Nvidia Corp. headed toward market-capitalization gains of nearly $200 billion in after-hours trading Wednesday, which could put the chip maker within sight of becoming only the seventh U.S. company to top a valuation of $1 trillion.
Nvidia ended Wednesday’s session with a market cap — the total value of all shares in existence — of roughly $754.3 billion, according to FactSet. A 25% increase would add nearly $189 billion to that total, putting the company within striking distance of $1 trillion. Only six U.S. companies have ever attained a $1 trillion market cap: Apple Inc. AAPL, +0.16%
and Microsoft Corp. MSFT, -0.45%
are currently worth more than $2 trillion apiece; Google parent Alphabet Inc. GOOGL, -1.35%
and Amazon.com Inc. AMZN, +1.53%
have valuation of more than $1 trillion; and Facebook parent Meta Platforms Inc. META, +1.00%
and Tesla Inc. TSLA, -1.54%
have both touched the $1 trillion plateau previously.
Nvidia’s market cap was ahead of both Meta and Tesla as of Wednesday’s close, with both worth less than $650 billion, showing the potential fleeting nature of such a valuation. Nvidia’s record market cap is $834.4 billion, established on Nov. 29. 2021, according to Dow Jones Market Data.
If Nvidia’s gains hold through Thursday’s trading session, the company could challenge for the largest one-day market-cap gain in history. The biggest currently on record was Amazon’s $191.2 billion increase on Feb. 4, 2022, according to Dow Jones Market Data, followed closely by a $190.9 billion gain by Apple on Nov. 10, 2022. Nvidia also stands to gain more than rival Advanced Micro Devices Inc. AMD, +0.14%
is worth in total — AMD ended Wednesday’s session with a market cap of $174.4 billion.
Nvidia is closing in on the rare $1 trillion plateau because of huge gains in its stock this year, as hopes and hype about generative AI have flooded the tech sector. After OpenAI debuted its ChatGPT AI offering, and investor Microsoft quickly integrated the chatbot into many of its services, expectations for the technology have exploded.
Despite the hype, most companies have avoided providing hard figures for revenue gains expected from AI. Nvidia’s fiscal second-quarter forecast — which calls for roughly $11 billion in sales, nearly 33% higher than Nvidia’s previous quarterly record of $8.28 billion — could be seen as the first sign of a wave of fresh spending coursing through the tech sector.
Other companies have indicated that they will be forced to spend to develop their technology before reaping large financial rewards from it. Microsoft, for example, disclosed to investors last month that capital expenditures are increasing as it builds AI capabilities into its Azure cloud-computing platform — spending that is largely going toward Nvidia.
That is a rather typical path for large jumps in tech spending: Companies that make the necessary hardware see gains before the companies that use that gear can develop offerings that take advantage of it. Other gear makers joined Nvidia in the sharp move higher in after-hours trading Wednesday, including AMD, which gained more than 10%; chip maker Marvell Technology Inc. MRVL, -1.31%,
which increased more than 5%; and networking specialist Arista Networks Inc. ANET, +0.53%,
which added about 5%.
Alphabet and Microsoft stocks both increased around 2% in after-hours trading, and software companies that have made AI a core part of their offerings also saw gains. Palantir Technologies Inc. PLTR, -3.24%
and C3.ai Inc. AI, +2.54%
shares both increased more than 8%, for example.
If the U.S. government cannot pay all its bills because of a debt-ceiling impasse, household borrowing costs could soar, the job market could shed millions of jobs and stock-market valuations could shrink, according to forecasts.
The consequences of a prolonged default could be grim, according to Moody’s Analytics. The projected fallout from a brief default is less severe but still enough to push an “already fragile” economy into a mild recession, Moody’s says.
On Wednesday, Treasury Secretary Janet Yellen said it’s “almost certain” that the Treasury will run out of resources in early June. She also said she would provide a new update on the debt-limit deadline “pretty soon.”
For all the uncertainties, financial experts say there are ways individuals can prepare. Start by making sure your deposits are in accounts backed by the Federal Deposit Insurance Corp., and think hard about rate-sensitive purchases like a car or a house.
It’s important for people to have a plan in case there is a default, said Rob Williams, managing director of financial planning, retirement income and wealth management at the Schwab Center for Financial Research, a division of Charles Schwab Corp. SCHW, -1.34%.
“On Wednesday, Treasury Secretary Janet Yellen said it’s ‘almost certain’ that the Treasury will run out of resources in early June.”
“Having a financial plan in place that looks at the long and short term is the best way to prepare for the debt ceiling or any other crisis,” he said.
There is still widespread expectation that Congress will strike a political deal that lifts the federal government’s $31 trillion borrowing limit. President Joe Biden and House Speaker Kevin McCarthy met again on Monday, and more talks are planned.
McCarthy on Wednesday said he “firmly believe[d]” the sides would reach a deal avoiding default.
But the window of time in which to act is getting smaller. It’s “highly likely” that the government will get to the point where it cannot pay all its bills and debt obligations in early June — possibly as early as June 1, Yellen said this week.
Meanwhile, new Federal Reserve figures offer a reminder that Americans’ personal finances over the last year have been under pressure, even as inflation rates retreat slowly.
More than one-third of people in the U.S. (35%) said they were worse off in 2022 than in 2021, according to the Fed’s annual look at economic well-being, released Monday.
That’s the largest percentage of people saying they were worse off since central bank researchers started asking the question nearly a decade ago.
“If there ever was a time for a rainy-day fund, this is it. But it’s not going to be able to help a lot of consumers,” said Rachel Gittleman, financial services outreach manager for the Consumer Federation of America.
For example, Social Security payments and payments to veterans could be delayed in the event of a default, she said. “There will be a lot of consumers who will be in an impossible financial situation,” Gittleman said.
If the government does not raise the debt ceiling, household borrowing costs could soar, the job market could shed millions of jobs and stock-market valuations could shrink, according to forecasts.
Getty Images/iStockphoto
Make sure your money is safe
The FDIC guarantees deposits up to $250,000 on accounts including checking, savings and certificates of deposit. That won’t change in the case of any default, an FDIC spokesperson told MarketWatch.
Deposit-insurance coverage came into hard focus in early spring when Silicon Valley Bank and Signature Bank failed, putting other regional banks under pressure as many customers moved their money into bigger banks.
If economic conditions deteriorate after a default, Gittleman said, people will want assurance their money is safe. If you haven’t taken any of the recent bank failures as a sign to put money in an FDIC-insured account, “this would be the time,” she said.
Start cutting costs quickly
During the early days of the pandemic when there were millions of job losses, many people had to quickly cut back on or delay regular expenses.
If a default puts people in an economic vise, Gittleman said they may need to be ready to shut down nonessential recurring payments and talk with their lenders and credit-card companies. “It’s thinking holistically about all of your financial expectations and where you can possibly either get forbearance or some leniency and ask for some help,” she said.
Credit-card debt reached $986 billion in the first quarter, according to the Federal Reserve Bank of New York, and delinquencies on credit cards and car loans continued to move higher after pandemic lows.
Rate-sensitive purchases
After more than a year of rising interest rates, it’s already a tough time to finance a major purchase. On Tuesday, the 30-year fixed mortgage rate climbed higher than 7% for the third time this year.
Any default lasting at least a month would push the 30-year mortgage up to 8.4% in September and price out hundreds of thousands of buyers, according to Zillow Z, -0.83%.
But that is no reason to speed up a home purchase, said Daniel Milan, founder and managing partner of Cornerstone Financial Services.
“Any default lasting at least a month would push the 30-year mortgage up to 8.4% in September and price out hundreds of thousands of buyers, according to Zillow.”
The Federal Reserve doesn’t set mortgage rates, but its policies influence their direction. The big questions are when the central bank will stop increasing its benchmark rate and when it will begin to reduce the rate.
“The odds of a rate cut outweigh the fear or the rush into buying a home now because of the debt-ceiling crisis,” Milan said.
But the Schwab Center’s Williams noted that trying to time a major financial decision around market and political events is a difficult task.
Financial decisions are a mix of math and emotions, even though many people tend to focus more on the math, he said. That’s why it’s important to figure out a financial plan. Often the best course is to stick to your plan and say, “I’m not going to make major changes in the face of market news,” Williams said.
Tuesday marked the Dow’s third straight trading-day loss. By Wednesday afternoon, the index had shed more than 200 points.
The yields on short-term Treasury debt TMUBMUSD01M, 5.666%
maturing in early June are pushing toward 6% amid continued uncertainty about whether a debt-ceiling resolution can come together fast enough to avoid a government default. Bond prices and yields move in opposite directions, reflecting less investor appetite for debt.
There’s no one rule for preparing an investment portfolio for a debt default, financial advisers said. But older retired investors are in a trickier spot — especially in relation to the prospect of delayed Social Security checks — compared with younger investors who have more time to bounce back from adverse events.
“‘We continue to urge clients to make sure we know about any short-term cash needs so that those funds are not at risk.’”
— Lisa A.K. Kirchenbauer, founder and president of Omega Wealth Management
Cash investments have proven attractive in rocky times. But the risk of a debt default could make a heftier cash allocation even more important for older investors, financial advisers said.
“We continue to urge clients to make sure we know about any short-term cash needs so that those funds are not at risk,” said Lisa A.K. Kirchenbauer, founder and president of Omega Wealth Management.
Kirchenbauer said she’s starting to hear from clients about debt-ceiling concerns. “I am making sure that larger [required minimum distributions] are in cash for 2023 now, before anything bad happens in the markets.”
Required minimum distributions are the minimum yearly amounts that have to be pulled out of qualified retirement accounts once the owner reaches a certain age, currently 73.
Preparing for any default is a mental exercise as much as asset allocation, said Amy Hubble, principal investment adviser with Radix Financial. If there’s been no change in a person’s personal circumstances, like job status, income needs or retirement timeline, they should avoid getting sidetracked by short-term issues, she said.
“There are only a small handful of things we can actually control when investing,” Hubble added. “So my advice is always to focus on that: keeping costs low, staying diversified, managing tax-recognition timing and avoiding stupid emotion-driven actions.”
Meta Platforms Inc. has started to execute on its latest round of layoffs, according to reports.
The third round of cuts is part of a plan that Meta META, +3.70%
Chief Executive Mark Zuckerberg announced in March in an effort to further slash costs at the social-media company. He said at the time that Meta would lay off about 10,000 workers while closing roughly 5,000 additional roles for which the company had yet to make hires.
The current rounds of cuts build on at least 11,000 layoffs that were announced last fall.
CNBC reported Wednesday that Meta employees in user experience, marketing and recruiting roles indicated they were affected by the current round of cuts.
Zuckerberg said in a March note to employees, which was also shared as a company blog post, that the company planned to make restructuring moves in its technology groups in late April before making changes to the business groups in late May.
Meta declined to comment in response to a MarketWatch request for confirmation of the latest layoffs.
The company is in the midst of what Zuckerberg has dubbed a “year of efficiency,” which comes in response to investor concern last fall about high spending levels at the company alongside the backdrop of declining revenue. Meta has since become arguably the most aggressive of the largest public technology companies in its cost-cutting efforts.
CHEYENNE, Wyo. (AP) — Declaring a mission to liberate “Taco Tuesday” for all, Taco Bell is asking U.S. regulators to force Wyoming-based Taco John’s to abandon its longstanding claim to the trademark.
Too many businesses and others refer to “Taco Tuesday” for Taco John’s to be able to have exclusive rights to the phrase, Taco Bell asserts in a U.S. Patent and Trademark Office filing that is, of course, dated Tuesday.
It’s the latest development in a long-running beef over “Taco Tuesday” that even included NBA star LeBron James making an unsuccessful attempt to claim the trademark in 2019.
“Taco Bell believes ‘Taco Tuesday’ is critical to everyone’s Tuesday. To deprive anyone of saying ‘Taco Tuesday’ — be it Taco Bell or anyone who provides tacos to the world — is like depriving the world of sunshine itself,” the Taco Bell filing reads.
A key question is whether “Taco Tuesday” over the years has succumbed to “genericide,” New York trademark lawyer Emily Poler said. That’s the term for when a word or phrase become so widely used for similar products — or in this case, sales promotions — they’re no longer associated with the trademark holder.
Well-known examples of genericide victims include “cellophane,” “escalator” and “trampoline.”
“Basically what this is about is you cannot trademark something that is ‘generic,’ ” Poler said. “That means it doesn’t have any association with that particular source or product.”
Basketball legend James — a well-known taco lover — encountered this problem when he tried to trademark “Taco Tuesday” in 2019. The Patent and Trademark Office, in a ruling that didn’t refer to Taco John’s, deemed “Taco Tuesday” too much of a “commonplace term” to qualify as a trademark.
With more than 7,200 locations in the U.S. and internationally, Taco Bell — a Yum Brands YUM, -2.45%
chain along with Pizza Hut, KFC and the Habit Burger Grill — is vastly bigger than Cheyenne-based Taco John’s. Begun as a food truck more than 50 years ago, Taco John’s now has about 370 locations in 23 mainly in western and midwestern states.
The chain’s size hasn’t discouraged big-time enforcement of “Taco Tuesday” as trademark, which dates to the 1980s. In 2019, the company sent a letter to a brewery just five blocks from its corporate headquarters, warning it to stop using “Taco Tuesday” to promote a taco truck parked outside on Tuesdays.
Actively defending a trademark is required to maintain claim to it, and the letter was just one example of Taco John’s telling restaurants far and wide to stop having “Taco Tuesdays.”
Taco John’s responded to Taco Bell’s filing by announcing a new two-week Taco Tuesday promotion, with a large side of riposte.
“I’d like to thank our worthy competitors at Taco Bell for reminding everyone that Taco Tuesday is best celebrated at Taco John’s,” CEO Jim Creel said in an emailed statement. “We love celebrating Taco Tuesday with taco lovers everywhere, and we even want to offer a special invitation to fans of Taco Bell to liberate themselves by coming by to see how flavorful and bold tacos can be at Taco John’s all month long.”
The filing is one of two from Taco Bell involving “Taco Tuesday.” One contests Taco John’s claim to “Taco Tuesday” in 49 states, while a similar filing contests a New Jersey restaurant and bar’s claim to “Taco Tuesday” in that state. Both Taco John’s and Gregory’s Restaurant and Bar in Somers Point, N.J., have been using “Taco Tuesday” for over 40 years.
A Taco John’s franchisee in Minnesota first came up with “Taco Twosday” to promote two tacos for 99 cents on a slow day of the week, Creel told the Associated Press in a recent interview.
The Patent and Trademark Office approved the Taco John’s “Taco Tuesday” trademark in 1989. Even with its many letters, Creel said, the company — established in 1969 in Cheyenne, Wyo. — has never had to go to court over the phrase.
He’s not feeling too picked on, either, by the much bigger Taco Bell. “It’s OK. It’s kind of nice that they’ve noticed,” Creel said.
What is it about CEOs and their intense — and often oddball — workout routines?
These days, some top corporate honchos take their exercise rituals to extremes. Consider Damola Adamolekun, chief executive officer of restaurant chain P.F. Chang’s, who recently told Fortune magazine that he wakes up each day at 4:30 a.m. and runs seven to eight miles. He explained that the routine stimulates his nervous system and sets the tone for the day ahead. “You’ll feel better the whole day; you’ll be smarter, you’ll be sharper, you’ll be more energetic,” he said.
Adamolekun is in good company when it comes to training hard. Here are how five other executives work up a sweat and aim to stay healthy.
Jack Dorsey, head of Block and co-founder of Twitter, walks an hour and 15 minutes every day.
AFP via Getty Images
Jack Dorsey
The Twitter co-founder, who now heads the tech conglomerate Block SQ, +3.36%, does it all: two-hour meditations, fasting — he has said he eats only once a day during the week and has almost no food on the weekends — and alternating saunas and ice baths. But he’s no gym rat: Dorsey gets his primary exercise by walking an hour and 15 minutes every day. “I might look a little bit more like I’m jogging than I’m walking. It’s refreshing … It’s just this one of those take-back moments where you’re like, ‘Wow, I’m alive!’” he once observed.
Meta’s Mark Zuckerberg takes his dog for frequent runs — good exercise for both him and his pooch.
Getty Images
Mark Zuckerberg
The Meta Platforms META, +1.09%
chief isn’t one to get up at the crack of dawn, according to GQ, but he still runs three mornings a week. “I also try to take my dog running whenever I can, which has the added bonus of being hilarious because that’s basically like seeing a mop run,” he told GQ. As for diet, he once was said to experiment with an eating plan that involved only devouring animals he had killed himself — including chickens, goats and pigs. But he also apparently skips meals — or at least he said as much in a 2021 Facebook post. “Do you ever get so excited about what you’re working on that you forget to eat meals?” he asked.
Richard Branson takes off on another kite-surfing adventure.
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Richard Branson
Kite surfing, anyone? The founder of the Virgin Group swears by it as one of his favorite ways to stay fit, according to Men’s Health. He once even kite surfed across the English Channel. His other activities include tennis and biking. He’ll work with a trainer if he’s on the road, but otherwise he likes to exercise outdoors on his private island in the British Virgin Islands. “I just want to be sure that when I’m 150, my body still looks as good as it is today,” said Branson, who is now 72.
Palantir Technologies CEO Alex Karp works out by cross-country skiing — and says the key is to take it as slowly as possible to build your “cardio base.”
Getty Images
Alex Karp
The head of software company Palantir Technologies takes advantage of the fact that he lives near the White Mountains of New Hampshire to have a regular cross-country skiing routine. Key to his approach, he told Axios, is taking it slow on the snow. “To run like a deer, you have to spend 90% of your time running like a snail,” he explained, adding that his unhurried pace “builds a cardio base.” He also includes tai chi and stretching to his routine. But he isn’t too fussy about his diet. “If I’m traveling and someone has a really nice Danish, I enjoy every minute of eating it,” he said.
Martha Stewart is one of the cover models for Sport Illustrated’s new swimsuit issue.
Sports Illustrated
Martha Stewart
The 81-year-old lifestyle entrepreneur and founder of Martha Stewart Living Omnimedia has been in the spotlight for her recent cover appearance on Sports Illustrated’s swimsuit issue. So what does she do to stay in shape for beach season? Stewart swears by Pilates, according to various media reports. And she rides horses. She has also said she doesn’t smoke, eats very well and every morning drinks a glass of “green juice” made with pears, cucumbers, celery stalks, parsley, fresh ginger and two oranges (complete with peels), a recipe she calls “so spectacular.”
As President Joe Biden and House Speaker Kevin McCarthy prepare to meet Monday afternoon over the debt-ceiling standoff, it’s really getting to be crunch time.
“We need to see a deal by Friday to have confidence that it can clear both chambers before the June 1 deadline,” Height Capital Markets analysts said in a note.
Ron DeSantis signs the Parental Rights in Education bill, known as the “Don’t say gay” bill, in March at Classical Preparatory School in Shady Hills, Fla.
Douglas R. Clifford/Tampa Bay Times/AP/file
ORLANDO, Fla. (AP) — The NAACP over the weekend issued a travel advisory for Florida, joining two other civil rights groups in warning potential tourists that recent laws and policies championed by Gov. Ron DeSantis and Florida lawmakers are “openly hostile toward African Americans, people of color and LGBTQ+ individuals.”
The NAACP, long an advocate for Black Americans, joined the League of United Latin American Citizens (LULAC), a Latino civil-rights organization, and Equality Florida, a gay-rights advocacy group, in issuing travel advisories for the Sunshine State, where tourism is one of the state’s largest job sectors.
The warning approved Saturday by the NAACP’s board of directors tells tourists that, before traveling to Florida, they should understand the state of Florida “devalues and marginalizes the contributions of, and the challenges faced by African Americans and other communities of color.”
Florida is one of the most popular states in the U.S. for tourists, and tourism is one of its biggest industries. More than 137.5 million tourists visited Florida last year, marking a return to pre-pandemic levels, according to Visit Florida, the state’s tourism promotion agency. Tourism supports 1.6 million full-time and part-time jobs, and visitors spent $98.8 billion in Florida in 2019, the last year figures are available.
The NAACP’s decision comes after the DeSantis’s administration in January rejected the College Board’s Advanced Placement African American Studies course. DeSantis and Republican lawmakers also have pressed forward with measures that ban state colleges from having programs on diversity, equity and inclusion, as well as critical race theory, and also passed the Stop WOKE Act that restricts certain race-based conversations and analysis in schools and businesses.
In its warning for Hispanic travelers considering a visit to Florida, LULAC cited a new law that prohibits local governments from providing money to organizations that issue identification cards to people illegally in the country and invalidates out-of-state driver’s licenses held by undocumented immigrants, among other things.
The law also requires hospitals that accept Medicaid to include a citizenship question on intake forms, which critics have said is intended to dissuade immigrants living in the U.S. illegally from seeking medical care.
“The actions taken by Gov. DeSantis have created a shadow of fear within communities across the state,” said Lydia Medrano, a LULAC vice president for the Southeast region.
Recent efforts to limit discussion on LGBTQ topics in schools, the removal of books with gay characters from school libraries, a recent ban on gender-affirming care for minors, new restrictions on abortion access and a law allowing Floridians to carry concealed guns without a permit contributed to Equality Florida’s warning.
“Taken in their totality, Florida’s slate of laws and policies targeting basic freedoms and rights pose a serious risk to the health and safety of those traveling to the state,” Equality Florida’s advisory said.
She doesn’t know how much her student-loan bill will be when the years-long pandemic-era freeze on payments ends. Eminger’s loans were transferred during the pandemic to a new servicer, but she’s struggled to communicate with the organization, which could help her learn her monthly payment amount. She’s also rushing to take steps that could provide her access to a loan-forgiveness program for public servants.
“I am very nervous about them starting again,” Eminger, 37, who has about $175,000 in student debt, said of the loan payments. “There’s just a lot of uncertainty and murkiness around it, which for a loan amount of my size is pretty scary.”
After a more than three-year freeze, payments, collections and interest are scheduled to resume on federal student loans later this year. This is the ninth time — spanning two administrations — that the government has threatened to turn payments back on. Once again, borrowers, advocates and servicers are gearing up for a financial and operational headache.
“It’s going to be frustrating for everybody involved — borrowers, servicers, the Department of Education, advocacy organizations like ours,” said Betsy Mayotte, the president of the Institute of Student Loan Advisors, a nonprofit that helps borrowers manage their student loans.
To advocates who pushed officials to delay restarting payments in the past, this moment in many ways looks similar to the months before the freeze was scheduled to end those eight other times. A challenging economy means borrowers’ budgets are still tight and promised fixes to the student-loan system that could help ensure a smooth transition to repayment and make borrowers’ bills more manageable still haven’t materialized.
But a few key factors are different, some of which are upping the pressure on the Biden administration to turn the student-loan system back on: the official end to the pandemic emergency, congressional Republicans taking aim at the payment pause in two pieces of legislation and multiplelawsuits challenging the freeze. Other elements unique to this moment are exacerbating the uncertainty and challenges related to restarting payments. Servicers will have fewer resources than in the past to handle a likely crush of calls.
“The Department remains focused on doing everything in its power to better serve students and borrowers, and we are fully committed to supporting student loan borrowers as they successfully navigate returning to repayment,” a Department of Education spokesperson wrote in an email. “The Department is deeply concerned about the lack of adequate annual funding made available to Federal Student Aid this year,” the spokesperson said, referring to Congress’s decision not to increase funding for FSA, despite the agency’s request. “As the Department has repeatedly made clear, restarting repayment requires significant resources to avoid unnecessary harm to borrowers.”
For Eminger, and other borrowers, part of the anxiety surrounding the restart to payments stems from major upheaval to the student-loan system that’s been announced during the pause that will make her loans more manageable. But accessing these benefits requires both diligence — staying on top of announcements and paperwork — and patience while she and others wait for the full implementation of these initiatives.
“The rules have been changing so much,” Eminger said. “Before the pandemic I felt like I very much understood what I was required to do. I always felt very on top of it. Now it just feels like a completely moving target.”
Kate Eminger says she’s nervous about the looming resumption of student-loan payments.
Courtesy of Kate Eminger
Compounding her uncertainty is a lack of clarity surrounding exactly when payments will resume. In November, President Joe Biden told borrowers they could expect the pause to end in the late summer, but he didn’t give an exact date. In addition, it’s hard for Eminger to see how this deadline for payments to restart is different from all the others, where student-loan bills never materialized. All of that has made it difficult for Eminger to figure out exactly when to take steps to make sure her student-loan payment can fit in with the rest of her budget such as the sale of her car.
“It does not feel real at all,” she said of the restart of student-loan payments. “It would be great to name a date. If they could name a date and if that date felt certain then you could plan.”
Tied up in court
The Biden administration has said that the freeze will end 60 days after litigation surrounding its plan to cancel up to $20,000 in debt for a wide swath of borrowers is resolved or 60 days after June 30, 2023, whichever comes first.
“When payments turn back on, it’s going to be a big problem,” said Eleni Schirmer, a researcher and organizer with the Debt Collective, a debtor activist group, “but to not even be granted the dignity of a clear date of when that happens just makes it even more of a problem.” She described providing a ballpark estimate for the restart of payments instead of an exact date as signaling an “almost cruel indifference” to how resumed monthly student-loan bills will impact borrowers.
That uncertainty could exacerbate the stress that student debt already places on borrowers, according to Daniel A. Collier, an assistant professor of higher education at the University of Memphis, who is studying the impact of student debt on mental health. What he’s found is that people who are the most uncertain about what’s going on with their student loan have the highest rates of psychological distress and suicidal ideation. For example, these borrowers worry they’re not getting an accurate sense of their balance or the number of payments they need to make before qualifying for a forgiveness plan.
“People are concerned about the pause because they don’t know what a restart looks like, this has never been done before,” he said. In the past, when payments have resumed after more limited pauses, delinquencies and defaults spiked — part of the Biden administration’s legal rationale for tying mass debt cancellation to the restart of payments. Borrowers don’t know “when it’s going to start, what their repayments are actually going to be,” Collier added.
Kevin Noonan, who together with his wife has about $100,000 in student debt, said he’s benefited from the pause. The couple has used the extra room in their budget to pay down private student loans. Still, Noonan is “frustrated” with the lack of clarity surrounding the resumed payments and the status of the Biden administration’s loan-forgiveness plan.
“Not knowing is the hardest part,” he said. “I have a Google alert set up, every time student loans come up I check everything. You kind of just have to plan for the worst-case scenario.”
Megan and Kevin Noonan have about $100,000 in student debt.
Courtesy of Kevin Noonan
The decision to tie the resumption of payments to the court’s decision “added an element of unpredictability,” said Persis Yu, managing counsel and deputy executive director at the Student Borrower Protection Center, an advocacy group.
“There’s the choice to not land on a certain date, but there’s also the choice of 60 days,” Yu said, referring to the 60-day delay between the court’s decision and payments resuming.
“I really wonder whether or not 60 days is enough time for borrowers,” she said. “When we think about the amount of work that is really going to have to happen to effectively turn on this system, 60 days does not seem like a lot of lead time.”
Secretary of Education Miguel Cardona said in a congressional hearing this month that the agency is “preparing to restart repayment because the emergency period is over.” He told another congressional panel that the agency is “geared up and ready to go,” to resume payments.
Scott Buchanan, the executive director of the Student Loan Servicing Alliance, a trade group, said that 60 days should be enough time for student-loan servicers to implement the restart. In order to accomplish that, they’ll need to be able to communicate with borrowers in the coming weeks about the end of the payment pause and be allowed to offer flexibilities like forbearance and allowing borrowers to verbally recertify their income for payment plans.
When the end of the payment freeze loomed in the past, servicers didn’t have the go-ahead from the Department of Education to communicate with borrowers, Buchanan said. They still don’t, but servicers have been working closely with officials to discuss the “communication playbook” in recent weeks and hope to roll it out shortly.
The Department of Education “remains in constant contact with servicers,” the department spokesperson wrote in an email, and will be in “direct contact” with borrowers before the end of the payment freeze. “Engaging with servicers to ensure they are communicating directly with borrowers about successfully returning to repayment is an important part of the Department’s efforts to smoothly transition borrowers back into repayment,” the spokesperson wrote.
Still, the uncertainty surrounding exactly when payments will start could create an obstacle to a seamless return to repayment, Buchanan said.
“If you’re a family and you’re planning a budget you need to know what is the date that I need to be prepared to make this payment,” he said. “Having a fuzzy date doesn’t do anyone any good including servicers, but especially for borrowers.”
Borrowers will receive a bill at least 21 days before their payments are scheduled to resume and likely won’t end up having to make a payment until October, Politico reported last month. Officials are also considering offering borrowers a grace period when the freeze ends, according to the report.
Servicers will be implementing plans the department previously developed to restart payments, Buchanan said. But they’ll be working with fewer resources than previously anticipated. The Department of Education cut the amount it’s paying servicers to manage each account. The agency has said the cuts are due to lawmakers’ decision not to increase funding for the Office of Federal Student Aid for the 2023 fiscal year. The lack of funds will mean fewer customer-service representatives and reduced call-center hours, including none on weekends.
“What is the right level of resources? How many staff should you have? It’s not a definable thing,” Buchanan said. “What I can say is having fewer than we had before does not make it better.”
The department spokesperson said the agency will keep working with Congress to fully fund President Biden’s fiscal 2024 budget request. The department asked for a $620 million increase in funding for FSA.
“Restarting repayment requires significant resources to avoid unnecessary harm to borrowers,” the spokesperson wrote in the email.
Members of the Class of 2022 at the University of Delaware.
Mandel Ngan/Agence France-Presse/Getty Images
In addition, the Department of Education recently announced an overhaul of the student-loan servicing system aimed at increasing accountability for servicers. For years, borrowers and advocates have complained that the firms don’t provide borrowers with enough information or the right information. Without that in place, Yu worries that ensuring borrowers have a truly affordable payment will be “a nightmare.”
“At this inflection point where you need the best servicing possible, we don’t have it,” she said. “It seems irresponsible to turn on the payment system into a broken servicing system and into a broken system overall.”
Though the new servicing system won’t go live until 2024, “our servicer contracts continue to include the same requirements that all vendors effectively serve our customers and still provide that servicers compete against each other to maintain low call-abandonment rates,” the department spokesperson wrote.
Fixing servicing is just one of many initiatives from the Biden administration aimed at overhauling the student-loan system in the process of being implemented and won’t be fully realized before the end of the summer.
For example, some borrowers have debts that should be wiped off the books, Yu said. The Biden administration has launched several initiatives over the past few years aimed at making it easier for borrowers to access the forgiveness already available to them under the law. So far, the department has announced more than $66 billion in discharges for nearly 2.2 million borrowers, including public servants, borrowers with severe disabilities and borrowers who were scammed by schools.
Still, there are more borrowers eligible to have their debt canceled under these programs who haven’t received relief, Yu said. “These borrowers are going to be thrown into a system to make payments on loans they shouldn’t be making payments on anymore,” she said.
In addition, a promise to make repaying student loans more manageable hasn’t fully materialized. At the same time that President Biden announced the mass debt-cancellation plan, he also unveiled sweeping changes to the repayment system aimed at making student-loan bills more affordable. But the program, which Biden called “a game changer” when he announced it in August, likely won’t be ready by the end of the summer. It’s also been a target for criticism by conservative advocacy groups and Republican members of Congress.
“The only way that that could be available to borrowers when payments resume is with another extension,” Yu said.
The proposed plan, which the department spokesperson described as “the most affordable student loan plan in history,” builds on an existing income-driven repayment plan called REPAYE. Eligible borrowers who enroll in REPAYE now will have their monthly payments automatically updated as the terms of the new plan are “finalized and implemented, starting later this year,” the spokesperson wrote.
‘Almost like a tax increase’
For many borrowers, the financial burden of resuming student-loan payments will be significant. Thomas Simons, a senior economist at Jefferies, estimates the return to repayment will cost borrowers about $18 billion per month.
“It’s almost like a tax increase for these people,” Simons said. “They have to pay it, [and] it doesn’t get them anything tangible right now.”
The amount borrowers are saving by not making student-loan payments accounts for about 2% of discretionary spending, Simons said. He sees the hit to borrowers’ wallets as analogous to the impact of a payroll-tax increase in 2013, which impacted a smaller share of discretionary spending for a larger number of Americans.
“‘It’s almost like a tax increase for these people. They have to pay it, [and] it doesn’t get them anything tangible right now.’”
— Thomas Simons, senior economist, Jefferies
“If you look at what happened in the economy in 2013 after those tax increases were announced, the first half of the year spending decelerated quite significantly,” he said. “It really didn’t recover until the latter part of the year.”
“I would be very surprised if we don’t see a similar slowdown in spending coming out of this,” Simons added.
And if payments resume in late summer or early fall, as planned, the hits to borrowers’ bank accounts will be arriving at “the worst possible time,” Simons said, when the labor market will likely start to feel the effects of the Federal Reserve’s battle against inflation.
“That could be a double whammy where people are starting to have significant questions about their income and then having a pretty significant expense,” Simons said.
Many borrowers will likely be juggling other bills, too. For one, the costs of rent, groceries and other basic needs have risen since the advent of the coronavirus pandemic. And borrowers’ other debt payments have actually become less manageable in the three years since the freeze was first implemented.
As of September of last year, about 7% of student-loan borrowers who were not in default on their student loans at the start of the pandemic were more than 60 days delinquent on other debt, compared with 6.2% at the beginning of the pandemic, according to the Consumer Financial Protection Bureau. Their monthly payments on other credit products have also increased during the pause period — 46% of borrowers saw their monthly payments on credit cards and car loans increase by at least 10% since the start of the pandemic, the agency found.
For Kelly, a Charleston, W. Va., student-loan borrower and her husband, the freeze on student-loan payments created financial space to take care of emergency expenses, like a leaking roof. Kelly, who declined to use her last name in order to more freely discuss her financial circumstances, owes about $23,000 in student debt from studying to become a paralegal. Her husband owes about $20,000 from his nursing-school studies.
Kelly, 45, found a job in her field after graduating, but was laid off during the pandemic. She started working some side gigs and eventually launched a dog-grooming business. Despite the business’s success and her passion for it, it likely won’t be enough to cover her bills once she has to start paying on her student loan again. She’s considering getting a second job when the payment freeze ends.
“We’re dual-income, no kids. One car is paid off, the other one is modest — a Volkswagen VOW, -0.43%
VWAGY, +0.22%,
” she added. “We don’t finance things, we don’t live a high and mighty life, but it seems like every month we’re budgeting to the penny.”
“I don’t know how much we can cut back,” she added. “Our entertainment as it is, is Netflix NFLX, -1.60%,
or we go out to eat once a month or so. I guess we can cut back on that.
President Joe Biden on Sunday called for Republicans to agree to compromises in debt-ceiling negotiations, as he wrapped up a visit to Japan for a G-7 summit and prepared to fly back to Washington, D.C.
“Now it’s time for the other side to move from their extreme positions, because much of what they’ve already proposed is simply, quite frankly, unacceptable,” Biden said during a news conference in Japan.
“It’s time for Republicans to accept that there is no bipartisan deal to be made solely — solely — on their partisan terms. They have to move, as well,” he said.
Biden’s comments on movement were similar to what House Speaker Kevin McCarthy said two days ago. The House Republican from south-central California told reporters on Friday that there needs to be “movement by the White House, and we don’t have any movement yet, so, yeah, we’ve got to pause.”
The president’s remarks in Hiroshima came as investors are watching for fresh signs of a bipartisan deal that would lift the federal government’s borrowing limit and prevent a market-shaking default.
Biden accused some Republicans of risking the economic damage of a default because of the 2024 White House race.
“I think there are some MAGA Republicans in the House who know the damage that it would do to the economy, and because I am president and presidents are responsible for everything, Biden would take the blame, and that’s the one way to make sure Biden is not re-elected,” he said.
“My guess is he’s going to want to deal directly with me,” the president said, adding that it had to do with “making sure we’re on the same page.”
“Our teams are going to continue working,” Biden also said.
When asked about McCarthy’s call for government spending to be less next year than this year, Biden said his side is “willing to cut spending, as well as raise revenue,” referring to tax increases. He also said his team is waiting for a GOP response to the White House’s latest counterproposal.
Graves, the Louisiana Republican, had, with his Friday-morning characterization of debt-ceiling negotiations as at a “pause,” suggested the Biden White House’s representatives were being “unreasonable.” Talks resumed Friday evening, but negotiators quickly called it quits for the night, and there was little progress reported Saturday, with McCarthy telling reporters that he didn’t think there would be an ability to “move forward until the president can get back.”
President Joe Biden on Sunday called for Republicans to agree to compromises in debt-ceiling negotiations, as he wrapped up a visit to Japan for a G-7 summit and prepared to fly back to Washington, D.C.
“Now it’s time for the other side to move from their extreme positions, because much of what they’ve already proposed is simply, quite frankly, unacceptable,” Biden said during a news conference in Japan.
“It’s time for Republicans to accept that there is no bipartisan deal to be made solely — solely — on their partisan terms. They have to move, as well,” he said.
Biden’s comments on movement were similar to what House Speaker Kevin McCarthy said two days ago. The House Republican from south-central California told reporters on Friday that there needs to be “movement by the White House, and we don’t have any movement yet, so, yeah, we’ve got to pause.”
The president’s remarks in Hiroshima came as investors are watching for fresh signs of a bipartisan deal that would lift the federal government’s borrowing limit and prevent a market-shaking default.
Biden accused some Republicans of risking the economic damage of a default because of the 2024 White House race.
“I think there are some MAGA Republicans in the House who know the damage that it would do to the economy, and because I am president and presidents are responsible for everything, Biden would take the blame, and that’s the one way to make sure Biden is not re-elected,” he said.
“My guess is he’s going to want to deal directly with me,” the president said, adding that it had to do with “making sure we’re on the same page.”
“Our teams are going to continue working,” Biden also said.
When asked about McCarthy’s call for government spending to be less next year than this year, Biden said his side is “willing to cut spending, as well as raise revenue,” referring to tax increases. He also said his team is waiting for a GOP response to the White House’s latest counterproposal.
Graves, the Louisiana Republican, had, with his Friday-morning characterization of debt-ceiling negotiations as at a “pause,” suggested the Biden White House’s representatives were being “unreasonable.” Talks resumed Friday evening, but negotiators quickly called it quits for the night, and there was little progress reported Saturday, with McCarthy telling reporters that he didn’t think there would be an ability to “move forward until the president can get back.”
Americans’ discontent with the size of their federal income-tax bill is at a two-decade high, according to a new poll — even though Congress hasn’t passed any direct income-tax increases in recent years.
One month after the 2023 tax season’s conclusion, 51% of respondents in a newly released Gallup poll said their income taxes were not fair. That’s up from 44% last year and marks a record high since 1997, when Gallup’s pollsters started asking how people felt about their income-tax bills.
Meanwhile, 46% of people said they were paying a fair amount of income tax. That basically matched the dim mood over two decades ago, in in 1999, when 45% said that they were paying a fair amount.
Six in 10 poll participants said their federal income taxes were “too high,” pollsters said. 2001 was the last time that share of people felt the same way, Gallup said.
Gallup pollsters spoke with more than 1,000 people, doing their field work through most of April.
The poll comes during a fierce debate about whether the wealthiest taxpayers, as well as corporations, are paying enough in taxes. The Biden administration has been pressing for higher tax rates on high earners. A Democratic-controlled Congress last year passed a law with an $80 billion funding infusion for the IRS over a 10-year span in part to launch more audits of rich individuals and corporations.
Many Americans walked away from tax season with income-tax refunds that were smaller than a year ago. That’s due, at least in part, to the end of pandemic-era boosts to certain credits, tax experts have previously told MarketWatch.
Both backdrops might be at play in the public mood on taxes, observers noted, and political affiliation could have something to do with these changes, Gallup said. Only one-third of Republicans said their income taxes this year were fair, for example — that’s down from 63% in 2020, the last full year of the Trump administration.
The change in Republican sentiment could be why there was a heavy swing since 2020, when 59% said their taxes represented a fair number. In 2020, 56% of political independents said their taxes were fair, and that percentage fell to 45% a few years later. Among Democrats, meanwhile, the 63% saying their taxes were fair was virtually unchanged over that span.
Republicans “are certainly more frustrated now with Biden in office,” said Jeff Jones, senior editor of the Gallup poll. “But they are even more frustrated than they were when Obama was in office.”
Democrat Joe Biden campaigned in 2020 on pledges to raise taxes on corporations and households earning over $400,000 a year and not on those making less than that. So far, the president has not been able to turn proposals like a billionaire’s minimum tax or a higher top tax rate into law.
The real tax-policy fight brewing in the background is the 2025 expiration of Trump-era tax cuts, experts have said.
In the sweeping 2017 tax-code overhaul, Congress reduced five of seven income-tax brackets and boosted commonly used features of the tax code, including payouts for the child tax credit and the standard deduction. But some of those tax cuts were scheduled to sunset, while others were permanent.
Another potential shaping the mood on taxes is the broader economy and recent tax season, Jones said. One possibility, he noted, is that some people are getting pushed to higher tax brackets with pay raises meant to keep up with inflation. (Tax brackets are adjusted annually to account for inflation.)
While inflation is still pinching wallets, tax refunds are lower than they were a year ago.
Refunds averaged just over $2,800, and that’s down more than 7% from a year earlier, according to IRS data through May 12.
For his part, Lawrence Zelenak, who teaches tax law at Duke University, thinks the current darkening public mood “is largely a response to the disappearance of all the temporary pandemic-related tax relief,” he said.
In 2020 an estimated 60% of households ended up with no federal income-tax liability because they were making less and bringing in more through direct cash assistance from the federal government, according to Tax Policy Center estimates.
By 2022, an estimated 40% of households wouldn’t face any federal income tax, according to the nonpartisan think tank — which is more in line with levels seen before the pandemic.
Refunds during 2022 got a kick from extragenerous payouts including the child tax credit, the child- and dependent-care credit and the earned-income tax credit.
Most taxpayers also got a chance to shave their tax bill with a temporary change that let them take the standard deduction and also write off a portion of their charitable donations. But the credits reverted to their prepandemic size, and the deduction on cash donations subsequently went away.
“With the end of the pandemic tax relief, many people have seen their income-tax liabilities go up, and it’s not surprising they see that as unfair,” Zelenak said. “So it may be the change more than the absolute level of tax.”
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Embattled Twitter may soon have a serious rival: Facebook’s Instagram is planning to release a text-based app as a competitor.
Instagram, a property of Meta Platforms Inc. META, -0.49%,
has been testing the service with creators, celebrities and influencers for months, according to people familiar with Meta’s strategy.
“We’re exploring a standalone decentralized social network for sharing text updates. We believe there’s an opportunity for a separate space where creators and public figures can share timely updates about their interests,” a Meta spokesperson told MarketWatch.
The app could debut as early as June, according to Lia Haberman, an adjunct professor at the University of California, Los Angeles, who teaches social and influencer marketing. She published a screenshot of an early description of the app, which may eventually be compatible with rival Twitter apps like Mastodon.
Twitter has hemorrhaged users since Tesla Inc. TSLA, +1.84%
Chief Executive Elon Musk began his chaotic leadership of the company late last year, prompting an exodus by disgruntled customers to alternative services like Mastodon and Bluesky.
Jasmine Enberg, an analyst at Insider Intelligence, said the text-based service has been in the works for months alternately code-named P92 or Barcelona.
“The big picture here is that there is clearly an appetite for Twitter-like services,” Enberg said in an interview. “With Twitter’s problems and so many alternatives, Meta’s new service looks like a mashup of Instagram and Twitter. Meta sees an opportunity to tap into this market, and it has a history of copying other popular apps [like Snap].”
Meta’s stock was flat in Friday’s regular trading session.
Social Security has been a vital safety net for retirees, disabled individuals, and surviving family members for decades. However, the program is facing financial challenges that may necessitate changes in the coming years. Let’s explore three potential ways Social Security benefits could change in the future.
Adjustments to the full retirement age
One possible change could involve adjusting the full retirement age (FRA), which is the age at which individuals can receive full Social Security benefits. Currently set at 67 for those born in 1960 or later, some experts argue that increasing the full retirement age could help address the program’s funding shortfall. However, this change could mean longer working lives for future retirees and careful consideration of how it impacts individuals with physically demanding jobs or limited job opportunities later in life.
This change would also result in a smaller benefit for the earliest filers at age 62, since the reductions are based on the amount of time between your filing age and the Full Retirement Age. If the FRA is increased to 68, for example, filing at age 62 would result in a benefit that is only 65% of your Full Retirement Age benefit amount.
In addition, unless the maximum filing age is adjusted, Delayed Retirement Credits (DRCs) would also be limited under such a scenario. Currently when your FRA is 67 you have the opportunity to increase your benefit by 24% (8% per year for DRCs), but if the FRA is 68, the increase would only be 16% at maximum.
Means-testing benefits
Another potential change is means-testing Social Security benefits. Means-testing would involve adjusting benefit amounts based on an individual’s income or assets. Supporters argue that this would ensure benefits are targeted to those who need them most, potentially reducing the strain on the program’s finances. However, critics express concerns about the potential impact on middle-income earners who have paid into the system throughout their working lives and rely on Social Security as a significant part of their retirement income.
An interesting concept I’ve recently seen bandied about involves a trade-off between Social Security benefits and Required Minimum Distributions (RMDs) from retirement plans. Essentially an individual could forgo Social Security benefits (at least partially if not fully) in exchange for looser restrictions on RMDs – allowing for further deferral of taxation on retirement accounts.
Benefit reductions
In order to sustain the Social Security program, benefit reductions might be considered. This could involve various approaches such as adjusting the formula used to calculate benefits or implementing a scaling factor to reduce benefit amounts. While benefit reductions would aim to preserve the long-term viability of Social Security, they could pose challenges for retirees who rely heavily on those benefits to cover essential living expenses.
Most benefit reduction proposals in the pipeline are in concert with expanding the tax base, while at the same time limiting benefits to the upper echelons of earnings levels. In these cases the taxable wage base is either expanded or removed altogether, and the amounts above the current wage base are credited for benefits at a minuscule rate.
It’s important to note that any changes to Social Security benefits would likely be accompanied by broader discussions and careful consideration from policy makers. The goal would be to strike a balance between ensuring the program’s financial stability and protecting the well-being of current and future retirees.
As an individual planning for retirement, it’s crucial to stay informed about potential changes to Social Security benefits. Keeping track of legislative proposals and staying engaged in the conversation can help you adapt your retirement plans accordingly. Consider consulting with a financial adviser who specializes in retirement planning to assess the potential impact on your retirement income and explore other strategies to supplement your savings.
Social Security benefits may undergo changes in the future as policy makers grapple with the program’s financial challenges. Adjustments to the full retirement age, means-testing benefits, and benefit reductions are among the potential changes that could be considered. By staying informed and seeking professional guidance, you can navigate these potential changes and make informed decisions to secure your financial well-being during retirement.
“‘I’ve always told people there is nobody who can really pick the market on a short-term or an intermediate-term basis. Maybe I made the mistake of not adhering to my own advice in recent years.’”
— Carl Icahn, activist investor
That’s Carl Icahn, legendary activist investor and billionaire, admitting in a Financial Times interview that he was wrong when he made a massive bet that the stock market would crash.
In 2017, his bet lost about $1.8 billion on hedging positions, according to FT calculations, that would have made money if asset prices had fallen. The trade lost another $7 billion between 2018 and the first quarter of 2023, according to the paper.
Icahn’s investing arm Icahn Enterprises LP IEP, +0.06%
started to short the market after the 2008 financial crisis, and became more aggressive in subsequent years. The company used a strategy of shorting broad market indexes, individual companies, commercial mortgages and debt securities.
“You never get the perfect hedge, but if I kept the parameters I always believed in . . . I would have been fine,” he said. “But I didn’t.”
Instead, regulatory filings show that IEP lost $4.3 billion on short positions in 2020 and 2021 as the market rallied off the pandemic slump, buoyed by the Federal Reserve’s massive stimulus.
“I obviously believed the market was in for great trouble,” Icahn said. “[But] the Fed injected trillions of dollars into the market to fight COVID and the old saying is true: ‘Don’t fight the Fed.’”
Icahn also explained what exactly he did with margin loans he borrowed from IEP that were recently highlighted by short-seller Hindenburg Research in a stinging report.
The loans were disclosed in regulatory filings in early 2022, but few seemed to notice at the time.
The Hindenburg report accused the company of inflating asset values and quested whether a margin call would send the company into a spiral if the stock price were to fall.
IEP’s stock did fall after that report — at the cost of about $6 billion of market cap.
Icahn addressed the report on the day it was released and offered an update on IEP’s recent earnings, saying he was fully in compliance with loan terms.
He told the FT he had used the money borrowed from IEP to make additional investments outside of his publicly traded vehicle.
“Over the years I have made a great deal of money with money,” he said. “I like to have a war chest and doing that gave me more of a war chest,” he added, referring to the margin loan.
Things move quickly in the world of artificial intelligence. It is easy to sit back and complain about developments that could be disruptive, but sometimes investors are best served by putting emotions aside and observing new developments and how they affect markets. Could AI developments and related trends make you a lot of money?
Below is a new screen showing a group of AI-oriented companies expected to increase their sales most rapidly through 2025, based on consensus estimates among analysts polled by FactSet. Then we show expected revenue growth rates for the largest AI-oriented companies in the screen.
Over the long haul, many businesses might perform more efficiently by employing AI. Maybe this technology can create an economic revolution similar to the one that moved the majority of the working population away from agricultural labor during the 19th and 20th centuries.
Back in February, we screened 96 stocks held by five exchange-traded funds focused on AI and related industries and listed the 20 that analysts thought would rise the most over the following 12 months.
Three months is a long time for AI, and the shakeout hasn’t even started.
There is no way to predict how politicians will react to perceived or real threats of AI and machine learning. And the largest U.S. tech players are doing everything they can to employ the new technology and remain dominant. But that doesn’t mean they will grow more quickly than smaller AI-focused players.
A new AI stock screen
Once again we will begin a screen with these five ETFs:
The Global X Robotics & Artificial Intelligence ETF BOTZ, +0.97%
BOTZ was established 2016 and has $1.8 billion in assets under management. The fund tracks an index of companies listed in developed markets that are expected to benefit from the increased utilization of robotics and AI. There are 44 stocks in the BOTZ portfolio, which is weighted by market capitalization and rebalanced once a year. Its largest holding is Intuitive Surgical Inc. ISRG, +0.53%,
which makes up 10% of the portfolio, followed by Nvidia Corp. NVDA, +3.30%
at 9.4%.
The iShares Robotics and Artificial Intelligence Multisector ETF IRBO, +1.64%
holds 116 stocks that are equal-weighted, as it tracks a global index of companies that derive at east 50% of revenue from robotics or AI, or have significant exposure to related industries. This ETF was launched in 2018 and has $304 million in assets.
The $246 million First Trust Nasdaq Artificial Intelligence & Robotics ETF ROBT, +1.83%
has 107 stocks in its portfolio, with a modified weighting based on how directly companies are involved in AI or robotics. It was established in 2018.
The Robo Global Artificial Intelligence ETF THNQ, +1.81%
has $26 million in assets and was established in 2020. I holds 69 stocks and isn’t concentrated. It uses a scoring system to weight its holdings by percentage of revenue derived from AI, with holdings also subject to minimum market capitalization and liquidity requirements.
The newest ETF on this list is the WisdomTree Artificial Intelligence and Innovation Fund WTAI, +2.42%,
which was established in December and has $13 million in assets and holds 73 stocks in an equal-weighted portfolio. According to FactSet, stocks are handpicked and selected companies “generate at least 50% of their revenue from AI and innovation activities, including those related to software, semiconductors, hardware technology, machine learning and innovative products.”
Altogether and removing duplicates, the five ETFs hold 270 stocks of companies in 23 countries. We first narrowed the list to 197 covered by at least nine analysts and for which consensus sales estimates are available through calendar 2025. We used calendar-year estimates because some companies have fiscal years that don’t match the calendar.
Here are the 20 screened AI-related companies expected by analysts to have the highest compound annual growth rates (CAGR) for sales from 2023 through 2025. Sales estimates are in millions of U.S. dollars. The list also shows which of the above five ETFs holds each stocks.
Click the tickers for more about each company or ETF.
Click here for Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote pages.
We have screened for expected revenue growth, rather than for earnings or cash flow, because in a newer tech-oriented business area, investors are most likely to consider the top line as companies sacrifice profits to build market share.
It is important to do your own research if you consider purchasing any individual stock, to form your own opinion about a company’s ability to remain competitive over the long term. Starting from the top of the list, BioXcel Therapeutics Inc. BTAI, -2.47%
is expected to show exponential sales growth, but that is from a low expected baseline this year.
What about the largest AI-related companies held by these ETFs?
Here are the largest 20 companies in the screen by market capitalization, ranked by expected sales CAGR from 2022 through 2025. Once again the sales estimates are in millions of U.S. dollars, but the market caps are in billions.
President Joe Biden sounded upbeat Wednesday as a divided Washington continued to work on achieving a bipartisan deal that raises the ceiling for federal borrowing and avoids a market-shaking default.
“I’m confident that we’ll get the agreement on the budget, and America will not default,” Biden said during a brief speech at the White House.
“We’re going to continue these discussions with congressional leaders in the coming days until we reach an agreement, and I’ll have more to say about that on Sunday,” the president also said, adding that he planned to hold a news conference on Sunday.
Biden’s remarks came shortly before his departure for a Group of Seven summit in Japan, and after both the president and House Speaker Kevin McCarthy sounded positive about their second debt-limit meeting, which took place Tuesday.
Biden said on Wednesday that is cutting his Asia trip short to be there for final negotiations and to be able to sign a deal. He promised to be “in constant contact” with his staff while he’s at the G-7 summit and “in close touch” with McCarthy and the other top U.S. lawmakers.
In addition, the president said he didn’t think the curtailing of the upcoming trip was a win for China.
“We’re still meeting. We still have four good allies,” he told reporters, referring to his plans to talk to members of the Quad — meaning the leaders of Australia, India, Japan and the U.S. — during the G-7 summit.
Biden said he plans to speak or meet with Chinese President Xi Jinping at some point, saying that will happen “whether it’s soon or not.”
Earlier Wednesday, McCarthy told CNBC, “I think at the end of the day we do not have a debt default.”
On Tuesday, the California Republican said the “structure of how we negotiate has improved,” because the president has appointed White House staff to talk with the speaker’s team, rather than involving all four top U.S. lawmakers.
Biden remarked on that development Wednesday.
“We narrowed the group to meet and hammer out our differences,” he said. “In fact, they met last night. They’re going to be meeting again today.”
Tesla Inc. Chief Executive Elon Musk said late Tuesday he foresees “a year of difficulty” for the global economy, with “lots of companies” going bankrupt, and said that the EV maker will not be immune to the downdraft, even as he teased two new products for Tesla in the future.
“It’s is going to be a challenging 12 months, and Tesla is not immune to the global economic environment,” Musk said at the Tesla TSLA, +0.10%
shareholder meeting in Austin, Texas, where he spoke for nearly two hours on a wide range of topics.
The macroeconomic environment will be “difficult for at least the next 12 months,” Musk said. A turnaround, however, would come in the following 12 months, and long-term investors in Tesla will do “extremely well,” he said.
A shareholder in the audience asked about “rumors” that Musk would be about to step down as CEO, ending with “say it ain’t so.” Musk responded with “it ain’t so,” but offered no further details.
The executive also surprised the audience by saying that Tesla, which famously has eschewed traditional advertising, will now do it. “We will try advertising and see how it goes,” he said.
Musk teased two new products to be unveiled in the future, and promised more details at a yet-to-be-detailed launch event. The unnamed products would be “head and shoulders above anything else” currently in the market, he said.
Tesla has been working on a next-generation vehicle that would be cheaper than its current offerings, but nothing has been detailed.
Musk promised a revamp for the Tesla Roadster in 2024, although he said that wasn’t a firm commitment. A new Roadster “will not be a huge contributor to revenue, but it will be sick,” he said.
The CEO’s remarks were largely upbeat, to the applause of the shareholders at the event. Musk also spoke about autonomous driving and Tesla’s plans for alternative energy, and confirmed the Cybertruck, Tesla’s electric pickup truck which has been delayed a couple of times, is on track to be sold this year.
“We will make as many as people want them” eventually, but the production ramp will be slow at first, he said.
Earlier, a preliminary tally indicated that shareholders voted yes on the proposals endorsed by the company, including approving the nomination of former Chief Technology Officer JB Straubel to the board.
A failed proposal, which had been introduced in previous years and called for a third-party audit into Tesla’s cobalt supply chain to prevent child and forced labor, ended up being embraced by Musk.
“You know what, we will do a third-party audit,” although he said that Tesla products don’t use that much cobalt.
Tesla shares gained 1.2% in after-hours trading. So far this year, Tesla has gained 35%, compared with gains of around 7% for the S&P 500 index SPX, -0.64%.
Tesla Inc. Chief Executive Elon Musk said late Tuesday he foresees “a year of difficulty” for the global economy, with “lots of companies” going bankrupt, and said that the EV maker will not be immune to the downdraft, even as he teased two new products for Tesla in the future.
“It’s is going to be a challenging 12 months, and Tesla is not immune to the global economic environment,” Musk said at the Tesla TSLA, +0.10%
shareholder meeting in Austin, Texas, where he spoke for nearly two hours on a wide range of topics.
The macroeconomic environment will be “difficult for at least the next 12 months,” Musk said. A turnaround, however, would come in the following 12 months, and long-term investors in Tesla will do “extremely well,” he said.
A shareholder in the audience asked about “rumors” that Musk would be about to step down as CEO, ending with “say it ain’t so.” Musk responded with “it ain’t so,” but offered no further details.
The executive also surprised the audience by saying that Tesla, which famously has eschewed traditional advertising, will now do it. “We will try advertising and see how it goes,” he said.
Musk teased two new products to be unveiled in the future, and promised more details at a yet-to-be-detailed launch event. The unnamed products would be “head and shoulders above anything else” currently in the market, he said.
Tesla has been working on a next-generation vehicle that would be cheaper than its current offerings, but nothing has been detailed.
Musk promised a revamp for the Tesla Roadster in 2024, although he said that wasn’t a firm commitment. A new Roadster “will not be a huge contributor to revenue, but it will be sick,” he said.
The CEO’s remarks were largely upbeat, to the applause of the shareholders at the event. Musk also spoke about autonomous driving and Tesla’s plans for alternative energy, and confirmed the Cybertruck, Tesla’s electric pickup truck which has been delayed a couple of times, is on track to be sold this year.
“We will make as many as people want them” eventually, but the production ramp will be slow at first, he said.
Earlier, a preliminary tally indicated that shareholders voted yes on the proposals endorsed by the company, including approving the nomination of former Chief Technology Officer JB Straubel to the board.
A failed proposal, which had been introduced in previous years and called for a third-party audit into Tesla’s cobalt supply chain to prevent child and forced labor, ended up being embraced by Musk.
“You know what, we will do a third-party audit,” although he said that Tesla products don’t use that much cobalt.
Tesla shares gained 1.2% in after-hours trading. So far this year, Tesla has gained 35%, compared with gains of around 7% for the S&P 500 index SPX, -0.64%.
President Joe Biden plans to return to the U.S. on Sunday, cutting short his upcoming Asia trip, NBC News reported on Tuesday, citing an anonymous source. Earlier Tuesday, White House spokesman John Kirby said Biden might not make planned stops in Australia and Papua New Guinea that were expected to happen in conjunction with his trip to Japan for a G-7 summit. “We’re re-evaluating,” Kirby told reporters. “There’s not been a cancellation, as yet, but that could happen.” The developments are coming as Biden and the four top U.S. lawmakers are meeting Tuesday afternoon on raising the ceiling for federal borrowing and avoiding a market-shaking default.
