’ assessment. “You know I think it’s terrific,” Jim said, referring to TJX stock. But he added, “I would probably let some go if we weren’t restricted.” Shares of TJX, the off-price retailer behind T.J. Maxx, Marshalls, and HomeGoods, are up 20% year-to-date. (Jim Cramer’s Charitable Trust is long MS, ABT, AMD, TJX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
This week’s rout in chip stocks is a buying opportunity for investors, according to Citigroup. “We think it’s time to double down on Micron as we believe the [dynamic random access memory] market will remain tight given the oligopoly,” analyst Christopher Danely wrote in a 24-page report, calling the stock Citi’s top pick. Chip stocks sold off this week amid a broader reckoning in the outperforming technology sector since mid-June. That weakness accelerated on the heels of a slack July jobs reports Friday and a surprise rate hike from the Bank of Japan that led many investors to ditch the yen carry trade, buying the yen and selling the dollar. SMH 1M mountain VanEck Semiconductor ETF over the last month Danely also blamed disappointing results from semiconductor and semiconductor equipment companies as contributing to the pullback in the sector. The VanEck Semiconductor ETF has slumped 21% over the last month. The San Francisco-based analyst added that “very high” expectations at the peak meant the PHLX Semiconductor Sector Index was trading at a 70% premium to the S & P, its highest valuation since 2008. Earnings estimates for calendar 2025 also declined 11%, due in part from disappointing results from Intel , NXP Semiconductors and Microchip Technology . Along with Micron Technology , Danely named Advanced Micro Devices , Nvidia and Analog Devices among his top buy-rated names. “AI and memory still driving the bus – we’re still positive,” he wrote. “Fundamentals from the AI and memory end markets (roughly 30% of semi demand) remain robust with AI [capital expenditures] increasing and DRAM pricing already better than expected in 3Q24.”
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Market slides : The S & P 500 gave back earlier gains and fell throughout Tuesday afternoon, led lower by the mega-cap tech stocks. Ahead of the post-Fed meeting news conference Wednesday afternoon, when central bank chief Jerome Powell is expected to signal interest rate cuts are coming, the market continued to toss out stocks of companies that don’t need lower rates to beat and raise. Investors instead kept buying stocks of companies whose prospects get a lot better in a lower-rate environment. In an example of this dynamic, Club name Nvidia doesn’t need rate cuts to spur demand for its artificial intelligence GPUs, but lower rates could create a windfall for Stanley Black & Decker if lower mortgage rates reignite sales of older homes that need repairs and remodeling. Nvidia dropped 5% on Tuesday. Stanley Black & Decker, also a portfolio holding, rose more than 9% in an earnings-driven rally that extended last week’s surge. We don’t know how long this rotation will last, but that’s what playing out right now. Banks shining : Lost in the shuffle of all the earnings earlier and another tech selloff was a bullish note on large-cap banks from Morgan Stanley analyst Betsy Graseck. We read Graseck carefully because of her previous big calls. Back in January, Graseck and her team upgraded their view on the large-cap banks to “attractive” and upgraded Citi , Goldman Sachs , and Bank of America to a buy-equivalent overweight. At the time, Morgan Stanley already had overweight ratings on Club name Wells Fargo and JPMorgan . It was a good call. Now, Graseck is back again raising price targets on nearly every bank in her coverage after second-quarter earnings. In her review of the quarter, she found that the capital markets rebound is only in its second inning, excess capital supports higher buybacks next year, and net interest income is starting to inflect for a handful of banks. Longer term, Grasck thinks the banks are skewing towards her “bull case” on lower expected credit losses. Up next: It’s a big night of earnings with Club names Microsoft , Advanced Micro Devices , and Starbucks scheduled to report. Some other names to watch are Arista Networks, Pinterest, First Solar, Caesars Entertainment, and Electronics Arts. Before Wednesday’s open, we get earnings from Club stocks GE Healthcare and DuPont . Boeing, Norwegian Cruise Line, Mastercard, Humana, Trane Technologies, and Kraft Heinz are also set to report. Club stock Meta Platforms is out with earnings after Wednesday’s close. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street.
It’s been another great run for stocks since the Club’s last monthly meeting in June. The likelihood the Federal Reserve will lower interest rates sooner than later after recent upbeat inflation data pushed stocks to new highs over the past few weeks. Traders now see the odds of a rate cut by September at 100% , according to the CME FedWatch tool . The Dow Jones Industrial Average reached an all-time intraday high on Tuesday, while the S & P 500 did the same Monday. On July 11, the Nasdaq Composite hit new a new high as well. Taking advantage of the overbought market, we’ve executed a series of trades. The Club offloaded shares of TJX Companies on Friday in order to raise some additional cash. Before that, we made sales of Meta Platforms and Palo Alto Networks on July 8, locking in massive gains of 150% and 94%, respectively, since we first purchased both. On the flip side, we’ve looked for opportunities during the tech pullback. We started by initiating a small position in Advanced Micro Devices , a stock we most recently owned in the summer of 2023, and bought more on Tuesday. Through all the portfolio action, a key theme has emerged in the stock market, especially over the past week. Investors are jumping on the chance to get in on sectors outside of Big Tech. The Russell 2000 , which measures the performance of small-cap U.S. stocks, jumped nearly 11% in the past five sessions. Meanwhile, the tech-heavy Nasdaq edged 0.18% lower over the period. Case in point: Some of our biggest winners in 2024, mega-cap stocks like Amazon , Alphabet, Meta and Microsoft posted losses since our last meeting. Amazon is still up 27% for the year, while Alphabet and Meta jumped 31% and 38%, respectively. Other losers included our stocks with heavy ties to China: Wynn Resorts , Starbucks and Estee Lauder . All said, 12 of the portfolio’s 34 stocks were in the red. We see the market rotation playing out in our top-five performing names as well. From the June 27 close through Tuesday, only one company is in mega-cap tech. Here’s our top five and what’s driving the gains for each: 1. Ford Motor: 17.7% There wasn’t a single catalyst for Ford Motor’s outperformance. Investor sentiment, however, looks to have improved on signs that sales are picking up. Shares of the automaker rose on July 3 after the company said hybrid vehicle sales surged 56% in the second quarter, which set a new quarterly sales record for the segment. On July 11, the stock jumped again after June’s consumer price index (CPI) print indicated easing inflation and strengthened the Fed’s case to lower rates — an environment that could lead to more consumers buying Ford’s vehicles. The stock reached a 52-week high of $14.43 apiece on Monday. 2. Morgan Stanley: 10.9% Would a second presidency for Donald Trump benefit big U.S. banks? Investors in Morgan Stanley seem to think so. Shares advanced after President Joe Biden and Trump squared off during the June 27 presidential debate , which many viewed as a big win for the former president. Morgan Stanley’s momentum continued into July and hit an all-time high of $109.11 on Tuesday after the bank posted a largely better-than-expected second quarter report . We raised our price target to $120 from $98 apiece after results. 3. Stanley Black & Decker: 10.5% Stanley Black & Decker shares surged on recent signs of forthcoming monetary policy easing, which could spur housing market activity because of lower borrowing costs. More homeowners means more demand for the DeWalt parent’s offerings as buyers look for tools needed to fix things around the house. This, along with investors looking for pockets outside of Big Tech, have sent the stock higher since July 1. Shares of the company climbed 3.5% on Tuesday, and the Club capitalized of the stock’s advance, trimming our position in the afternoon. To be sure, we still see long-term gains ahead once the Fed starts to cut. 4. Apple: 9.7% Apple hit a record high of $237.23 apiece on Monday after Morgan Stanley listed the stock as a top industry pick. The Wall Street analysts said that the company’s artificial intelligence efforts will cause a much-needed upgrade cycle for the company’s flagship iPhone. Morgan Stanley also hiked Apple’s price target to $273 apiece from $213, a more than 16% upside from Tuesday’s close. It’s not like the stock was stalled: Shares have been climbing for months on excitement about Apple’s AI plans, which were recently unveiled at the company’s worldwide developers conference on June 10. 5. Dover: 7.3% Dover began its ascent higher on July 9 as capital rotated into sectors that benefit more from interest rate cuts. Dover is an industrial name, producing thermal connectors that are used in one of the fastest-growing end markets: data centers. This makes Dover a great under-the-radar AI play. “Dover is going to be a big name for me,” Jim said recently. Shares hit an all-time high Tuesday of $190.54 each, and closed the day nearly 3% higher. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
A trader works, as a screen broadcasts a news conference by U.S. Federal Reserve Chair Jerome Powell following the Fed rate announcement, on the floor of the New York Stock Exchange in New York City, U.S., June 12, 2024.
Brendan Mcdermid | Reuters
It’s been another great run for stocks since the Club’s last monthly meeting in June.
In what was the most anticipated quarter this earnings season, Nvidia far outpaced lofty expectations on the top and bottom lines. Even better was a big revenue guide and a broader vision from CEO Jensen Huang that reinforced the notion that companies and countries are partnering with the AI chip powerhouse to shift $1 trillion worth of traditional data centers to accelerated computing. Revenue for its fiscal 2025 first quarter surged 262% year-over-year to $26.04 billion, well ahead of analysts’ forecasts of $24.65 billion, according to data provider LSEG, formerly known as Refinitiv. The company had previously guided revenue to $24 billion, plus or minus 2% — so that was a huge beat. Adjusted earnings-per-share increased 461% to $6.12, exceeding the LSEG compiled consensus estimate of $5.59. Adjusted gross margin of 78.9% also beat the Street’s 77.2% estimate, according to market data platform FactSet. The company had guided gross margins to 77%. plus or minus 50 basis points. On top of the strong results, Nvidia announced a 10-for-1 stock split. Although stock splits don’t technically create value, they do tend to have a positive impact on the stock. The company said the split is to “make stock ownership more accessible to employees and investors.” We commend Nvidia for doing this and will continue to press other companies to do the same. Nvidia most recently split its stock in July 2021 on a 4-for-1 basis. In after-hours trading, it was little surprise to see Nvidia shares surging. Nvidia Why we own it : Nvidia’s high-performance graphic processing units (GPUs) are the key driver behind the AI revolution, powering the accelerated data centers being rapidly built around the world. But this is more than just a hardware story. Through its Nvidia AI Enterprise service, Nvidia is in the process of building out a potentially massive software business. Competitors : Advanced Micro Devices and Intel Most recent buy : Aug 31, 2022 Initiation : March 2019 Bottom line What air pocket? Coming into the quarter, it sounded like the only thing that could hold Nvidia back was a product transition-related slowdown from customers delaying orders of the H100 and H200 GPUs (graphics process units) in anticipation of the superior Blackwell chip platform. As you can see from Nvidia’s big beat and upside guide, that was far from the case and demand is expected to exceed supply for quite some time. Should this narrative form again, here’s a good thing to remember for next time so that these concerns don’t shake you out of a strong long-term thesis: Jensen explained on the post-earnings conference call that customers are still so early in their build-outs that they have to keep buying chips to keep up in the current technology arms race. And technology leadership is everything. “There’s going to be a whole bunch of chips coming at them and they just got to keep on building and just, if you will, performance average your way into it. So that’s the smart thing to do,” the CEO said. More broadly, we didn’t hear anything Wednesday evening to change our long-term view about how Nvidia is the driving force behind the current AI industrial revolution. Here’s how Jensen explained the shift that’s happening: “Longer term, we’re completely redesigning how computers work. And this is a platform shift. Of course, it’s been compared to other platform shifts in the past, but time will clearly tell that this is much, much more profound than previous platform shifts. And the reason for that is because the computer is no longer an instruction-driven only computer. It’s an intention understanding computer.” Jensen went on to mention how computers not only interact with us, “but it also understands our meaning, what we intend that we asked it to do, and it has the ability to reason, inference iteratively to process and plan and come back with a solution.” The billions and billions of dollars being spent on accelerated computing is why we own Nvidia for the long-haul and are not trying to trade it back and forth on every headline. By the way, another bearish narrative we often hear is that the custom chips all the big cloud companies are making are a threat to Nvidia’s leadership. Jensen doesn’t see it that way because his platform system has the highest performance at the lowest total cost of ownership. It’s an unbeatable value proposition. NVDA YTD mountain Nvidia YTD The strong results and outlook, upbeat commentary, and stock split were sending Nvidia shares roughly 6% higher to above $1,000 per share for the first time ever. However, we don’t think the gains end here. We’re increasing our price target to $1,200 from $1050 and maintaining our 2 rating , meaning we view it as a buy on pullbacks. Quarterly Results Growth was driven by all customer types, but enterprise and consumer internet companies led the way. Large cloud companies represented a mid-40% of data center revenue in the quarter, so when you see companies like Oracle and Club names Amazon , Microsoft and Alphabet raise their capital expenditure outlooks, understand that a lot of those dollars will flow Nvidia’s way. And, there’s a good reason for it. On the call, Nvidia CFO Colette Kress estimates that for every $1 spent on Nvidia AI Infrastructure, a cloud provider has an opportunity to earn $5 in GPU instant hosting revenue over four years. One customer call out in the quarter was Tesla , expanding its training AI cluster to 35,000 H100 GPUs (graphic processing units). Nvidia said Tesla’s use of Nvidia AI infrastructure “paved the way” for the “breakthrough performance” of full self-driving version 12. (Full self-driving, or FSD, is the way Tesla markets its high level of driver-assisted software.) Interestingly, Nvidia sees automotive as a huge vertical this year, a multi-billion revenue opportunity across on-premise and cloud consumption. Another highlight was Meta’s announcement of Llama 3, its large language model. It was trained on a cluster of 24,000 H100 GPUs. Kress believes that as more consumer internet customers use generative AI applications, Nvidia will see more growth opportunities. The Tesla and Meta clusters are examples of what Nvidia calls “AI Factories.” The company believes “these next-generation data centers host advanced full-stack accelerated computing platforms where the data comes in and intelligence comes out. Nvidia also pointed out that sovereign AI has been a big source of growth. The company defines sovereign AI as a “nation’s capabilities to produce artificial intelligence using its own infrastructure, data, workforce, and business networks.” Kress expects sovereign AI revenue to approach the high single-digit billions of dollars this year from nothing last year. Looking ahead, Nvidia sees supply for the H100 improving but is still constrained on the H200. Even with the transition to Blackwell, Nvidia expects demand for Hopper for quite some time. “Everybody is anxious to get their infrastructure online, and the reason for that is because they’re saving money and making money, and they would like to do that as soon as possible,” the company said. In other words, customers will take whatever they can get. But look for Blackwell revenue later this year, perhaps in a very meaningful amount. The company explained manufacturing of Blackwell has been in production and shipments are expected to start the fiscal 2025 second quarter, ramp in the third, and customers will have full data centers stood up in the fourth quarter. Software was mentioned more than two dozen times on the conference call. And taken together, Nvidia said on the prior quarter’s call that its software and services reached an annualized revenue rate of $1 billion. They are high-margin, recurring revenue businesses, which continue to be key watch areas in future quarters. As for China, the company said it started to ramp up new products specifically made for the region that don’t require an export control license. The U.S. government has put restrictions on sales of the fastest chips for fear they will be used by the Chinese military. However, it doesn’t like China is expected to be a driver of revenue like it was in the past because the limitations to Nvidia’s technology have made the environment more competitive. Guidance The company’s fiscal second quarter guide should dismiss the market’s concerns that some sort of AI spending “air pocket” was forming. For the current Q2, Nvidia projected revenue of $28 billion, plus or minus 2%, above consensus estimates of $26.6 billion Adjusted gross margins are expected to be 75.5%, plus or minus 50 basis points, above estimates of 75.2%. Capital returns Nvidia increased its quarterly dividend by 150%, which is nice but the annual yield is insignificant to the investment case. More impactful is the $7.7 billion of stock the company repurchased in fiscal Q1. (Jim Cramer’s Charitable Trust is long NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Jensen Huang, co-founder and chief executive officer of Nvidia Corp., during the Nvidia GPU Technology Conference (GTC) in San Jose, California, US, on Tuesday, March 19, 2024.
David Paul Morris | Bloomberg | Getty Images
In what was the most anticipated quarter this earnings season, Nvidia far outpaced lofty expectations on the top and bottom lines. Even better was a big revenue guide and a broader vision from CEO Jensen Huang that reinforced the notion that companies and countries are partnering with the AI chip powerhouse to shift $1 trillion worth of traditional data centers to accelerated computing.
Tech giants aren’t doing much acquiring these days, due mostly to an unfavorable regulatory environment. But they’re finding other ways to spend billions of dollars on the next big thing.
Amazon’s $2.75 billion investment in artificial intelligence startup Anthropic, announced this week, was its largest venture deal and the latest example of the AI gold rush that’s prompting the biggest tech companies to fling open their wallets.
Anthropic is the developer behind the AI model Claude, which competes with GPT from Microsoft-backed OpenAI, and Google’s Gemini. Along with Meta and Apple, they’re all racing to integrate generative AI into their vast portfolios of products and features to ensure they don’t fall behind in a market that’s predicted to top $1 billion in revenue within a decade.
In 2023, investors pumped $29.1 billion combined into nearly 700 generative AI deals, an increase of more than 260% in value from the prior year, according to PitchBook.
A significant chunk of that money was strategic, in that it came from tech companies rather than venture capitalists or other institutions. Fred Havemeyer, head of U.S. AI and software research at Macquarie, said a fear of missing out is one factor driving their decisions.
“They definitely don’t want to miss out on being part of the AI ecosystem,” Havemeyer said. “I definitely think that there’s FOMO in this marketplace.”
The hefty investments are necessary because AI models are notoriously expensive to build and train, requiring thousands of specialized chips that, to date, have largely come from Nvidia. Meta, which is developing its own model called Llama, has said it’s spending billions on Nvidia’s graphics processing units, one of the many companies that’s helped the chipmaker bolster year-over-year revenue by more than 250%.
Whether going the building or investing route, there are a finite number of companies that can afford to play in the market. In addition to developing the chips, Nvidia has emerged as one of Silicon Valley’s top investors, taking stakes in a number of emerging AI companies, partly as a way to make sure its technology gets widely deployed. Similarly, Microsoft, Google and Amazon sometimes offer cloud credits as part of their investments.
In the Amazon-Anthropic deal announced on Wednesday, the two companies said they’ll work closely together in a variety of ways. Anthropic will be using Amazon Web Services for its computing needs as well as Amazon’s chips. Anthropic’s models will be distributed by Amazon to AWS customers.
Earlier this month, Anthropic launched Claude 3, its most powerful model and one that it says lets users upload photos, charts, documents and other types of unstructured data for analysis and answers.
Microsoft got into the business of generative AI investing earlier, putting $1 billion into OpenAI in 2019. The size of its investment has since swelled to about $13 billion. Microsoft heavily uses OpenAI’s model and offers open source models on its Azure cloud.
Alphabet is playing the part of builder and investor. The company has refocused much of its product development on generative AI, and its newly rebranded Gemini model, adding features into search, documents, maps and elsewhere. Last year, Google committed to invest $2 billion in Anthropic, after previously confirming it had taken a 10% stake in the startup alongside a large cloud contract between the two companies.
In this photo illustration, Gemini Ai is seen on a phone on March 18, 2024 in New York City.
Michael M. Santiago | Getty Images
Havemeyer said tech giants aren’t just throwing money into the “hype cycle,” as these investments in AI startups align with their product road maps.
“I don’t think it’s frivolous,” he said.
Havemeyer said that alliances with big cloud providers not only bring much-needed cash to startups but also help them sign up customers.
The cloud companies are saying, “Come to us, work on our platform, have native access to the latest and greatest AI models, and also use our infrastructure,” Havemeyer said. “It’s also part of a much larger ecosystem play.”
“We’re seeing a lot of alliances appearing among those hyperscalers that have substantial scale, infrastructure and very deep pockets,” he added.
In recent earnings calls, tech execs reiterated their focus on generative AI, making it clear to investors that they have to spend money to make money, whether it’s on internal development or through investing in startups.
Microsoft Chief Financial Officer Amy Hood said last year the company was adjusting its “workforce toward the AI-first work we’re doing without adding material number of people to the workforce.” She said Microsoft will continue to prioritize investing in AI as “the thing that’s going to shape the next decade.”
Leaders of Google, Apple and Amazon have also suggested to investors that they’re willing to cut costs broadly across departments in order to redirect more funding toward their AI efforts.
Startups are among the beneficiaries.
Microsoft has taken stakes in Mistral, Figure and Humane, in addition to OpenAI. The company invested in Inflection AI before the startup essentially dissolved and joined Microsoft this month. Mistral is an open source-focused company that uses Azure’s cloud and offers its service to Azure clients.
Startup Figure AI is developing general-purpose humanoid robots.
Figure AI
Figure, a startup seeking to build a robot that walks like a human, has raised money from Microsoft, OpenAI and Nvidia and was valued last month at $2.6 billion.
Amazon’s biggest bet is Anthropic, pouring in a total of $4 billion so far. The company has also invested in open source AI platform developer Hugging Face.
Google’s investments include Essential AI, which is developing consumer AI programs and is backed by AMD and Nvidia. Alphabet and Nvidia are also investors in Runway ML, a generative AI company known for its video-editing and visual effects tools. Others in Nvidia’s portfolio include Mistral, Perplexity and Cohere.
Meanwhile, many of the Big Tech companies continue to spend internally on developing their own models.
Microsoft has invested in many of the techniques underpinning generative AI through its Microsoft Research division. Amazon reportedly has plans to train a bigger, more data-hungry model than even OpenAI’s GPT-4.
Apple researchers recently published details of their work on MM1, a family of small AI models that can take both text and visual input. Apple is in a different position that its peers in that it doesn’t sell a cloud service. Still, the tech giant is reportedly looking for AI partners, including potentially Google in the U.S. and Baidu in China. An Apple representative declined to comment on AI partners.
Daniel Newman, CEO of technology analysis firm Futurum Group, said tech companies are having to get clever when it comes to investing in AI.
For example, OpenAI’s investment from Microsoft included profit sharing in a nonprofit wing, as well as credits to use Microsoft’s cloud service. Microsoft’s deal for Inflection AI amounted to an expensive acquihire, with some reports putting the total outlay at $1 billion. As part of the transaction, Microsoft hired Inflection AI founder Mustafa Suleyman to lead Copilot AI initiatives.
“I think we’re starting to see some some creativity and dealmaking,” said Newman. With respect to Amazon’s agreement with Anthropic, he said an acquisition would be “a lot harder than investing.”
That’s because regulators across the globe are cracking down on Big Tech, making it more difficult to do sizable acquisitions. Even the investments are attracting scrutiny.
FTC Chair Lina Khan described the probe as a “market inquiry into the investments and partnerships being formed between AI developers and major cloud service providers.” The regulator has the authority to order companies to file specific reports or answer questions in writing about their businesses.
“We know regulators are becoming increasingly focused on the traditional path of closing an acquisition,” Newman said. “Right now, the game is having access to the most fundamental IP.”
A microchip and the Nvidia logo displayed on a phone screen are seen in this photo taken in Krakow, Poland, on April 10, 2023.
Nurphoto | Getty Images
Artificial intelligence and semiconductor chip stocks rallied after U.S. chip design firm Nvidiabeat Wall Street’s expectations for fourth-quarter earnings and revenue on Wednesday and projected “continued growth” in 2025 and beyond.
Nvidia supplier Taiwan Semiconductor Manufacturing Company jumped as much as 2.05% in Thursday morning trade. TSMC is the world’s largest contract chip maker and produces advanced processors for companies like Nvidia and iPhone maker Apple.
Shares of server component supplier Super Micro Computer rose 11.42% in Wednesday’s after-hours trading. Dutch chip equipment manufacturer ASML, which supplies TSMC lithography machines critical to chip making, jumped 2.7% in the U.S. during after hours trading.
Following Nvidia’s earnings report, rivals Advanced Micro Devices and SoftBank-backed U.K. chip designer Arm Holdings surged 4.08% and 7.87%, respectively, in after hours trading.
Nvidia, which custom designs AI chips for the likes of Amazon, Microsoft and Google, saw skyrocketing demand for its graphics processing units thanks to the AI boom.
OpenAI’s ChatGPT, which gained massive popularity worldwide in November 2022 for its ability to generate human-like responses to user prompts, is trained and run on thousands of Nvidia’s GPUs. Nvidia shares rose 9% in extended trading.
South Korea’s memory chipmakers Samsung Electronics and SK Hynix gained 0.41% and 3.22% respectively on Thursday. Large language models such as ChatGPT rely on high-performance memory chips to remember details from past conversations and user preferences in order to generate humanlike responses.
Other Taiwanese semiconductor firms Orient Semiconductor Electronics and MediaTek rose 2.94% and 1.53% respectively on Thursday.
Intel, Broadcom and Qualcomm, three U.S. chip makers, saw increases in share prices in extending trading Wednesday, surging 1.38%, 2.79% and 1.80% respectively.
“Fundamentally, the conditions are excellent for continued growth” in 2025 and beyond, Nvidia CEO Jensen Huang told analysts on Wednesday in an earnings call. He added that demand for Nvidia GPUs will remain high due to generative AI and an industry-wide shift away from central processors to the accelerators that Nvidia makes.
“If I was going to just kind of put a stake in the ground relative to the conversation, whether it’s related to market share or to their margins, I think they’re going to surprise people,” Gene Munster, managing partner of Deepwater Asset Management, told CNBC’s “Street Signs Asia” on Thursday.
Google CEO Sundar Pichai speaks at a panel at the CEO Summit of the Americas hosted by the U.S. Chamber of Commerce in Los Angeles on June 9, 2022.
Anna Moneymaker | Getty Images
Results were good, but not good enough.
That’s Wall Street’s reaction to quarterly results on Tuesday from Alphabet and Microsoft. Both companies reported revenue and earnings that exceeded estimates, yet the stocks sold off after hours, a drop that carried over into Wednesday’s trading session.
In investor speak, the stocks were priced for perfection. Prior to earnings, Alphabet was up 56% for the year and climbed to a fresh high last week, exceeding the prior record from late 2021, the peak of the tech boom. Microsoft was up 70% over the past 12 months, also reaching a fresh high recently and surpassing Apple as the most valuable publicly traded company.
The companies generated excitement last year by riding the artificial intelligence wave, and were also lauded by shareholders for their dramatic cost-cutting efforts, which included eliminating thousands of jobs.
In the weeks heading into their earnings reports, investors were buying as if they expected positive surprises. They were left disappointed and nitpicked the numbers.
Alphabet on Tuesday reported 13% revenue growth, the fastest rate of expansion since early 2022. Sales of $86.31 billion topped the average estimate of $85.33 billion, according to LSEG, formerly known as Refinitiv. Earnings per share of $1.64 beat estimates by 5 cents.
Revenue at Microsoft increased 18% to $62.02 billion, topping the $61.12 billion average analyst estimate. EPS of $2.93 was 15 cents above consensus.
Both companies also beat expectations in their cloud businesses, with Google Cloud reporting 25% growth and Microsoft’s larger Azure and other cloud services expanding 30%.
The one disappointment from Alphabet was in Google’s ad business, which delivered revenue of $65.52 billion, trailing analysts’ estimates of $65.94 billion, according to StreetAccount. Within ads, YouTube came in just shy of expectations.
Stifel analysts, who recommend buying the stock, said in a quick-take report on Tuesday that Alphabet produced “healthy advertising results, but not enough.”
Brian Wieser, an analyst at media and advertising consultancy Madison and Wall, said the market has unrealistic expectations for Google given its size and dominance.
“In my general conversations with public market investors and sell-side analysts, few have a correct view of the advertising market,” Wieser said. “Many think that growth can continue at double-digit levels for the fastest-growing companies for much longer a period of time than is realistic to expect.”
Alphabet shares dropped more than 6% Wednesday. Microsoft’s decline was less severe, with the stock falling less than 2%.
Microsoft’s outlook was a bit light, overshadowing the earnings and revenue beat. The company called for fiscal third-quarter sales between $60 billion and $61 billion, while analysts polled by LSEG had expected $60.93 billion.
Shares of chipmaker AMD also dropped despite better-than-expected revenue numbers and profit that met estimates. The stock, which is up 137% in the past year on excitement about its artificial intelligence processors, fell almost 6% after the announcement.
Attention now turns to Thursday, when Amazon, Apple and Meta all report quarterly results. Similar to Alphabet and Microsoft, Meta shares have climbed to a record this month. Apple hit its all-time high in December, while Amazon remains about 6% below its record from 2022.
— CNBC’s Jonathan Vanian, Jordan Novet and Kif Leswing contributed to this report.
The 2023 rally for stocks in the U.S. accelerated as more investors bought the idea that the Federal Reserve succeeded in its effort to bring inflation to heel.
The S&P 500 SPX
ended Friday with a 24.2% gain for 2023, following a 19.4% decline in 2022. (All price changes in this article exclude dividends). Among the 500 stocks, 65% were up for 2023. Below is a list of the year’s 20 best performers in the benchmark index.
This article focuses on large-cap stocks. MarketWatch Editor in Chief Mark DeCambre took a broader look at all U.S. stocks of companies with market capitalizations of at least $1 billion, to list 10 with gains ranging from 412% to 1,924%.
The Fed began raising short-term interest rates and pushing long-term rates higher in March 2022 by allowing its bond portfolio to run off. That explains the poor performance for stocks in 2022, as bonds and even bank accounts because more attractive to investors.
Investors are anticipating the return to a low-rate environment by scooping up 10-year U.S. Treasury notes BX:TMUBMUSD10Y,
whose yield ended the year at 3.88%, down from 4.84% on Oct. 27 — the day of the S&P 500’s low for the second half of 2023.
Before looking at the list of best-performing stocks of 2023, here’s a summary of how the 11 sectors of the S&P 500 performed, with the full index and three more broad indexes at the bottom:
A look at 2023 price action really needs to encompass what took place in 2022 for context. The broad indexes haven’t moved much from their levels at the end of 2022 (again, excluding dividends). We have included current forward price-to-earnings ratios along with those at the end of 2021 and 2022. These valuations have declined a bit, which may provide some comfort for investors wondering how likely it is for stocks to continue to rally in 2024.
Biggest price increases among the S&P 500
Here are the 20 stocks in the S&P 500 whose prices rose the most in 2023:
Nvidia Corp. has catapulted up the list of the most valuable U.S. companies this year, rising eight spots from the end of last year to sit in the fifth position with a market capitalization of $1.2 trillion.
But other chip companies have seen their positions rise even more. Just look at Broadcom Inc. AVGO, +2.10%,
which has climbed 16 spots over the course of 2023 and on Friday cracked the top 10 for the first time, according to Dow Jones Market Data. Broadcom eclipsed Visa Inc. V, -0.27%
at Friday’s close to take the No. 10 spot, with a valuation of $527.7 billion.
Admittedly, Broadcom had some help along the way. The company acquired VMware in late November, and its market capitalization gained about $50 billion at the close of the transaction, according to FactSet data.
But Broadcom’s ascent also reflects how chip stocks have gotten more shine this year amid the artificial-intelligence frenzy. Broadcom’s stock has doubled so far in 2023.
Mizuho desk-based analyst Jordan Klein expects “an order acceleration in networking silicon for AI clusters” in the second half of 2024, as calendar year 2025 could bring a big year of capital-expenditure investments in AI for ethernet back-end high-speed connections.
Broadcom “is the KEY WINNER in that investment cycle as the arms dealer to all networking OEMs,” or original equipment manufacturers, wrote Klein, who’s associated with Mizuho’s sales team and not its research arm.
Advanced Micro Devices Inc. AMD, +0.83%
has also seen a nice march up the charts, rising 48 spots so far in 2023 to rank 30th in terms of market cap. AMD was valued at $223.9 billion as of Friday’s close.
“We view AMD as well-positioned to gain incremental share of the hugely profitable $100 billion-plus accelerator market while continuing to make progress in server [central processing units] against incumbent [Intel],” BofA Securities analyst Vivek Arya wrote in a recent upgrade.
A photo taken on November 23, 2023 shows the logo of the ChatGPT application developed by US artificial intelligence research organization OpenAI on a smartphone screen (left) and the letters AI on a laptop screen in Frankfurt am Main, western Germany.
Kirill Kudryavtsev | Afp | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Google’s answer to ChatGPT Google owner Alphabet’sshares jumped 5% Thursday, a day after the company announced its latest artificial intelligence model, Gemini, that will compete with OpenAI, Microsoft and Meta offerings. The company will start licensing Gemini to customers through Google Cloud later this month — it remained unclear whether Google plans to monetize Gemini through all of its products in the long term.
AMD ups the ante AMDlaunched new artificial intelligence chips on Wednesdaythat will compete against Nvidia to power AI applications. Shares of the chipmaker surged 9.9% Thursday to close at $128.37, marking its best day since May and the highest close since June. Nvidia has dominated the AI chip market for the past year, but cloud providers and technology companies have been searching for a flexible alternative to save costs.
No yoga pants this Christmas Lululemon, known for its yoga pants and belt bags, issued a tepid fourth-quarter outlook. The retailer said it was expecting sales between $3.14 billion and $3.17 billion during the quarter, just shy of analysts’ estimate of $3.18 billion, according to LSEG. This despite the company seeing strong third-quarter demand and a positive start to the holiday shopping season.
[PRO] These global stocks may be overbought U.S. stocks aren’t they only ones doing well — global markets have also rallied in the past month. These are a few global stocks that may have been overbought but analysts still like them — giving one nearly 40% upside.
Oxford's word of the year is "rizz", which it defines as pertaining to someone's ability to attract another person through style, charm, or attractiveness and is derived from the middle part of the word 'charisma'. On Wall Street, it might as well be "AI".
Wall Street resumed its rally after a three-day break as technology giants intensified their AI arms race, lifting tech stocks.
When you have Google launching a new AI model and AMD eying a slice of the scorching AI chip pie, there are few surer ways to turn investors frowns upside down. Artificial intelligence, which perhaps wasn't even part of our daily vocabulary five years ago, is now becoming more and more integrated with our day-to-day functioning.
But it is left to be seen if these gains could shine through Friday's session that will be guided by fresh evidence on the strength of the U.S. labor market, which has been a key focus this week amid a series of mixed data releases that have left traders scratching their heads.
Weekly jobless claims released Thursday missed economists' expectations, signaling the pace of layoffs hasn't increased, while private payrolls data on Wednesday showed that employers added fewer-than-expected positions.
Meanwhile, the volume of job openings in October fell to its lowest level since March 2021, according to the Labor Department.
Friday's official jobs report is expected to show 190,000 jobs were added in November, according to economists polled by Dow Jones. Higher than the prior month.
Investors would be watching for analysts' commentary on whether the latest data releases will allow the Federal Reserve to keep interest rates on pause at its meeting next week.
While Advanced Micro Devices Inc. shares didn’t enjoy a Wednesday bump during the company’s artificial-intelligence event, they were rallying sharply Thursday as analysts reflected on the chip maker’s presentation.
Chief Executive Lisa Su and her team “put together one of the most impressive new product event/launches by our reckoning in the last decade, perhaps ever,” Rosenblatt Securities analyst Hans Mosesmann wrote in a note to clients.
The launch of AMD’s AMD, +7.09%
MI300X AI/graphics-processing-unit accelerator “was not just a speeds and feeds geek fest (it was that for sure, with AMD claiming superiority in AI inferencing), but an industry movement coalescing around the concept of ‘open’ sourced technologies are preferred (demanded really), to address the insanely fast/accelerating life-changing thing that AI has become,” Mosesmann continued.
He was also impressed by the company’s talk of its software platform ROCm, which he thinks is catching up to Nvidia Corp.’s NVDA, +1.54%
CUDA.
“Of course, Nvidia is not going away, and we are quite sure will remain the dominant AI player for years to come but AMD we feel made the case yesterday that they will be an important AI innovator on a secular basis,” Mosesmann noted, as he kept his outperform rating and $200 target price on the stock.
AMD shares were up 6% in Thursday morning trading.
Baird’s Tristan Gerra was also impressed.
“Rapidly unfolding hyperscaler engagements, highly competitive AI architecture specs, along with accelerated new product roadmap, bode well for share gains and continued acceleration in AI-related revenue for AMD beyond 2024, while faster-than-expected rate of adoption so far could potentially drive upside in the AI revenue outlook for 2024, in our view,” he wrote.
Gerra also sees the potential for “high-volume deployments,” thanks to the “significant software milestones” AMD is showing. He rates the stock at outperform with a $125 target price.
TD Cowen’s Matthew Ramsay said that AMD’s event reinforced his belief that the company “is well positioned to meaningfully participate” in the large total addressable market for AI accelerators.
The company called out Microsoft Corp. MSFT, -0.01%,
Meta Platforms Inc. META, +2.41%
and Oracle Corp. ORCL, -0.08%
as customers, announcements that were “strong” but not “surprising,” in Ramsay’s view.
“We remain encouraged that AMD is making an impressive case (and is getting customer support) to provide adaptive computing solutions for both training and inference in increasingly large [generative-AI] infrastructure builds,” he wrote. “We believe this signifies a strong AI strategy of delivering a broad portfolio of [central processing unit], GPU, and [field-programmable gate array] assets, with open software that enables easily deployed AI workloads while leveraging the company’s existing partnerships to accelerate its AI ramps at-scale.”
Ramsay has an outperform rating and $130 target price on AMD shares.
Here are the biggest calls on Wall Street on Thursday: Raymond James upgrades Biogen to outperform from market perform Raymond James said it likes the company’s Alzheimer’s drug, Leqembi, and believes Biogen stock sets up well for 2024. “Leqembi survey of Alzheimer’s treating physicians … suggests bottlenecks for use are slowly improving and the vast majority of treatment candidates are expected to be treated in the next ~12-mos.” Stifel initiates Rivian as buy Stifel initiated Rivian with a buy and called it a “long-term competitive differentiator.” “The company is also focused on scaling its service network of mobile service vans and physical service centers as a long-term competitive differentiator to significantly enhance [the] customer experience of owning the EVs.” Stifel upgrades DataDog to buy from hold Stifel said the software company has an attractive setup heading into 2024. “Overall, after a volatile 2023, given current consumption trends and a stable macro backdrop, we expect DDOG to post ~25% CY24 rev-growth, but expect guidance to start at ~20%. Upgrade to Buy, target $140.” Bank of America names Amazon a top pick in 2024 Bank of America says the e-commerce giant and owner of Amazon Web Services is a top pick in 2024. “Amazon remains our top eCommerce stock as the company is well positioned for margin expansion in 2024 from continued optimization of its regional logistics network, the ramp of advertising opportunity (through Prime Video & 3P partnerships), and reacceleration of AWS revenues.” Bernstein reiterates Apple as market perform Bernstein said it sees several risks for Apple in China. “We see three main sources of China-related risk for Apple: (1) regulatory risk; (2) incremental competition and (3) supply chain risk. While we see a significant ongoing risk to Apple from any major geo-political escalation in US-China relations, we don’t believe that near term conditions have changed.” Bank of America reiterates Nvidia as buy Bank of America sees “consistent execution” for Nvidia , and says it’s a still a top pick. “Meanwhile valuation is compelling at only 22x CY24 PE for a company with 55-60% YoY sales and eps growth.” Citi opens a positive catalyst watch on Rio Tinto Citi opened a positive catalyst watch on Rio and says iron ore prices should remain robust. “We expect iron ore prices to remain strong into the Chinese New Year and the premiums for higher grade iron ore to increase.” TD Cowen names Constellation Brands a top 2024 pick TD Cowen said the beer and wine company is “best-in-class.” ” STZ is our Best Idea in 2024. Shares currently trade at a 3-turn discount to its 10-year average, despite the de-risked multi-year wine outlook and EPS growth algo at Analyst Day. We believe this offers investors an attractive entry point for a best-in-class.” UBS upgrades J.B. Hunt to neutral from sell UBS said the outlook is improving for the trucking company. “We raise our rating on JBHT from Sell to Neutral because we see an improving outlook for intermodal volume growth in 2024 and we also believe the reset down in EPS expectations for 2024 has nearly run its course.” Bank of America upgrades Equinor to buy from neutral Bank of America said in its upgrade of the Norwegian energy company, which also trades in the U.S., that it’s a “balance sheet fortress.” “Other than Equinor’s minimal exposure to fading refining margins, we believe its financial framework offers more resilience to its shareholder distributions than its share price gives it credit for.” Bank of America downgrades Take-Two to neutral from buy Bank of America said in its downgrade of Take-Two that not enough is known about the next generation of Grand Theft Auto. “We downgrade TTWO to Neutral from Buy and maintain our PO because (1) we expect FY25 consensus estimates, which assume a GTA 6 launch by March 2025, to fall by ~20% before August 2024, (2) not all investors are willing to extend duration beyond 15 months.” Morgan Stanley reiterates AMD as overweight Morgan Stanley said it was impressed by the company’s AI event on Wednesday. “The AMD AI event showed a wide range of customer testimonials from cloud and OEM [original equipment manufacturers] customers, and validates that the architecture will play an important role.” Guggenheim initiates Pure Storage as buy Guggenheim said in its initiation of the data storage company that it’s a “disruptor.” “We are initiating coverage of Pure Storage (PSTG) with a BUY rating and [discounted cash flow]-based price target of $48, implying 50% potential upside.” Wells Fargo initiates Bumble as overweight Wells said it’s optimistic on the company’s “sustainability.” “We struggle to reconcile BMBL’ s current multiple w/ consistent share gain in online dating, so we initiate OW w/ $19 PT. While Bumble isn’t a structural share gainer, it is benefiting from underinvestment at industry incumbent Tinder.” Wells Fargo initiates Match as equal weight Wells said the stock’s valuation is full right now. “We see MTCH valuation as compelling at 9x WFSe ’25 EBITDA, but we are concerned Tinder is over-earning & that Hinge top of funnel share gains have limited incrementality to Match Group overall. As a result, we initiate with an EW rating and $32 PT.” Wells Fargo upgrades Schneider to equal weight from underweight Wells said it sees a more balanced risk/reward for the Wisconsin-based trucking and logistics company. “We’re upgrading SNDR to Equal Weight (from Underweight) and raising our PT to $25 (from $23). We view the risk/reward [as] balanced given the backdrop of stabilizing freight trends and opportunity for earnings acceleration in H2 2024.” Leerink initiates Tourmaline Bio as outperform Leerink initiated the biotech company with an outperform on Thursday and says it has “best-in-class potential.” “We are initiating coverage of Tourmaline Bio with an Outperform rating and a $45 price target.” Goldman Sachs initiates Hertz as neutral Goldman initiated the car rental company and says it sees slightly more opportunity in Hertz than Avis. “As such, we believe that greater focus on company-specific growth is more warranted late cycle, and we identify incremental opportunities for HTZ from here. Goldman Sachs upgrades Qiagen to buy from neutral and names Thermo Fisher a top pick Goldman said in its upgrade of Qiagen that the diagnostic company is defensive. The bank also named Thermo as a top pick and says it has a “consistent” trend of raising guidance. “Highlight our top ideas for 2024: AVTR and TMO , upgrade QGEN to Buy, downgrade DHR to Neutral on valuation and highlight our top instrument name, Agilent, in order to keep exposure to the cyclical recovery potential for the sector in 2H24.” Stephens upgrades Q2 Holdings to overweight from equal weight Stephens said the software company is well positioned for growth. “In our view, QTWO has transitioned from a hyper-revenue growth to a margin expansion story, with a predictable, LDD (low double digit) rev profile.” Seaport upgrades Sphere to buy from neutral Seaport said in its upgrade of the entertainment company that it sees “better unit economics.” “Upgrading SPHR to Buy from Neutral on better unit economics and expenses out-of-the-gate.” UBS initiates Bio-Techne as buy UBS said in its initiation of the life science company that it has a path to double-digit growth. “We are initiating coverage of Bio-Techne (TECH) with a Buy rating. We see a path for Bio-Techne to return to double-digit growth post the ‘COVID hangover.'” UBS initiate Bio-Rad as buy UBS said in its initiation of the life science and diagnostics company that it has room to boost profit margins. “Our Buy rating on Bio-Rad (BIO) reflects our constructive view of the company’s margin expansion opportunity and product cycles.”
Lisa Su displays an AMD Instinct MI300 chip as she delivers a keynote address at CES 2023 in Las Vegas, Nevada, Jan. 4, 2023
David Becker | Getty Images
Meta, OpenAI, and Microsoft said at an AMD investor event on Wednesday they will use AMD’s newest AI chip, the Instinct MI300X. It’s the biggest sign so far that technology companies are searching for alternatives to the expensive Nvidia graphics processors which have been essential for creating and deploying artificial intelligence programs like OpenAI’s ChatGPT.
If AMD’s latest high-end chip is good enough for the technology companies and cloud service providers building and serving AI models when it starts shipping early next year, it could lower costs for developing AI models, and put competitive pressure on Nvidia’s surging AI chip sales growth.
“All of the interest is in big iron and big GPUs for the cloud,” AMD CEO Lisa Su said on Wednesday.
AMD says the MI300X is based on a new architecture, which often leads to significant performance gains. Its most distinctive feature is that it has 192GB of a cutting-edge, high-performance type of memory known as HBM3, which transfers data faster and can fit larger AI models.
At an event for analysts on Wednesday, CEO Lisa Su directly compared its Instinct MI300X and the systems built with it to Nvidia’s main AI GPU, the H100.
“What this performance does is it just directly translates into a better user experience,” Su said. “When you ask a model something, you’d like it to come back faster, especially as responses get more complicated.”
The main question facing AMD is whether companies that have been building on Nvidia will invest the time and money to add another GPU supplier. “It takes work to adopt AMD,” Su said.
AMD on Wednesday told investors and partners that it had improved its software suite called ROCm to compete with Nvidia’s industry standard CUDA software, addressing a key shortcoming that had been one of the primary reasons why AI developers currently prefer Nvidia.
Price will also be important — AMD didn’t reveal pricing for the MI300X on Wednesday, but Nvidia’s can cost around $40,000 for one chip, and Su told reporters that AMD’s chip would have to cost less to purchase and operate than Nvidia in order to convince customers to buy it.
AMD MI300X accelerator for artificial intelligence.
On Wednesday, AMD said it had already signed up some of of the companies most hungry for GPUs to use the chip. Meta and Microsoft were the two largest purchasers of Nvidia H100 GPUs in 2023, according to a recent report from research firm Omidia.
Meta said that it will use Instinct MI300X GPUs for AI inference workloads like processing AI stickers, image editing, and operating its assistant. Microsoft’s CTO Kevin Scott said it would offer access to MI300X chips through its Azure web service. Oracle‘s cloud will also use the chips.
OpenAI said it would support AMD GPUs in one of its software products called Triton, which isn’t a big large language model like GPT, but is used in AI research to access chip features.
AMD isn’t yet forecasting massive sales for the chip yet, only projecting about $2 billion in total data center GPU revenue in 2024. Nvidia reported over $14 billion in data center sales in the most recent quarter alone, although that metric includes other chips beside GPUs.
However, AMD says that the total market for AI GPUs could climb to $400 billion over the next four years, doubling the company’s previous projection, showing how high expectations and how coveted high-end AI chips have become — and why the company is now focusing investor attention on the product line. Su also suggested to reporters that AMD doesn’t think that it needs to beat Nvidia to do well in the market.
“I think it’s clear to say that Nvidia has to be the vast majority of that right now,” Su told reporters, referring to the AI chip market. “We believe it could be $400-billion-plus in 2027. And we could get a nice piece of that.”
Nvidia shares moved down 1% in extended trading on Tuesday after the chipmaker reported fiscal third-quarter results that surpassed Wall Street’s predictions. But the company called for a negative impact in the next quarter because of export restrictions affecting sales to organizations in China and other countries.
“We expect that our sales to these destinations will decline significantly in the fourth quarter of fiscal 2024, though we believe the decline will be more than offset by strong growth in other regions,” Nvidia’s finance chief, Colette Kress, said in a letter to shareholders.
On a conference call with analysts, Kress said Nvidia is working with some clients in the Middle East and China to obtain U.S. government licenses for sales of high-performance products. Nvidia is trying to develop new data center products that comply with government policies and don’t require licenses, but Kress said she didn’t think they would be meaningful in the fiscal fourth quarter.
Here’s how the company did, compared to the consensus among analysts surveyed by LSEG, formerly known as Refinitiv:
Earnings: $4.02 per share, adjusted, vs. $3.37 per share expected
Revenue: $18.12 billion, vs. $16.18 billion expected
Nvidia’s revenue grew 206% year over year during the quarter ending Oct. 29, according to a statement. Net income, at $9.24 billion, or $3.71 per share, was up from $680 million, or 27 cents per share, in the same quarter a year ago.
The company’s data center revenue totaled $14.51 billion, up 279% and more than the StreetAccount consensus of $12.97 billion. Half of the data center revenue came from cloud infrastructure providers such as Amazon, and the other from consumer internet entities and large companies, Nvidia said.
Healthy uptake came from clouds that specialize in renting out GPUs to clients, Kress said on the call.
The gaming segment contributed $2.86 billion, up 81% and higher than the $2.68 billion StreetAccount consensus.
With respect to guidance, Nvidia called for $20 billion in revenue for the fiscal fourth quarter. That implies nearly 231% revenue growth.
During the quarter, Nvidia announced the GH200 GPU, which has more memory than the current H100 and an additional Arm processor onboard. The H100 is expensive and in demand. Nvidia said Australia-based Iris Energy, an owner of bitcoin mining data centers, was buying 248 H100s for $10 million, which works out to about $40,000 each.
Computing instances based on the GH GPUs are coming soon to Oracle’s cloud, Kress said on the call.
As recently as two years ago, sales of GPUs for playing video games on PCs were the largest source of Nvidia’s revenue. Now the company gets most revenue from deployments inside server farms.
The introduction of the ChatGPT chatbot from Microsoft-backed startup OpenAI in 2022 caused many companies to look for ways to add similar generative artificial intelligence capabilities to their software. Demand for Nvidia’s GPUs strengthened as a result.
Nvidia faces obstacles, including competition from AMD and lower revenue because of export restrictions that can limit sales of its GPUs in China. But ahead of Tuesday report, some analysts were nevertheless optimistic.
“GPU demand continues to outpace supply as Gen AI adoption broadens across industry verticals,” Raymond James’ Srini Pajjuri and Jacob Silverman wrote in a note Monday to clients, with a “strong buy” recommendation on Nvidia stock. “We are not overly concerned about competition and expect NVDA to maintain >85% share in Gen AI accelerators even in 2024.”
Nvidia is still working on its plan to grow supply throughout next year, Kress said on the call.
Excluding the after-hours move, Nvidia stock has gone up 241% so far this year, vastly outperforming the S&P 500 index, which is up 18% over the same period.
Hedge fund manager Michael Burry is potentially making another bet that a part of the investing world has gotten too hot, just as he did with the broader stock market earlier this year and with the housing market more than a decade ago. Burry’s Scion Asset Management has a put position against 100,000 shares in the iShares Semiconductor ETF (SOXX) , according to a securities filing representing the end of the third quarter released Tuesday. The exact value of the options position is not known, but the notional value of the ‘SOXX’ shares involved was more than $47 million at the end of the quarter. It is also not known whether Burry still holds the position or whether it’s some sort of hedge against a long position. A put option gives investors the ability to sell the underlying asset at a predetermined price. The date of expiration and the strike price of the put position were not disclosed. One put contract typically covers 100 shares of the underlying stock or ETF, so Burry’s position is likely 1,000 put contracts. The SOXX is up more than 30% year to date, and its top holdings include Advanced Micro Devices , Broadcom and Nvidia . SOXX YTD mountain Semiconductor stocks have rallied sharply in 2023. Burry also closed out previous put positions against the S & P 500 and the Nasdaq 100 during the quarter, according to securities filings. Those positions were winners for Burry as the stock market finished the third quarter lower. Burry is one of several hedge fund managers who correctly identified the housing bubble ahead of the 2008 financial crisis. His actions at that time were captured in the Michael Lewis book “The Big Short” and the movie of the same name. Burry closed his previous hedge fund, known as Scion Capital Management, after the financial crisis. The newer Scion Asset Management does also hold long positions on stocks, including a $7.7 million position in Stellantis and a stake in Nexstar Media Group worth just under $7 million, according to the filing. The hedge fund filings do not show all types of derivatives or private investments, so the full scope of Burry’s positions are unknown.
