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These 5 tech stocks could let you play earnings season like a pro
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Tag: Computers/Electronics
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Hewlett Packard Enterprises to buy Juniper Networks in $14 billion deal
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In an effort to keep up in the accelerating AI arms race, cloud-services provider Hewlett Packard Enterprise Co. on Tuesday agreed to buy Juniper Networks, Inc. in a deal worth around $14 billion.
Under the terms of the deal, Hewlett Packard Enterprises
HPE,
-8.92%
will acquire Juniper
JNPR,
+21.81%
— which makes communications-networking products and also has an AI segment called Mist AI — for $40 a share. The companies expect the deal to close late this year or in early 2025.“The acquisition is expected to double HPE’s networking business, creating a new networking leader with a comprehensive portfolio that presents customers and partners with a compelling new choice to drive business value,” the companies said in a release.
After the deal is completed, Juniper Chief Executive Rami Rahim will lead the combined HPE networking business, and report to HPE CEO Antonio Neri.
“This transaction will strengthen HPE’s position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds, while also generating significant value for shareholders,” Neri said in a statement.
HPE said the addition of Juniper will boost margins and result in up to $450 million in annual cost savings within three years of the deal’s completion, as well as accelerate growth. HPE’s networking segment was the company’s top source of quarterly earnings before taxes, $401 million, on $1.4 billion in revenue.
HPE’s deeper plunge into networking closes a chapter of sorts. Then-Hewlett-Packard Co. acquired Aruba Networks for about $3 billion in March 2015, months before Silicon Valley’s original garage startup split in half, resulting in the formation of HPE, which sells servers and other equipment for data centers, and HP Inc.
HPQ,
-2.71% ,
which makes PCs and printers.The Wall Street Journal reported the possibility of a deal on Monday, sending shares of Juniper higher.
Shares of Juniper
JNPR,
+21.81%
rose 0.5% after hours, after jumping 21.8% during regular trading hours. Hewlett Packard
HPE,
-8.92%
shares were down 0.4% after hours, after falling 8.9% during the day.As of Tuesday’s close, Juniper had a market cap of $9.64 billion, while HPE’s was $23.04 billion.
The companies hope the deal can provide a much-needed jolt after a series of lackluster quarterly earnings. Juniper shares have gained 15.7% over the past 12 months, while HPE shares are down 5.4% over that span. The S&P 500
SPX,
in comparison, is up about 21.4% over the past year.For decades, Juniper has lagged rival Cisco Systems Inc.
CSCO,
-1.09%
in the networking-equipment market. In its most recent quarter, Juniper reported net income of $76 million on revenue of $1.4 billion, down 1% from the same quarter a year earlier.[ad_2]
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If Nvidia looked more like Salesforce, it might unlock billions more in cash
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Nvidia Corp. is raking in billions in cash, but one analyst thinks the chip maker could throw $100 billion more onto the pile if it started to look more like Salesforce Inc.
Nvidia
NVDA,
+2.29%
might unlock even more cash by developing businesses that expand recurring revenue, according to BofA Securities analyst Vivek Arya. The company has suffered some boom-and-bust cycles in recent years, and another bust could be smoothed by developing longer-term software contracts akin to those of Salesforce
CRM,
-0.05% .
, Workday Inc.
WDAY,
-0.48%
and ServiceNow Inc.
NOW,
+0.64% ,
which generate recurring revenue from their customers.Arya sees a pathway for Nvidia to rake in $100 billion in incremental free cash flow over the next two years if it can bulk up its own recurring-revenue options.
Read: Apple’s stock needs to get ‘unstuck’ — and its innovation rut may not be helping
“While NVDA has a solid lead in AI, hardware-oriented businesses are not valued as highly as visibility tends to be limited,” Arya wrote. Nvidia generates only about $1 billion, or 2%, of its sales from software and subscriptions. Arya doesn’t think the company can get much higher than $5 billion with its software and subscription offerings unless it turns to acquisitions.
Nvidia has shown some openness to deals that would beef up its intellectual property and software offerings, Arya notes, as it tried to buy British chip designer Arm Holdings
ARM,
-1.96%
before facing regulatory pushback.“We envision [Nvidia] considering more enhanced partnerships/M&A of software companies that are helping traditional enterprise customers deploy, monitor and analyze [generative AI] apps,” he wrote. Nvidia “is already serving them via on-premise hardware and/or its DGX cloud service, but we believe greater direct recurring software/service channel could be more impactful.”
The addition of more recurring-revenue streams could help Nvidia’s “relatively depressed trading multiple,” in Arya’s view. Nvidia shares trade at a 20% to 30% discount to its “Magnificent Seven” peers on the basis of price to earnings as well as enterprise value to free cash flow, even though the company’s compound annual growth rate on the top line is three times what it is for those other tech giants.
The discount is “partly due to uncertainty in [calendar 2025] growth prospects, and partly due to a very hardware-dependent business unlike other large-cap software/internet peers that have recurring-revenue profiles,” he wrote.
Arya has a buy rating and $700 price objective on the stock.
See also: Amazon’s stock could be helped by this secret weapon in 2024, BofA says
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These 20 stocks soared the most in 2023
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(Updated with Friday’s closing prices.)
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.
The central bank hasn’t raised the federal-funds rate since moving it to the current target range of 5.25% to 5.50% in July, and its economic projections point to three rate cuts in 2024.
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.Read: Treasury yields end mostly higher but little changed on year after wild 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:
Sector or index 2023 price change 2022 price change Price change since end of 2021 Forward P/E Forward P/E at end of 2022 Forward P/E at end of 2023 Information Technology 56.4% -28.9% 11.5% 26.7 20.0 28.2 Communication Services 54.4% -40.4% -7.6% 17.4 14.3 21.0 Consumer Discretionary 41.0% -37.6% -11.4% 26.2 21.7 34.7 Industrials 16.0% -7.1% 8.0% 20.0 18.7 22.0 Materials 10.2% -14.1% -4.9% 19.5 15.8 16.6 Financials 9.9% -12.4% -3.4% 14.6 13.0 16.3 Real Estate 8.3% -28.4% -21.6% 18.3 16.9 24.7 Healthcare 0.3% -3.6% -3.3% 18.2 17.7 17.3 Consumer Staples -2.2% -3.2% -5.4% 19.3 20.6 21.4 Energy -4.8% 59.0% 51.8% 10.9 9.8 11.1 Utilities -10.2% -1.4% -11.4% 15.9 18.7 20.4 S&P 500
SPX24.2% -19.4% 0.4% 19.7 16.8 21.6 Dow Jones Industrial Average
DJIA13.7% -8.8% 3.8% 17.6 16.6 18.9 Nasdaq Composite
COMP43.4% -33.1% -3.5% 26.9 22.6 32.0 Nasdaq-100
NDX53.8% -33.0% 3.5% 26.3 20.9 30.3 Source: FactSet 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:
Company Ticker 2023 price change 2022 price change Price change since end of 2021 Forward P/E Forward P/E at end of 2022 Forward P/E at end of 2021 Nvidia Corp. NVDA,
239% -50% 68% 24.9 34.4 58.0 Meta Platforms Inc. Class A META,
-1.22% 194% -64% 5% 20.2 14.7 23.5 Royal Caribbean Group RCL,
-0.37% 162% -36% 68% 14.3 14.9 232.4 Builders FirstSource Inc. BLDR,
-1.02% 157% -24% 95% 14.2 10.7 13.3 Uber Technologies Inc. UBER,
-2.49% 149% -41% 47% 56.9 N/A N/A Carnival Corp. CCL,
-0.70% 130% -60% -8% 18.7 41.3 N/A Advanced Micro Devices Inc. AMD,
-0.91% 128% -55% 2% 39.7 17.7 43.1 PulteGroup Inc. PHM,
-0.26% 127% -20% 81% 9.1 6.3 6.2 Palo Alto Networks Inc. PANW,
-0.24% 111% -25% 59% 50.2 38.0 70.1 Tesla Inc. TSLA,
-1.86% 102% -65% -29% 66.2 22.3 120.3 Broadcom Inc. AVGO,
-0.55% 100% -16% 68% 23.2 13.6 19.8 Salesforce Inc. CRM,
-0.92% 98% -48% 4% 28.0 23.8 53.5 Fair Isaac Corp. FICO,
-0.46% 94% 38% 168% 47.1 29.3 28.7 Arista Networks Inc. ANET,
-0.62% 94% -16% 64% 32.7 22.3 41.4 Intel Corp. INTC,
-0.28% 90% -49% -2% 26.6 14.6 13.9 Jabil Inc. JBL,
-0.45% 87% -3% 81% 13.5 7.9 10.3 Lam Research Corp. LRCX,
-0.81% 86% -42% 9% 25.2 13.5 20.2 ServiceNow Inc. NOW,
+0.57% 82% -40% 9% 56.0 42.6 90.1 Amazon.com Inc. AMZN,
-0.94% 81% -50% -9% 42.0 46.7 64.9 Monolithic Power Systems Inc. MPWR,
-0.23% 78% -28% 28% 49.1 27.3 57.9 Source: FactSet Click on the tickers for more about each company.
Don’t miss: Nvidia tops list of Wall Street’s 20 favorite stocks for 2024
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Apple can sell its latest smartwatches again after court pauses FTC import ban
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The latest Apple Watches are available again after the company scored a legal victory Wednesday.
“We are thrilled to return the full Apple Watch lineup to customers in time for the new year,” Apple
AAPL,
+0.05%
said in a statement to MarketWatch. “Apple Watch Series 9 and Apple Watch Ultra 2, including the blood-oxygen feature, will become available for purchase again in the United States at Apple Stores starting today and from apple.com tomorrow by 3 p.m. ET.”A U.S. appeals court earlier Wednesday temporarily blocked a government commission’s import ban on popular Apple Watch models following a patent dispute with medical-technology firm Masimo Corp.
MASI,
-4.57% .The court’s order allows Apple to temporarily resume selling the Apple Watch Series 9 and Apple Watch Ultra 2. Both watches were pulled from Apple’s website last week and off store shelves this week when the ban went into effect. The appeals court is weighing a longer halt on the import and sales ban.
Masimo declined to comment.
On Tuesday, the tech giant filed an emergency request for the U.S. Court of Appeals for the Federal Circuit to halt the ban at least until U.S. Customs and Border Protection decides whether redesigned versions of its watches infringe Masimo’s patents.
The appeals court’s decision will allow the U.S. Customs department to consider Apple’s redesign of the offending Apple Watch models. A fix is expected by Jan. 12. Apple said in the motion Tuesday it could “suffer irreparable harm” if the ban is kept in place while the appeal is ongoing.
Shares of Apple were flat in trading Wednesday.
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Activision Blizzard to pay $55 million to settle California civil-rights lawsuit
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Videogame maker Activision Blizzard has agreed to pay nearly $55 million to settle a California civil-rights lawsuit brought over complaints of sexual harassment, discrimination and pay disparities by women employees that helped trigger the company’s acquisition by Microsoft.
The settlement, announced by the California Civil Rights Department on Friday evening, resolves the lawsuit filed against the “Call of Duty” videogame studio by the agency in 2021 over claims that it “discriminated against women at the company, including by denying promotion opportunities and paying them less than men for doing substantially similar work,” CRD said.
The agreement, subject to court approval, will see Activision pay nearly $46 million into a settlement fund dedicated to compensating women employees and contract workers at the company, plus more than $9 million in attorneys’ fees and costs. Additionally, Activision will take steps “to help ensure fair pay and promotion practices at the company,” including retaining an independent consultant to evaluate its compensation and promotion policies.
Yet the settlement also sees CRD withdraw its initial claims alleging a culture of widespread, systemic workplace sexual harassment at Activision, according to a copy of the agreement provided to MarketWatch. The document notes that the department is filing an amended complaint that removes the sexual-harassment allegations against the company and focuses on the gender-based pay and promotion claims.
CRD made no note of its prior sexual-harassment claims against Activision in its announcement Friday. A spokesperson for the department said the statement “largely speaks for itself with respect to the historic nature of this more than $50 million settlement agreement, which will bring direct relief and compensation to women who were harmed by the company’s discriminatory practices.
Representatives for Activision declined to comment.
The Wall Street Journal first reported the news of the settlement Friday.
The California agency’s complaint was one of several high-profile investigations by both state and federal regulators in recent years into alleged workplace misconduct at Activision and failures by its leadership to respond appropriately.
While Activision repeatedly denied the allegations, they ramped up pressure on the Santa Monica, Calif.-based company and its CEO, Bobby Kotick, and eventually led to a $68.7 billion takeover bid by Microsoft
MSFT,
+1.31%
in January 2022. The acquisition closed this October after receiving approval by U.K. and E.U. antitrust regulators, though the U.S. Federal Trade Commission continues to challenge the deal in court. Kotick is expected to leave the company, which he led for more than three decades, at the end of this year.The settlement would be the second-largest ever for the California Civil Rights Department, according to the Journal, after its $100 million agreement with another Los Angeles-area videogame developer, Riot Games, to resolve gender-discrimination allegations in 2021. The agency had initially sought a much-larger settlement with Activision, the publication reported, citing how the state had estimated the company’s liability at nearly $1 billion to some 2,500 employees with potential claims.
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Apple iPhone, Watch product design head to leave: report
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Tang Tan, the Apple Inc. executive who headed product design for the iPhone and Apple Watch, is leaving amid a shake-up of the division responsible for the company’s most critical product lines, according to a Bloomberg report.
Tan reports to John Ternus, senior vice president of hardware engineering, and the division is reshuffling duties to handle the transition.
Earlier this week, Bloomberg reported that Steve Hotelling, who worked on key technologies like the iPhone’s multitouch screen, Touch ID, and Face ID, is retiring from Apple.
Shares of Apple
AAPL,
+0.74%
are up 0.7% in trading Friday. Apple had no comment on the departures.[ad_2]
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Broadcom logs earnings beat, but chip stock edges lower
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Broadcom Inc. topped profit expectations for its latest quarter, but shares of the chip company were falling in Thursday’s aftermarket action.
The company recorded fiscal fourth-quarter net income of $3.5 billion, or $8.25 a share, whereas it posted net income of $3.3 billion, or $7.83 a share, in the year-earlier period.
On an adjusted basis, Broadcom
AVGO,
+2.06%
earned $11.06 a share, up from $10.45 a share a year before, while analysts tracked by FactSet were modeling $10.96 a share.Revenue increased to $9.30 billion from $8.93 billion, while the FactSet consensus was for $9.28 billion. Broadcom generated $7.33 billion in revenue from semiconductor solutions, up 3%, along with $1.97 billion in revenue from infrastructure solutions, up 7%.
Results were “driven by investments in accelerators and network connectivity for AI by hyperscalers,” Chief Executive Hock Tan said in a release.
Broadcom’s stock was off about 2% in Thursday’s extended session.
See also: Nvidia’s stock is now this chip analyst’s top pick — knocking out AMD
For the new fiscal year, Broadcom anticipates $50 billion in revenue, when including contributions from the recently closed acquisition of VMware that may not be fully reflected in consensus estimates. The company also expects adjusted earnings before interest, taxes, depreciation and amortization to be about 60% of projected revenue; it was 65% of revenue in the most recent fiscal year.
The company expects its semiconductor segment to sustain a mid- to high-single-digit revenue growth rate in fiscal 2024.
Opinion: AMD is poised for huge AI growth in 2024 and the stock market is paying attention
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Why Sam Altman is a no-brainer for Time’s ‘Person of the Year’
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Nothing has changed our lives more this year than the advances made in artificial intelligence — and they have the potential to alter our lives in even more dramatic ways down the road.
So it’s a no-brainer that Sam Altman, co-founder and recently returned chief executive of the once-little-known OpenAI, should be named “Person of the Year” by Time Magazine when the selection is announced Wednesday.
Altman has already cracked Time’s shortlist, joining candidates from varied backgrounds, including world leaders like Xi Jinping and entertainment phenomenon Taylor Swift. The selection ultimately comes down to an “individual or group who most shaped the previous 12 months, for better or for worse.”
But Time has often given “agents of change” its yearly honor — just look at 2021 winner Elon Musk — and Altman certainly fits that bill.
No other innovation in the past year has had an impact in such disparate realms. OpenAI publicly launched its ChatGPT chatbot late last year, and as the technology grew viral in 2023, it upended the stock market, Silicon Valley and companies that wouldn’t normally be classified as technology businesses. The ensuing product development and surge in generative AI investment revitalized a tech industry that had sunk into the doldrums amid a pandemic hangover.
Admittedly, it will take time for companies to realize the true financial benefits of AI: Nvidia Corp.
NVDA,
-2.68%
is among the few to generate serious money from the frenzy so far. But market researcher IDC predicted that global spending on AI, including software, hardware and services for AI-centric systems will reach $154 billion this year, up 27% from a year ago. That total could zoom above $300 billion by 2026.Also read: One year after its launch, ChatGPT has succeeded in igniting a new era in tech
And AI isn’t only impacting the corporate world. The technology is already affecting our daily lives, and it will have even deeper effects going forward. Chatbots are getting smarter on websites, facilitating better customer service. They’re starting to alter the workplace as well, spitting out mostly coherent marketing copy, research and even, gasp, news articles — albeit with plenty of errors.
At first, ChatGPT seemed like a fun way to kill time or get homework help, but the chatbot and its ilk will seriously alter the working world, helping to eliminate perhaps millions of jobs. Morgan Stanley recently predicted that more than 40% of occupations will be affected by generative AI in the next three years.
Altman himself has been the face of OpenAI in the past year. He’s talked up the technology, but he also appeared at congressional hearings in May to discuss potential regulation of AI, testifying that “if this technology goes wrong, it can go quite wrong.” His recent firing and quick rehiring by OpenAI and its small, nonprofit board late last month fueled a veritable media storm before the Thanksgiving holiday in the U.S.
Time chooses its persons of the year for their impact, not because they’re saints. And Altman’s own story is not without controversy. The recent brouhaha over his leadership of OpenAI is believed to have been caused by a deep schism over the ethics of AI development. The board seemingly wanted more guardrails and precautions, and feared that rushed development could irrevocably doom mankind.
Read in the Wall Street Journal: How effective altruism split Silicon Valley and fueled the blowup at OpenAI
Altman, who also wooed Microsoft Corp.
MSFT,
-1.43%
to become an investor in OpenAI, emerged the victor in the upheaval with his own company’s altruistic board. Had Altman truly been fired from OpenAI, Microsoft was planning to hire him, and nearly every employee at OpenAI was ready to quit and follow him there. While OpenAI faces plenty of competition, including from Alphabet Inc.’s
GOOG,
-2.02% GOOGL,
-1.96%
Google, Altman should continue to be the face of AI development, for good and for bad, even as he has advocated industry regulation.The debut and influence of ChatGPT and follow-on AI products are having the biggest impact on tech development since the invention of the iPhone. Altman is at the center of it and leading the charge. Whether he can keep the lid on Pandora’s Box or not depends on many factors, but he and the company he leads are clearly driving a new tech movement that affects us all, whether we like it or not.
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Nvidia ends an earnings recession and is helping to reshape corporate profits
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With yet another blowout earnings report, Nvidia Corp. has ended an earnings recession in the U.S. and helped to solidify the continuation of a drastic change to corporate profits.
Nvidia NVDA on Tuesday rode enduring demand for hardware that is essential for artificial-intelligence tasks to yet another record quarter, as revenue tripled and profit zoomed more than 1,300% higher year over year. Nvidia recorded earnings of more than $9 billion in just three months, a total it had never achieved in a full year before 2022.
…
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How the Biden-Xi meeting in San Francisco could help prevent a world war
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President Joe Biden will meet with his Chinese counterpart Xi Jinping near San Francisco Wednesday, and hanging over the summit is the threat of war over the island of Taiwan, a conflict that would likely cripple the world economy and plunge the U.S. and its allies into a devastating global conflict.
Experts are divided on how Biden can best avoid such an outcome, but there is a consensus that a war with China would be extremely costly in economic, political and human terms. China has long seen self-ruled Taiwan as a breakaway province.
Also read: Biden says his goal for Xi meeting is to get U.S.-China communications back to normal
“The U.S. Air Force and Navy would have to operate in an environment unlike anything they’ve seen since World War II,” said Mark Cancian, a former Marine Corps colonel, Defense Department official and senior adviser at the Center for Strategic and International Studies.
Earlier this year, Cancian led a wargame simulation of what would happen if China attempted an amphibious invasion of Taiwan and found that if the U.S. intervened to defend the island, it would likely lead to the loss of dozens of ships, hundreds of aircraft and 15,000 U.S. casualties in just the first month of the war.
Other experts argue that this is too optimistic a scenario. Lyle Goldstein, director of the Asia Engagement program at the think tank Defense Priorities, criticized the war game in a recent panel discussion as too optimistic in its estimate of the forces China would bring to bear in a Taiwan invasion, arguing that the Chinese would use their coast guard and merchant marine as well as military vessels to invade the island.
“The idea that we would have anywhere near the munitions to sink tens of thousands of ships that would be involved is a major fallacy,” he said, adding that a war with China would make the conflicts in Ukraine and Gaza “look like small brushfires.”
Biden and Xi last met about a year ago in Indonesia, and the U.S. leader at the time told his Chinese counterpart that he objected to China’s “coercive and increasingly aggressive actions” toward Taiwan. Speaking with reporters on Nov. 9, a senior Biden administration official said the U.S. is concerned about “a ramping up of military activities around Taiwan in ways that are unprecedented, that are dangerous, that are provocative.”
Now see: Taiwan says more than 100 Chinese warplanes flew toward the island in past day
Economic fallout
The CSIS report underscores the damage that U.S. armed forces and those of its allies would suffer in a war with China, but the economic fallout would also have a profound affect on Americans at home.
“It’s almost hard to calculate the just how bad a Chinese invasion of Taiwan would be economically,” said Zack Cooper, a senior fellow at the American Enterprise Institute and former National Security Council official under President George W. Bush.
Barron’s: China’s clout undimmed as U.S. companies line up to meet Xi Jinping. Why it’s a two-way street.
He noted that because of Taiwan’s central importance in the supply chain for advanced semiconductors
SMH,
it could grind to a halt markets for advanced electronic devices as well as consumer goods like automobiles that increasingly rely on computer chips.“I think we’d be looking at a global financial crash that’s more in line with what we’ve seen in World War I and World War II than anything we’ve seen recently,” he said.
Market observers have latched onto the idea that China’s recent economic woes make it less likely that it will behave aggressively on the global stage.
“If Chinese consumers have been spooked by COVID lockdowns and a cascading property collapse, imagine how an escalating confrontation might shatter their outlook,” wrote Christopher Smart, managing partner at Arbroath Group, in a recent note.
But some U.S. policymakers disagree, including Republican Rep. Mike Gallagher of Wisconsin, chairman of the House select committee on competition with China, who said at a recent event that it’s “plausible that as China confronts serious economic and demographic issues, Xi Jinping could get more risk accepting, and could get less predictable and do something very stupid.”
Biden’s task
The foreign policy community in Washington is divided over what the best strategy for deterring a Chinese invasion, with some emphasizing restraint and others the need to show strength in the face of a progressively belligerent Xi Jinping.
“Taiwan is increasingly discussed as being a critical strategic location for the United States that it must defend and can’t allow to fall to China because it will have a domino effect across the region,” said Michael Swaine, a China expert and senior research fellow at the Quincy Institute for Responsible Statecraft.
He added that this is a departure from the stance the U.S. adopted in 1979 when it established official relations with the People’s Republic of China, which was that it does not seek Taiwanese independence and would not stand in the way of a peaceful reunification.
Biden has underscored this drift with several statements in recent years that the U.S. would defend Taiwan if China were to try to take it by force, a change from the so-called strategic ambiguity that has guided U.S. policy in the past.
Swain argues that the Biden administration must do more to foster communication with China on a broad set of issues and take seriously Chinese concerns that the U.S. alliance system in Asia is seeking to contain Chinese growth with military means.
Others argue that Xi Jinping is a rational actor and U.S. efforts to foster alliances in the region are necessary to show China that a Taiwanese invasion would be costly and potentially threaten the Chinese Communist Party’s rule.
“There’s a big difference between Xi Jinping and Vladimir Putin,” AEI’s Cooper said. “Most experts don’t see Xi as a risk taker, and we need to be doing everything we can to have the deterrence capability to convince him not to start a conflict.”
The summit
It’s unlikely that the public will will see evidence from Wednesday’s meeting of thawing tensions over the Taiwan issue, as the two sides have already said there will be no joint statement issued, Swaine of the Quincy Institute said.
“They will repeat their talking points on Taiwan and move on,” he said. “But it’s possible we could see them state very clearly their commitment to resuming a crisis communication dialogue” between each country’s militaries, which was cut off following former House Speaker Nancy Pelosi’s visit to Taiwan last year.
Cooper of AEI said that the reason for the meeting isn’t concrete deliverables, but mutual understanding that can result from a leader-to-leader dialogue.
“The real value of the Xi meeting is the administration’s ability to interact with him directly and try to understand better how he’s thinking, what information he’s getting,” he said. “It’s not something you’ll see in a statement, it will be done behind closed doors and judging the aftermath will be difficult.”
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Soros snaps up tech stocks in Q3, but dumps some of the biggest names
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Soros Fund Management, the investment firm founded by billionaire George Soros, took new positions or bulked up on IPOs and a number of tech names during the third quarter.
But it sold off small holdings of some of the largest — like Nvidia Corp. and Microsoft Corp. — as well as electric-vehicle maker Rivian Automotive.
According to a filing on Tuesday, the firm during the third quarter bought up 325,000 shares of chip designer Arm Holdings
ARM,
+3.37% ,
which went public in September, for $17.4 million. It also bought smaller stakes in recent IPOs such as Maplebear Inc.
CART,
+1.25% ,
better known as grocery-delivery platform Instacart, and digital-marketing firm Klaviyo Inc.
KVYO,
+6.90% .
Those purchases were disclosed as investors remain cautious on new IPOs.Elsewhere, the fund took a new position, of around 41,000 shares, in Apple Inc.
AAPL,
+1.43% .
And it did so as well for Datadog Inc.
DDOG,
+4.58% ,
buying 62,000 shares during the quarter. It also bought up 574,962 shares of Splunk, and took fresh positions in Snowflake Inc.
SNOW,
+4.51%
and Taiwan Semiconductor
TSM,
+2.58% .Soros also packed on more to some of its other tech holdings. It added 125,000 shares to its stake in Uber Technologies Inc.
UBER,
+3.14% ,
boosting its position by 16.6% for a total of 878,955 shares. It also bought 42,000 more shares of another gig-economy player, DoorDash Inc.
DASH,
+4.37% ,
a 30.9% increase for 178,075 shares.While Soros boosted its stake in General Motors
GM,
+4.83% ,
it sold off its 4.2 million shares in Rivian
RIVN,
+4.39% .
The firm also sold off its positions — of roughly 10,000 shares apiece — in tech giants Microsoft
MSFT,
+0.98%
and Nvidia
NVDA,
+2.13% .Soros Fund Management also sold off its stake in Walt Disney Co.
DIS,
+1.82% .[ad_2]
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Intel’s stock flirts with highest close in 15 months
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Intel Corp. shares
INTC,
+2.80%
were up 2.8% in afternoon trading Friday and flirting with their highest close in more than 15 months, according to Dow Jones Market Data. The stock traded as high as $38.99 earlier in the session and recently changed hands at $38.86. A close above $38.86 and below $39.71 would make for the stock’s highest finish since July 28, 2022. Friday’s rally comes on a day of strength for chip stocks, with the PHLX Semiconductor Index
SOX,
+4.04%
up nearly 4%. Earlier Friday, Taiwan Semiconductor Manufacturing Co. Ltd.
TSM,
+6.35%
posted a 34.8% sequential increase in revenue for the month of October in a positive signal for the sector.[ad_2]
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A wall of debt rolling over: Here’s what’s scaring Bridgewater’s co-CIO
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A weak session is setting up for Tuesday, with oil under pressure after unexpectedly downbeat China export data. So the preference is for bonds this morning, as stock futures tilt south.
Onto our call of the day, which deals with another worry — a wall of government debt that will be with us for decades. It comes from Bridgewater’s highly regraded co-chief investment officer Bob Prince, who was speaking at the Global Financial Leaders’ Investment Summit on Tuesday, hosted by the Hong Kong Monetary Authority.
Prince touches on asset liability mismatches, such as what was seen during the banking crisis earlier this year. He explains that one big factor behind a crisis is when a certain economic regime exists for an extended period of time and “people extrapolate that into the future on the basis of leverage and asset liability mismatches. Then you get a shift in that regime.”
The events of March, which saw the collapse of SVB, Signature Bank and Silvergate, were a perfect example of that, Prince says. Then he turns to what he calls the “broader effects of a transition from 15 years of abundant free money,” that was first used to battle deleveraging pressures in the financial system in 2008 and then the pandemic.
One long-term effect of that gets particular attention by Prince, who points out how U.S. government Treasury debt to GDP was about 70% in 2008, around where it had been for decades.
“The after effects of offsetting deleveraging and pandemic, you’ve had a massive wealth shift from the public sector to the private sector and that’s left the government with debt to GDP up from 70% up to 120%. And the particular vulnerability of that is in the debt rollovers and the gross issuance that you’re going to see in the coming decades . You’re stuck with that debt until you pay it off and that means you have to roll it over like anybody else does,” said Prince.
“Gross debt issuance will be running at 25% for as far as the eye can see, that means every year you’re issuing 25% of GDP in debt. In 1960, the average amount of debt issuance was 12% of GDP,” he said.
Prince says most people really don’t pay attention to debt rollovers because they just assume those will get done, but notes that when countries have experienced balance of payments crisis in the past, mostly emerging markets, that is because they have been unable to roll over that debt.
In the U.S. case, it’s crucial to look at who is holding the debt, particularly the 27% held by foreign investors and 18% by central banks. “Foreign investors would normally be a reliable source of investment but it does heighten sensitivity to geopolitical risk, and so geopolitical risk converges with debt rollovers and gross issuance of the Treasury is an issue that you need to pay attention to in the coming years.
While not an “acute problem,” he says, it’s a lingering one, and when it comes to central banks it’s also unclear whether their holdings also present a “rollover risk.”
Prince also touches on the fact that that all that “abundant free money” has fueled a private-equity boom, but with interest rates now at 8% instead of 2% or 3%, “the pace and transaction cycle is bound to slow,” and they are starting to see that.
“When we talk to institutional investors around the world, many of them are experiencing liquidity issues right now and the liquidity issues result from the fact so much money was allocated to private assets and the transaction cycle is slowing,” he said.
MarketWatch 50: Forget U.S. stocks for now. Invest here instead, says Bridgewater’s co–investment chief
A team of analysts at Citigroup led by Nathan Sheets have also weighed in on government debt, telling clients in a new note that “it’s unwise for policy makers to experiment or test” where the threshold for too much debt lies. Here’s their chart showing the bleak trajectory:
Dirk Willer, head of global asset allocation at Citigroup, said a debt crisis scenario in the U.S. would likely mean a selloff of risk assets globally. He notes that bonds in rival countries may not be the best bet as they don’t always benefit. And both gold and bitcoin underperformed during the U.K. gilt crisis, so those may be out.
Also in attendance at the conference in Hong Kong, Deutsche Bank’s CEO is worried geopolitics could create another market event and Citadel’s Ken Griffin said investors should put money in China.
Read: ‘Stock-market correction is over’ after broad surge amid ‘epic’ market rallies
The markets
Stock futures
ES00,
-0.02% NQ00,
+0.31%
are pointing to a weak to flat session ahead, while the 10-year Treasury yield
BX:TMUBMUSD10Y
eases back. U.S. crude
CL.1,
-2.20%
is under $80 a barrel after worse-than-forecast China exports signaled more economic bumps in the global growth engine. The dollar
DXY
is up.The buzz
Planet Fitness stock
PLNT,
-0.27%
is surging on upbeat results and an improved growth outlook. Uber
UBER,
+0.82%
is up as earnings beat forecasts, but revenue fell short. D.R. Horton
DHI,
-0.96%
stock is also getting a boost from results. EBay
EBAY,
-0.44% ,
Occidental Petroleum
OXY,
-2.00% ,
Akamai Tech
AKAM,
-0.06%
and Gilead Sciences
GILD,
-0.55%
after the close.Reporting late Thursday, Tripadvisor
TRIP,
+2.29%
delivered blowout results and the stock is surging, while Sanmina
SANM,
-1.03%
is down 14% after the manufacturing services provider’s disappointing results.UBS
UBS,
-0.49% UBSG,
+2.79%
swung to a $785 million quarterly loss on lingering effects of its Credit Suisse takeover, but it pulled in $33 billion in new deposits and shares are up.After a decade of turmoil, office-sharing group WeWork
WE,
-24.73%
filed for Chapter 11 bankruptcy protection on Monday.The U.S. trade deficit climbed 5% in September to $61.5 billion as imports rebounded. Still to come is consumer credit at 3 p.m. Fed Vice Chair for Supervision Michael Barr speaks at 9:15 a.m., followed by Fed Gov. Christopher Waller at 10 a.m.
The International Monetary Fund boosted its China outlook for 2023 and 2024.
Best of the web
Big banks are cooking up new ways to offload risk.
Retirees continue to flock to places where climate risk is high.
How to know when it’s time to retire
The chart
According to this recent JPMorgan survey, two-thirds of investors are ready to start pumping more money into equities, while just 19% plan to increase bond exposure. Also, note that 67% also said they did not expect performance of the Magnificent 7 stocks — Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta — to “crack before the end of the year.”
Top tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
TSLA,
-0.31% Tesla AMC,
+2.15% AMC Entertainment NVDA,
+1.66% Nvidia AAPL,
+1.46% Apple NIO,
-3.16% NIO GME,
-2.45% GameStop AMZN,
+0.82% Amazon.com PLTR,
-1.85% Palantir Technologies MULN,
+3.88% Mullen Automotive MSFT,
+1.06% Microsoft NVDA,
+1.66% Nvidia Random reads
Fifteen people ended up with eye pain and sight issues after a Bored Ape NFT event.
A death metal band asked for singers on social media. A choir responded.
undefined
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Here’s why you might not have to pay a 6% commission next time you sell a home
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Going back decades, if you wanted to buy or sell a stock on the open market, you had to pay a 2% commission to buy and a 2% commission to sell. Then the advent of discount brokerage, led by Charles Schwab Corp.
SCHW,
+1.64% ,
made lower commissions available until eventually, with improved technology and efficiency, the entire industry changed to enable the average investor to avoid commissions completely.But the internet hasn’t done much to reduce the cost of selling a home in the U.S. Sellers typically pay a 6% commission to a real-estate agent to list and sell a home, with the seller’s agent splitting that commission with the buyer’s agent. But all of that may change because of a verdict this week in a class-action lawsuit in federal court against the National Association of Realtors.
Aarthi Swaminathan covers the case, what may happen next and the implications for home sellers and buyers:
Real-estate advice from the Moneyist
MarketWatch illustration
Quentin Fottrell — the Moneyist — works with three readers to answer tricky real-estate questions:
Economic outlook
On Wednesday, Federal Reserve Chair Jerome Powell may have bolstered the case that the central bank is finished raising interest rates for this economic cycle. The federal-funds rate was left in its target range of 5.25% to 5.50%.
Jon Gray, the president of Blackstone Group, spoke with MarketWatch Editor in Chief Mark DeCambre and said he expected the Fed to succeed in bringing down inflation without pushing the U.S. economy into a deep recession.
Friday employment numbers: Jobs report shows 150,000 new jobs in October as U.S. labor market cools
Bond-market trend switches again
The U.S. Treasury yield curve has been inverted for nearly a year.
FactSet
Normally, longer-term bonds have higher yields than those with short maturities. But the yield curve has been inverted for nearly a year, with 3-month U.S. Treasury bills
BX:TMUBMUSD03M
having higher yields than 10-year Treasury notes
BX:TMUBMUSD10Y.There has been elevated demand for long-term bonds, as investors have anticipated a recession and a reversal in Federal Reserve interest-rate policy. When interest rates decline, bond prices rise and vice versa.
As you can see on the chart above, the yield curve was narrowing until mid-October. Yields on 10-year Treasury notes were close to 5% on Oct. 19, but they have been falling the past several days as the three-month yield has remained close to 5.5%.
In this week’s ETF Wrap, Christine Idzelis reports on where all the money is flowing in the bond market.
In the Bond Report, Vivien Lou Chen summarizes the action as investors react to the Federal Reserve’s decision not to change its federal-funds-rate target range this week and to other economic news.
For income-seekers looking to avoid income taxes, here’s a deep dive into municipal bonds, with taxable-equivalent yields and a deeper look at those within four high-tax states.
Ford’s good news — in the bond market
Ford Motor Co.’s debt rating has been lifted by S&P to investment-grade.
Getty Images
Ford Motor Co.’s
F,
+4.14%
credit rating was upgraded to an investment-grade rating by Standard & Poor’s on Monday. This takes about $67 billion in bonds out of the high-yield, or “junk,” market, as Ciara Linnane reports.A stock-market warning based on history
The original Magnificent Seven.
Courtesy Everett Collection
By now you have probably heard the term “Magnificent Seven” used to describe stocks of the tremendous tech-oriented companies that have led this year’s rally for the S&P 500
SPX
: Apple Inc.
AAPL,
-0.52% ,
Microsoft Corp.
MSFT,
+1.29% ,
Amazon.com Inc.
AMZN,
+0.38% ,
Nvidia Corp.
NVDA,
+3.45% ,
Alphabet Inc.
GOOGL,
+1.26% GOOG,
+1.39% ,
Meta Platforms Inc.
META,
+1.20%
and Tesla Inc.
TSLA,
+0.66% .
With Tesla’s recent decline, that company is now the ninth-largest holding in the portfolio of the SPDR S&P 500 ETF Trust
SPY,
which tracks the benchmark index. Here are the top 10 companies held by SPY (11 stocks, including two common-share classes for Alphabet), with total returns through Thursday:Company Ticker % of SPY portfolio 2023 total return 2022 total return Total return since end of 2021 Apple Inc. AAPL,
-0.52% 7.2% 37% -26% 1% Microsoft Corp. MSFT,
+1.29% 7.1% 46% -28% 5% Amazon.com Inc. AMZN,
+0.38% 3.5% 64% -50% -17% Nvidia Corp. NVDA,
+3.45% 3.0% 198% -50% 48% Alphabet Inc. Class A GOOGL,
+1.26% 2.1% 44% -39% -12% Meta Platforms Inc. Class A META,
+1.20% 1.9% 158% -64% -8% Alphabet Inc. Class C GOOG,
+1.39% 1.8% 45% -39% -11% Berkshire Hathaway Inc. Class B BRK.B,
+0.80% 1.8% 13% 3% 17% Tesla Inc. TSLA,
+0.66% 1.7% 77% -65% -38% UnitedHealth Group Inc. UNH,
-0.98% 1.4% 2% 7% 9% Eli Lilly and Company LLY,
-2.15% 1.3% 60% 34% 115% Sources: FactSet, State Street (for SPY holdings) Five of these stocks (including the two Alphabet share classes) are still down from the end of 2021. SPY itself has returned 14% this year, following an 18% decline in 2022. It is still down 7% from the end of 2021.
Mark Hulbert makes the case that a decade from now, the Magnificent Seven are unlikely to be among the largest companies in the stock market.
More from Hulbert: These dividend stocks and ETFs have healthy yields that can lift your portfolio
A different market opportunity: India is seeing a multidecade growth surge. Here’s how you can invest in it.
The MarketWatch 50
MarketWatch
The MarketWatch 50 series is back, with articles and video interviews starting this week, including:
PayPal soars after earnings report
PayPal CEO Alex Chriss.
MarketWatch/PayPal
After the market close on Wednesday, PayPal Holdings Inc.
PYPL,
+1.89%
announced quarterly results that came in ahead of analysts’ expectations, and the stock soared 7% on Thursday even though the company lowered its target for improving its operating margin.In the Ratings Game column, Emily Bary reports on the positive reaction to PayPal’s new CEO, Alex Chriss.
A less enthusiastic earnings reaction: EV-products maker BorgWarner’s stock suffers biggest drop in 15 years after downbeat sales outlook
Consumers drive mixed reactions to earnings results
Apple Inc. reported mixed quarterly results.
Mario Tama/Getty Images
Here’s more of the latest corporate financial results and reactions. First the good news:
And now the news that may not be so good:
Harsh verdict for SBF
FTX founder Sam Bankman-Fried.
AP
It might seem that some legal battles never end, but it took only a year from the collapse of FTX for the cryptocurrency exchange’s founder, Sam Bankman-Fried, to be convicted on all seven federal fraud and money-laundering charges brought against him. The charges were connected to the disappearance of $8 billion from FTX customer accounts.
Here’s more reaction and coverage of the virtual-currency industry:
Want more from MarketWatch? Sign up for this and other newsletters to get the latest news and advice on personal finance and investing.
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The Nasdaq just fell into a correction. Now what?
[ad_1]
The Nasdaq Composite Index fell into its 70th correction in history on Wednesday, as surging long-term Treasury yields increased borrowing costs and weighed on stocks.
The interest rate sensitive Nasdaq
COMP
barreled higher in the year’s first half, in part on optimism about a potential Federal Reserve pivot away from rate hikes to fight inflation, but stocks have been under fire in recent months as the Fed dialed up its message that interest rates could will stay higher for longer.The tech-heavy equity index fell 2.4% on Wednesday to close below the 12,922.216 threshold, marking a drop of a least 10% from its prior peak, which was set in mid-July at 14,358.02, according to Dow Jones Market Data.
That met the common definition for a correction in an asset’s value and is the Nasdaq’s 70th close in correction territory since the index’s inception in February 1971.
Robert Pavlik, senior portfolio manager at Dakota Wealth Management, said the sharp rise in long-term Treasury yields has spooked investors, especially those in highflying, high-growth technology stocks where rising rates can be particularly corrosive.
Pavlik likened the dynamic to the spending power of a lottery winner hitting a jackpot when rates are at 2% versus someone who wins when rates are closer to 10%.
He also expects the 10-year Treasury yield
BX:TMUBMUSD10Y,
which rose to 4.952% Wednesday, to top out at 5.25% to 5.5% and likely complicate any recovery for the Nasdaq.In the past 20 corrections for the Nasdaq, it took an average of three months for performance to improve, with index then gaining 14.4% on average a year later, according to Dow Jones Industrial Average.
Nasdaq corrections are usually followed by a bounce in a few months
Dow Jones Market Data
The damage on Wednesday was most acute in shares of highflying technology stocks, including Alphabet Inc.
GOOG,
-9.60%
as shares skid 9.5%, after it reported earnings that were overshadowed by downbeat performance for its Google Cloud business. Spillover also hit shares of rival cloud computing giant Amazon.com Inc.,
AMZN,
-5.58%
with its shares slumping 5.6%“You’re feeling the pressure in some big-name stocks,” Pavlik said. “But this too will, at some point, end. But concerns about the Fed are still in the forefront of everybody’s minds.”
The Nasdaq was still up 22.5% on the year through Wednesday, while the Dow Jones Industrial Average
DJIA
was down 0.3% and the S&P 500 index
SPX
was up 9% in 2023, according to FactSet.[ad_2]
-
‘Nobody in their right mind would do it.’ Nvidia CEO Jensen Huang says he wouldn’t start a company if he had a do-over.
[ad_1]
“ ‘You have to get yourself to believe that it’s not that hard, because it’s way harder than you think. If I go taking all of my knowledge now and I go back, and I said, I’m going to endure that whole journey again, I think it’s too much. It is just too much.’ ”
That was one of the world’s most visionary tech-sector leaders, Nvidia
NVDA,
-1.86%
CEO Jensen Huang, who explained that building Nvidia was “a million times harder than I expected it to be” as he theorized that “nobody in their right mind would do it” if they were aware of the true personal toll.The Taiwan-born 60-year-old, whose family relocated to Thailand and then the U.S. in his youth and is said to have co-founded Nvidia in 1993 following a meeting at a Denny’s restaurant in San Jose, Calif., after stints at AMD
AMD,
-0.49%
and LSI Logic, wouldn’t start his own company today, he said, if he were 30 years old.The tech titan, however, posited in a recent interview with the podcast Acquired that a “superpower” among entrepreneurs is the ability to trick themselves into believing “it’s not that hard.”
Huang said that his biggest fear remains, as it has been since Nvidia’s early days, is failing to facilitate success among workers. “I’m afraid of the same things today that I was in the very beginning of this company, which is letting the employees down.”
Huang, who according to FactSet owns a 3.5% stake in Nvidia (market cap: $1.04 trillion), explained in the podcast interview that workers joining a company end up believing in its vision and taking on its aspirations as their own.
“You have a lot of people who joined your company because they believe in your hopes and dreams, and they’ve adopted it as their hopes and dreams,” Huang said. “You want to be right for them. You want to be successful for them. You want them to be able to build a great life. … The greatest fear is that you let them down.”
In explaining how he persevered, despite doubts and challenges, in building Nvidia into the company it is today, Huang credited a “support network” of people who never gave up on him during the three-decade journey.
He explained that the experience of leading Nvidia during those periods when its share price has been in seeming free fall was almost “too much to endure,” after the company was first listed on public markets in 1999. “It’s embarrassing no matter how you think about it.”
His comments come as Nvidia’s share price has, again, been in retreat, losing ground following a major 245% surge over the previous 12 months.
More recently, the Santa Clara–based company’s stock was hit by the Biden administration’s decision to introduce tougher controls on the export of semiconductors to China.
Read: One semiconductor company is expected to grow sales nearly as quickly as Nvidia through 2025
Looking ahead, Huang said developments in artificial intelligence now pose an “enormous” opportunity for companies like Nvidia. “The market opportunity has grown by probably a thousand times,” he said.
He said AI will “create more jobs” in the near term, but he also warned that the creation of those jobs doesn’t mean certain other jobs will not be lost to automation. “If you become more productive and the company becomes more profitable, usually they hire more people to expand into new areas,” Huang said.
“Now, obviously, net generation of jobs doesn’t guarantee that any one human doesn’t get fired. That’s obviously true. It’s more likely that someone will lose a job to someone else, some other human that uses an AI,” he added.
He advised people to “learn how to use AI” as he argued that “jobs will change.”
As to Nvidia itself, Huang explained, the company — in a reflection of the products it sells — is structured like a “computing stack.”
He said “Nvidia’s not built like a military” with a top-down command and control system. Instead, Huang said, the company is organized like a “neural network” with a decentralized structure, reflecting a belief that “your organization should be the architecture of the machinery of building the product.”
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-
HP Enterprise stock drops following disappointing 2024 earnings forecast
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Hewlett Packard Enterprise Co. shares fell in the extended session Thursday after the company’s forecast for fiscal 2024 fell short of expectations.
HPE
HPE,
-2.28%
shares dropped as much as 4% after hours, following a 2.3% decline to close Thursday’s regular session at $16.30.For fiscal 2024, HPE said it expects adjusted earnings of $1.82 to $2.02 a share, while analysts surveyed by FactSet had forecast, on average, $2.15 a share.
The company also forecast revenue growth of 2% to 4% in 2024, while analysts expect $29.63 billion, or 1.6% above their current consensus estimate for 2023 of $29.15 billion.
For the current fiscal year, HPE forecasts revenue to growth 4% to 6%, and adjusted earnings of $2.11 to $2.15 a share. Analysts expect $2.14 a share.
In August, HPE’s third-quarter earnings results came in slightly above expectations.
As of Thursday’s close, HPE shares were up 2.1% for the year, while the S&P 500 index
SPX
is up 11.4% over the same period.[ad_2]
-
‘For religious reasons, I cannot invest to earn interest’: I’m 53 and expect to earn $90,000 a year. Is it too late to start investing?
[ad_1]
I recently graduated with my master’s degree and am seeking full-time employment at age 53. I want to know what is the best way to invest some of my earnings when I begin receiving a paycheck. I expect to have an annual salary of between $80,000 and $90,000.
For religious reasons, I cannot invest to earn interest, but business-related ventures such as stocks are acceptable. I am planning to set aside up to $1,000 per month for investment purposes, so that I can build some retirement funds. What are my options?
First-Time Investor
“You have already made the best investment you can make — one in yourself, your education and your future.”
MarketWatch illustration
Dear First-Time,
Congratulations on your master’s degree. You have already made the best investment you can make — one in yourself, your education and your future. It takes patience, guts and stamina to go back to college in your 50s, and you should be very proud. You were one of about 505,000 students in college ages 50 and over, representing less than 4% of the student population.
Given your faith, CDs and high-yield savings accounts are ruled out. A letter writer recently asked me where he should start looking to invest his $50,000 life savings, and I pointed him in the “make interest off your cash” direction, particularly given the recent rise in interest rates. That won’t work for you, but the good news is that you do have many options.
There are investment vehicles for you. In fact, the Accounting and Auditing Organization for Islamic Financial Institutions sets guidelines for investing in accordance with the Sharia religious code, including rules around companies that derive a percentage of their profits from tobacco and alcohol products. And, yes, it also regards interest as unjust and exploitative.
Saturna Capital has mutual funds that follow Islamic principles. The Amana Income Fund AMANX, which focuses on current income and the preservation of capital, has had an average annual five-year return of 8.8% for investor shares, slightly lower than the 9.9% average return for the S&P 500
SPX
over the same period with dividends reinvested. I suggest this as a guidepost rather than a recommendation.Similarly, the Knights of Columbus assets are managed by Knights of Columbus Asset Advisors in accordance with Catholic moral principles, which are distilled to six main tenets: “protecting human life, promoting human dignity, reducing arms production, pursuing economic justice, protecting the environment [and] encouraging corporate responsibility.”
Related: How do I know if my ESG investments are doing any good?
Of course, investing along religious principles — similar to ESG investment, which takes environmental, social, and corporate-governance factors into account when deciding what to do with your money — is fraught with complications, contradictions and problems with transparency. Regulators are cracking down on vehicles that “greenwash” their ESG credentials.
A major report by the Organization for Economic Cooperation and Development, an intergovernmental organization with 38 member nations, found that ESG ratings vary strongly depending on the provider, as they commonly use different measures, indicators, metrics, data and qualitative judgments to make decisions about funds and companies.
“Moreover, returns have shown mixed results over the past decade, raising questions as to the true extent to which ESG drives performance,” the OECD said. “This lack of comparability of ESG metrics, ratings, and investing approaches makes it difficult for investors to draw the line between managing material ESG risks within their investment mandates.”
You have many funds to choose from. If you’re Catholic, you could look into the Global X S&P 500 Catholic Values ETF
CATH
; the LKCM Aquinas Catholic Equity Fund AQEIX; or Ave Maria, which offers mutual funds for growth AVEGX, value AVEMX and bonds AVEFX AVEFX. You can read more here. Investing based on religious, moral or ethical principles doesn’t guarantee a satisfactory return.It’s not too late to start investing at 53. With the advice of a financial adviser, your risk profile may need regular adjusting, based on your age and tolerance. But you may work into your 70s and may live into your 80s or 90s, and you will want to find myriad ways to build your wealth throughout your retirement. Cash-hoarding typically gets outdone by inflation.
You may find a job with a 401(k) and an employer match, meaning your employer will contribute an additional sum toward your retirement based on the amount you are contributing every month. You may also consider an IRA. Both account types have “catch-up” contributions for people who are over 50. Annual IRA contribution limits for 2023 are $6,500 for people under 50, but $7,500 for those 50 and older.
You can also use pretax dollars for health savings accounts, which are used to offset the burden of high-deductible healthcare plans. With the latter, you pay a lower premium, but you will be saddled with higher out-of-pocket expenses for medical services should you require them. You can contribute up to $4,150 to an HSA for 2024, up from $3,850 this year.
As for right now? Pay off your credit cards. Don’t let high-interest debt trap you. Warren Buffett said one of the best investments he ever made was buying his Omaha, Neb., home for $31,500 in 1958. It’s worth $1.4 million today. He has said he may have put that money to better use if he had rented instead, but owning your own home will solidify your financial position in retirement.
Investing $1,000 a month may be ambitious. But thinking in the medium to long term — and knowing this is a marathon rather than a sprint, even at 53 — is half the battle. With compounding, or making money off your principal and the increase in value of your initial investment, you could have more than $120,000 in 10 years, and over $600,000 in 30 years.
Bravo on this new chapter. Take it one day, one week and one month at a time, and enjoy your life.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
‘I’m tired of feeling like I am in hell’: My boss tears into me almost daily. He says I’m worthless. What can I do?
I earn $210,000 and I’m 59. My wife and I want to move to Hawaii. Is it too late to get a mortgage?
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AI stole the show this year, but earnings will drag Wall Street back to reality
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Nearly a year ago, OpenAI released ChatGPT 3 into the world, and investors got visions of dollar signs in their heads as they imagined the ways that artificial intelligence could make big money for businesses.
Wall Street’s now coming to terms with the fact that those sorts of paydays are going to take time. As investors have already seen from the past two quarters of earnings, AI has only really delivered financial benefits for a select few hardware companies so far — while spurring new costs for many others.
“The AI boom has already bifurcated into the contenders and pretenders,” said Daniel Newman, chief executive and principal analyst of Futurum Research. And while Advanced Micro Devices Inc., Intel Corp. and Arm Holdings PLC
ARM,
+0.38%
have stirred up interest, Nvidia Corp.
NVDA,
-4.68%
has established itself as far and away the greatest “contender,” with AI driving strong demand for its chips tuned for AI training.Nvidia last quarter reported record earnings, including a 141% jump in revenue for its graphics chips used in AI infrastructure building up data centers. Nvidia, which reports near the end of earnings season on Nov. 21, posted record revenue of $13.5 billion last quarter and is expected to easily top that with $16 billion in the most recent quarter, a surge of 170% versus a year ago. Those estimates include $12.3 billion of revenue coming from data-center sales.
Other chip companies could post gains from AI as well, but to far lesser extents. Candidates include Broadcom Corp.
AVGO,
-2.01%
and system maker Super Micro Computer Inc.
SMCI,
+2.35% ,
as well as Marvell Technology Inc.
MRVL,
-0.91% ,
which last quarter told analysts that it expects to end the year at a revenue run rate of about $800 million this year from cloud/data-center chips related to AI.“This is well above what we had outlined last quarter. Put this in perspective: This would put us at the run rate we had previously communicated for all of next year,” Marvel Chief Executive Matthew Murphy told analysts.
Super Micro is also riding the AI wave with its customized data-center servers that are designed to consume less power. But revenue in the September quarter is forecast to rise just 15% from a year ago and drop on a sequential basis, as supply constraints from Nvidia likely hampered Super Micro’s ability to meet all its demand.
Much as Advanced Micro Devices Inc.
AMD,
-1.24%
and Intel Corp.
INTC,
-1.37%
want to be in the AI conversations with the graphics chips they hope will be used for AI data-center applications, they won’t see much of an impact yet from AI revenue. Plus, those companies are experiencing a slowdown in PC sales that may overshadow any small benefit from AI chips.The AI boom in chips is clearly not providing enough of a boost to lift finances for the overall semiconductor sector, which is forecast to see earnings fall 3.3% in the third quarter and post a revenue decline of 0.6%, according to FactSet. The industry is being dragged down in part by Micron Technology Inc.
MU,
-0.12% ,
which reported a 40% drop in revenue and a whopping fiscal fourth-quarter loss in late September for the quarter ended Aug. 31, which is included in FactSet’s third-quarter data. Even so, the company called a bottom to the memory-chip downturn.Read also: Micron’s AI focused chip won’t help financial results anytime soon.
“Most of the consumer-based tech is still struggling, [including] PCs, laptops and to a certain extent smartphones,” said Daniel Morgan, senior portfolio manager at Synovus Trust Co. Wall Street has tempered expectations related to the impact of Apple Inc.’s
AAPL,
-0.88%
iPhone 15 launch on the quarter, as estimates call for an overall 1% drop in September-quarter revenue. Last quarter, Apple executives forecast that both Mac and iPad sales would be down by double-digits and that revenue performance would be similar to its June quarter, when revenue fell 1.3%In addition, when asked about AI, Apple CEO Tim Cook said the company views AI and machine learning “as core fundamental technologies that are integral to virtually every product that we build.” Those comments, though, can also apply to the bulk of tech companies, where AI is built into software as another layer to improve a product. Internet companies such as Meta Platforms Inc.
META,
+0.89%
and Alphabet Inc.
GOOG,
+0.36% GOOGL,
+0.45%
incorporate AI into their software and algorithms but don’t treat it as a specific, revenue-generating product.Other software companies are building AI into their products as separate features or add-ons, but they are still in the early stages of seeing whether or not customers will pay more for them. Take Microsoft Corp.,
MSFT,
-0.17%
which has showed off Copilot, an extra AI feature for customers of Microsoft 365.“[Microsoft] can distinguish itself by providing more details around its AI revenue
ramp since we don’t expect much information from Google, who really doesn’t seem
to have the monetization plan for Bard and AI-assisted search (SGE) ready to
articulate yet,” Melius Research analyst Ben Reitzes said in a note to clients this week. He also noted that the cost of offering AI products to consumers is steep, and requires lots of investment.“There are sophisticated issues to contend with for Microsoft, including balancing the potential for higher revenue from Copilots with the high costs per query and much-needed investment,” Reitzes said. “The balance of AI adoption vs. cost was implied when Microsoft guided to flat operating margins year over year for fiscal 2024.”
Earlier this year, the Information reported that OpenAI, the creator of ChatGPT and recipient of a hefty investment from Microsoft, has costs of up to $700,000 a day, because the massive amounts of computing power needed to run queries. In February, OpenAI launched ChatGPT Plus, for $20 a month, a service that will give subscribers access to its AI during peak times and faster response times.
Another example is Adobe Inc.
ADBE,
+1.70% ,
which has a few AI offerings, including a subscription service called Generative Credits, tokens that let customers turn text-based prompts into images. Another is Firefly, a generative AI service for images, and an AI option in Photoshop, currently called Photoshop Beta AI, to help users fill in images and other collaborative tools. Adobe did not provide any forecasts on potential revenue generation during its analyst day earlier this month.Toni Sacconaghi, a Bernstein Research analyst, said AI could drive a massive increase in enterprise productivity, and companies could dramatically increase IT spending on servers in order to invest in productivity-enhancing AI. “However, we note that enterprise adoption appears to be in early stages,” he said in a recent note to clients, adding that it was feasible that spending on AI infrastructure could take money away from other IT projects in process. “We do worry that projected AI infrastructure build out may be occurring too quickly, necessitating a digestion period, which could result in a commensurate stock pullback in AI-related names.”
Overall, the information-technology sector itself is expected to see anemic revenue growth this quarter. The consensus on FactSet forecasts a meager 1.35% revenue uptick in the third quarter, with earnings growth of 4.65%. FactSet’s estimates for IT companies exclude internet companies like Meta and Alphabet, which are under the category of communications/interactive media services. That sector is expected to see sales growth of 12%, and earnings growth of 51%, thanks to a 116% boost in Meta’s net income, after it hit a low point in the year-ago quarter.
Amazon.com Inc.
AMZN,
-0.81% ,
in the category of consumer discretionary/broadline retail, is forecast to see earnings growth of 109%, and revenue growth of 11%. Amazon’s cloud services business, AWS, is expected to also see a potential uplift from customers spending money on AI projects, according to a TD Cowen & Co. survey, in which 41% of respondents said they were “highly considering” allocating a budget for generative AI.“This trend could bode well for Amazon’s AWS,” TD Cowen analyst John Blackledge said in a recent report, adding that he expects AWS revenue growth to reaccelerate in the second half of this year and in 2024, boosted by the move of additional workloads to the cloud, possibly including generative AI.
As companies build up their infrastructure, or their spending on cloud computing to add or improve AI capabilities, they are seeing higher costs, which is affecting margins — especially if revenue has slowed down, as it has in some sectors. Across both the broader S&P 500
SPX,
and the IT sector, earnings are lower than a year ago.As Newman of Futurum pointed out, “AI stole the budget this year.” And that is a mixed bag for tech.
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