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Tag: humanities

  • Who is having the most influence over your money in 2023? Meet the MarketWatch 50.

    Who is having the most influence over your money in 2023? Meet the MarketWatch 50.

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    What do Elon Musk, Warren Buffett, Shawn Fain and Lina Khan have in common? On the surface, it might not seem like much — one is an impetuous tech-bro genius, another is a buy-and-hold nonagenarian investor, and the other two are a tough union boss and a business-busting regulator. 

    But each of them are having a serious impact on your money. They all appear on this year’s MarketWatch 50 list of the most influential people in markets. The MarketWatch 50 is our tally of the investors, CEOs, policymakers, AI players and financial…

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  • AI could spark the next financial crisis, SEC Chair Gary Gensler says

    AI could spark the next financial crisis, SEC Chair Gary Gensler says

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    Securities and Exchange Commission Chair Gary Gensler has plenty to worry about as he seeks to bring order and fairness to America’s $100 trillion capital markets, and there are few issues that cause him more concern than the spread of artificial-intelligence technology. 

    In an exclusive interview with MarketWatch, the regulator argued that generative AI technologies in the vein of ChatGPT have the potential to revolutionize the way we invest by leveraging large data sets to “predict things that were unimaginable even 10 years ago,” but that these new powers will come with great risks. 

    “A growing issue is that [AI] could lead to a risk in the whole system,” Gensler said. “As many financial actors rely on one or just two or three models in the middle … you create a monoculture, you create herding.” 

    Gary Gensler: AI could pose ‘a risk in the whole system.’

    This herding effect can be dangerous if there is a flaw in the model that might reverberate through markets during a time of stress, causing abrupt and unpredictable price changes in markets. Gensler pointed to the examples of cloud computing and search engines as markets for tech products that have quickly become dominated by one or two major players, and he said he worries about similar concentration in the market for AI technology.

    The regulator said this issue is especially difficult because of the fragmented nature of the U.S. regulatory apparatus, which relies on the SEC to oversee securities markets while other agencies have responsibility for banks or commodity markets. 

    “This is more of a cross-entity issue,” Gensler said. “That’s the challenge for these new technologies.”

    As SEC chair, Gensler has escalated his regulatory agency’s crackdown on the cryptocurrency industry in 2023 by launching lawsuits against Binance and Coinbase, the two largest digital asset exchanges in the world by trading volume. The SEC alleges the two companies are operating unregistered securities exchanges in the U.S., but the companies say they are not running afoul of securities laws.

    Gensler is simultaneously pushing forward the most fundamental market-structure reform measures in a generation. Gensler lands on The MarketWatch 50 list of the most influential people in markets. 

    But AI is another issue that Gensler is starting to ring alarm bells over. There’s a little bit of irony because the promise of AI has largely been responsible for the S&P 500’s
    SPX
    gains in 2023. The SEC chair said that his agency is already contemplating new rules to regulate artificial intelligence. For example, the SEC proposed a rule this summer to address conflicts of interest associated with stock brokers and investment advisors that leverage algorithms to predict and guide investor decisions through their smartphone applications or web interfaces.

    The industry is pushing back on the proposal, arguing that existing rules are sufficient to prevent harm to investors and that a new rule would prevent brokers from using technology to create a better experience for clients. 

    Gensler said that the SEC benefits from such feedback, but still believes that regulators must be vigilant about the impact of these so-called predictive analytical tools. “If they do that to suggest a certain movie on a streaming app, okay,” he said. “But if they’re doing that about your financial help … we should address those conflicts.”

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  • Microsoft and Alphabet results show Wall Street only cares about AI

    Microsoft and Alphabet results show Wall Street only cares about AI

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    Microsoft Corp. and Alphabet Inc. both reported mostly strong results Tuesday, but the disparate reactions from investors showed that Wall Street only cares about artificial intelligence right now.

    While Microsoft shares
    MSFT,
    +0.37%
    rose 4% in after-hours trading following the company’s latest report, Alphabet shares
    GOOG,
    +1.61%

    GOOGL,
    +1.69%
    dropped 6% as Wall Street got the sense that AI is manifesting differently in the companies’ cloud businesses.

    Microsoft surprised investors with 28% constant-currency growth in its Azure cloud-computing business, above the company’s own forecast and the projection for 25.6% growth that analysts were modeling on average. While Microsoft continues to see “optimization” challenges as customers remain conscious about their spending, the company is also benefiting from AI tailwinds in the cloud.

    Companies looking to beef up their AI offerings are often looking to add AI services for their customers through additional cloud services, so they don’t have to do as much internal development themselves. In addition, AI offerings ranging from chatbots to tools that can streamline the writing of reports require ever more computing power, and both Azure and Google Cloud are starting to offer new software applications to address those needs.

    Microsoft Chief Executive Satya Nadella called AI a “unique and different” factor that was helping Azure trends. “Given our leadership position, we are seeing complete new project starts, which are AI projects,” he said in response to an analyst question about the sustainability of cloud growth rates.

    In addition, Microsoft, which has invested heavily in ChatGPT-creator OpenAI, offers an Azure OpenAI service that more than 18,000 organizations are now using. Some of these customers are new to Azure.

    Microsoft Chief Financial Officer Amy Hood forecast that Azure revenue growth should be around 26% in constant currency in the fiscal second quarter, driven by new workload trends and with the growing contributions from AI.

    Investors seem less confident that Alphabet is seeing the same tailwinds in its Google Cloud business, especially as that segment showed its slowest quarterly growth since Google began breaking out results that way back in 2019. Cloud revenue of $8.4 billion, with growth of 22%, was $250 million shy of consensus estimates on Wall Street, according to Colin Sebastian, an analyst with Baird. That overshadowed an upbeat performance in the company’s advertising business.

    When one analyst asked Alphabet executives about the deceleration in the revenue growth of its cloud business, Chief Executive Sundar Pichai was vague but said that customers are being selective of where they are spending their IT budgets.

    “On cloud, what I would say is overall, we have definitely started seeing customers looking to optimize spend,” Pichai said. “We leaned into it to help customers, given some other challenges they were facing, and so that was a factor.”

    Alphabet is seeing “a lot of interest in AI,” but it remains to be seen whether that’s contributing materially to its financial performance just yet.

    “Google Cloud missed consensus revenue expectations (although in line with Baird) on slowing growth, and we believe consistent with the view that newer Gen-AI workloads will take time to move the needle,” Sebastian wrote in a note to clients.

    Insider Intelligence senior analyst Max Willens added that Google Cloud is facing tough competition, and while the business seems to have traction with AI startups that “may bear fruit in the long run, it is not currently helping Google Cloud enough to satisfy investors.”

    Wall Street clearly is looking to AI to fuel better growth rates and help offset sluggish macroeconomic trends. The poster child for that dynamic is Nvidia Corp.
    NVDA,
    +1.60%    ,
    which is expected to single-handedly drive earnings growth for the information technology sector thanks to booming demand for its AI hardware.

    Read: Big-tech results will decide ‘where we go from here’ amid investor caution. They would fall if it weren’t for this one company

    Given economic pressures, it’s becoming obvious that companies without much of an AI story to contribute this quarter will continue to fall out of favor with investors.

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  • AI stole the show this year, but earnings will drag Wall Street back to reality

    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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  • Hollywood writers strike declared over after boards approve new contract with studios

    Hollywood writers strike declared over after boards approve new contract with studios

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    LOS ANGELES — Leaders of the screenwriters union declared their nearly five-month-old strike over Tuesday after board members approved a contract agreement with studios, bringing Hollywood at least partly back from a historic halt in production.

    The governing boards of the eastern and western branches of the Writers Guild of America and their joint negotiating committee all voted to accept the deal, two days after the tentative agreement was reached with a coalition of Hollywood’s biggest studios, streaming services and production companies. After the vote they declared that the strike would be over and writers would be free to start on scripts at 12:01 a.m. Wednesday.

    Late-night talk shows — the first to go dark when writers walked out on May 2 — are likely the first shows that will resume. Scripted shows will take longer to return, with actors still on strike and no negotiations yet on the horizon.

    The writers still have to vote to ratify the contract themselves in early October, but lifting the strike will allow them to work during that process, the guild told members in an email.

    After Tuesday’s board votes, the contracts were released for the first time to the writers, who had not yet been given any details on the deal, which their leaders called “exceptional.”

    The three-year agreement includes significant wins in the main areas writers had fought for — compensation, length of employment, size of staffs and control of artificial intelligence — matching or nearly equaling what they had sought at the outset of the strike.

    The union had sought minimum increases in pay and future residual earnings from shows of between 5% and 6%, depending on the position of the writer. The studios had wanted between 2% and 4%. The compromise deal was a raise of between 3.5% and 5%.

    The guild also negotiated new residual payments based on the popularity of streaming shows, where writers will get bonuses for being a part of the most popular shows on Netflix
    NFLX,
    -1.44%    ,
    Max and other services, a proposal studios initially rejected. Many writers on picket lines had complained that they weren’t properly paid for helping create heavily watched properties.

    The writers also got the requirement they sought that shows intended to run at least 13 episodes will have at least six writers on staff, with the numbers shifting based on the number of episodes. They did not get their desire for guaranteed staffs of six on shows that had not yet been ordered to series, settling instead for a guaranteed three.

    Writers also got a guarantee that staffs on shows in initial development will be employed for at least 10 weeks, and that staffs on shows that go to air will be employed for three weeks per episode.

    On artificial intelligence, the writers got the regulation and control of the emerging technology they had sought. Under the contract, raw, AI-generated storylines will not be regarded as “literary material” — a term in their contracts for scripts and other story forms a screenwriter produces. This means they won’t be competing with computers for screen credits. Nor will AI-generated stories be considered “source” material, their contractual language for the novels, video games or other works that writers may adapt into scripts.

    Writers have the right under the deal to use AI in their process if the company they are working for agrees and other conditions are met. But companies cannot require a writer to use AI.

    Still-striking members of the Screen Actors Guild-American Federation of Television and Radio Artists returned to the picket lines earlier Tuesday for the first time since the writers struck their tentative deal, and they were animated by a new spirit of optimism.

    “For a hot second, I really thought that this was going to go on until next year,” said Marissa Cuevas, an actor who has appeared on the TV series “Kung Fu” and “The Big Bang Theory.” “Knowing that at least one of us has gotten a good deal gives a lot of hope that we will also get a good deal.”

    Writers’ picket lines had been suspended, but they were encouraged to walk in solidarity with actors, and many were on the lines Tuesday, including “Mad Men” creator Matthew Weiner, who picketed alongside friend and “ER” actor Noah Wyle as he has throughout the strikes.

    “We would never have had the leverage we had if SAG had not gone out,” Weiner said. “They were very brave to do it.”

    The Alliance of Motion Picture and Television Producers, which represents the studios in negotiations, chose to deal with the longer-striking writers first, and leaders of SAG-AFTRA said they had received no overtures on resuming talks. That’s likely to change soon.

    Actors also voted to authorize their leadership to potentially expand their walkout to  include the lucrative videogame market, a step that could put new pressure on Hollywood studios to make a deal with the performers who provide voices and stunts for games.

    The Screen Actors Guild-American Federation of Radio and Television Artists announced the move late Monday, saying that 98% of its members voted to go on strike against videogame companies if ongoing negotiations are not successful. The announcement came ahead of more talks planned for Tuesday.

    Acting in videogames can include a variety of roles, from voice performances to motion capture work as well as stunts. Video game actors went on strike in 2016 in a work stoppage that lasted nearly a year.

    Some of the same issues are at play in the video game negotiations as in the broader actors strike that has shut down Hollywood for months, including wages, safety measures and protections on the use of artificial intelligence. The companies involved include gaming giants Activision Blizzard
    ATVI,
    -0.05%    ,
    Electronic Arts
    EA,
    -1.13%    ,
    Epic Games, Take 2 Productions
    TTWO,
    -0.99%
    as well as Disney
    DIS,
    -1.19%
    and Warner Bros.′
    WBD,
    +0.28%
    videogame divisions.

    “It’s time for the videogame companies to stop playing games and get serious about reaching an agreement on this contract,” SAG-AFTRA President Fran Drescher said in a statement.

    Audrey Cooling, a spokesperson for videogame producers, said they are “continuing to negotiate in good faith” and have reached tentative agreements on more than half of the proposals on the table.

    So far this year, U.S. consumers have spent $34.9 billion on videogames, consoles and accessories, according to market research group Circana.

    The threat of a videogame strike emerged as Hollywood writers were on the verge of getting back to work after months on the picket lines.

    The alliance of studios, streaming services and producers has chosen to negotiate only with the writers so far, and has made no overtures yet toward restarting talks with SAG-AFTRA. That will presumably change soon.

    SAG-AFTRA leaders have said they will look closely at the writers’ agreement, which includes many of the same issues, but it will not effect their demands.

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  • Are we bored yet? Retail investors slowing their roll on AI stocks, according to this chart

    Are we bored yet? Retail investors slowing their roll on AI stocks, according to this chart

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    There are more signs that investors are cooling a bit on the hot artificial intelligence play, though no one appears ready to let go of their Nvidia stock just yet.

    That’s according to Vanda Research analysts, who shared a chart of their latest weekly data showing how retail investor’s net purchases of AI-themed stocks is “steadily waning”:

    Marco Iachini, senior vice president, Giacomo Pierantoni, head of data and Lucas Mantle, data scientist at Vanda, said they’ve also noticed fewer news stories covering the sector as well, in their Vandatrack weekly comment that published Thursday.

    The fervor for AI-related stocks and technology took off earlier this year, with a pinnacle moment in May when Nvidia
    NVDA,
    -2.89%
    made big predictions on a boom for demand for its AI-related chips. Shares of the company are still up 211% so far this year, but enthusiasm for many tech stocks faded in August as China and interest rate-hike worries cropped up and some companies stressed AI benefits might not happen right away.

    That said, Vanda analysts don’t expect Nvidia will feel the hurt of any such waning interest. They point out that short interest in the chip maker has seen a “considerable decline,” in line with its soaring stock price.

    “This phenomenon suggests that bearish institutional investors, including long/short hedge funds, may have been compelled to cover their short positions,” said Iachini and his team. “As a result they are unlikely to want to sell the stock in the near term barring strong conviction to do so.”

    “It is crucial to recognize that a slowdown in retail demand, by itself, is improbable to trigger substantial price movements, without active bearish participation from institutional investors,” they added.

    However, the story is different for smaller AI-related companies such as smaller-cap C3.ai
    AI,
    -2.78%
    as seen in their chart:

    For C3.ai, they see a selling trend persisting in coming weeks. The AI software group’s shares are up 154% so far this year, but down 9% this month, taking a hit recently from solid quarterly results that came with forecasts for a bigger-than-expected full year loss. Analysts aren’t quite giving up — among 10 covering the company tracked by FactSet most have hold or a similar rating.

    “We believe C3.ai is taking the proper steps to capitalize on Generative AI, but it will take time to prove out,” said a team of analysts at Oppenheimer led by Timothy Horan, after those results were released on Sept. 7. They rate the company perform.

    Vanda analysts said another exception to an AI buying slowdown has been IonQ
    IONQ,
    -6.21%    ,
    “a relatively small quantum computing company that has been outperforming its AI-related counterparts.”  They noted “remarkably resilient” demand for the stock, as short interest also increases rapidly.

    “This juxtaposition raises a cautionary flag, as a potential weakening of retail interest, coupled with speculative institutional investors accumulating short positions, could create a demand-supply imbalance, potentially triggering a selloff,” they said. Shares of IONQ have soared 422% year-to-date. The company lifted its lifted full-year bookings guidance last month as it reported blowout second-quarter sales.

    Young Money blogger Jack Raines highlighted the slowing interest in AI in a post on Thursday , citing data from analytics firm Similarweb that showed ChatGPT traffic down 3.2% in August, after 10% declines in June and July.

    “While ChatGPT will probably experience a resurgence this fall as students return to the classroom and expedite their homework via chatbot, it seems like talks of AI disrupting/replacing anything and everything have cooled down,” he said, adding that the “initial euphoria was a bit much.”

    Deutsche Bank strategists hopped on the topic in a note to clients entitled “Even hype needs a summer break,” on Thursday, noting how AI interest waned as investors went to the beach and the media turned its attention to extreme weather and “silly season” stories.

    “Under the surface, though, there have been important developments indicating a slow maturing of the cycle, of the underlying technologies and of attitudes to a revolution in waiting,” said a team led by analyst Adrian Cox.

    Those include Ai being the “elephant in the earnings room,” this summer that also brought a steady stream of AI-related tech announcements. Another theme “Your job is safe..for now,” came via fresh evidence that AI might boost rather than replace white-collar jobs, while yet another saw U.S. politicians also got involved.

    This week saw Tesla CEO Elon Musk telling Capital Hill politicians that a new federal agency to oversee AI development is a must.

    Another big theme that erupted this summer was the chatter by contrarian commentators questioning the hype around generative AI. Cox alluded to the Similarweb report that got everyone excited as it showed Chat GPT traffic falling to 1.4 billion visitors in August from 1.8 billion in May.

    “The bigger picture is that open.ai had zero visitors before the launch of ChatGPT less than a year ago and is now No. 28 in the world, according to Similarweb,” said the Deutsche Bank team.

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  • Just how much is the AI discourse helping stocks? An analyst scoured earnings calls for clues

    Just how much is the AI discourse helping stocks? An analyst scoured earnings calls for clues

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    Talking about AI alone has been pixie dust for big technology stocks this year. And as executives look for any way to shoehorn AI into their business plans, more S&P 500 index companies during their second quarter earnings calls mentioned “AI” than at any point since at least 2010, according to a report published on Friday.

    What’s more, according to the report from FactSet, the companies talking about AI — even the ones that aren’t the big, obvious tech names — have seen their stocks fare better than shares of companies that haven’t.

    For S&P 500 companies that mentioned “AI” on their second-quarter earnings calls, shares on average since June 30 dipped 0.8%, while rising 13.3% since Dec. 31, FactSet said. For companies that didn’t talk about AI on those calls, shares on average fell a bit more since the end of June — 2.3% — while inching only 1.5% higher since the end of last year.

    “Even excluding the ‘Magnificent Seven’ (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla), the S&P 500 companies that cited ‘AI’ still outperformed the S&P 500 companies that did not cite ‘AI’ on average during these periods,” FactSet Senior Earnings Analyst John Butters said in the report.

    Meanwhile, Wall Street has long believed corporate America’s profits would rebound for the second half of 2023, after a year ruled by anxieties over inflation’s impact on the economy. Still, that collective bounce-back, as it has through this year, will hinge on strong results from the world’s biggest tech players.

    Wall Street analysts expect S&P 500 companies to eke out a 0.5% gain in per-share profit growth during the third quarter, according to the FactSet report. If that number holds, it would be the first quarter of earnings growth since the third quarter of last year.

    Those potential gains, however, will largely depend on results from Amazon.com Inc.
    AMZN,
    +0.28%    ,
    Meta Platforms Inc.
    META,
    -0.26%
    and Alphabet Inc.
    GOOG,
    +0.73%

    GOOGL,
    +0.83%
    — outsized companies with outsized influence on markets and S&P 500 company financials overall. Financials for those companies have rebounded this year, after big tech retrenched amid a drop-off in pandemic-related digital demand from people spending more time at home and online.

    This week in earnings

    Three years of supply disruptions have upended the economy and driven prices higher, forcing the Federal Reserve to embark on a delicate effort to bring them lower by discouraging borrowing and spending through a series of interest-rate hikes. But what about the impact on bowling? For answers, we turn to results this week from bowling-alley chain Bowlero Corp.
    BOWL,
    -3.43%    ,
    which saw a jump in demand following the economy’s reopening but now faces questions about that demand as it shows signs of returning to Earth. Convenience-store chain Casey’s General Stores Inc.
    CASY,
    +0.85%
    and homebuilder Lennar Corp.
    LEN,
    +0.50%
    also report.

    The call to put on your calendar

    Adobe results: Digital-media, analytics and design firm Adobe Inc. reports quarterly results on Thursday. But Mizuho analyst Gregg Moskowitz said his focus was on the company’s broader digital transformation.

    He cited stronger Web traffic, the potential for more deals with bigger customers, signs of improving trends in Adobe’s
    ADBE,
    -0.02%
    analytics segment, as well as the segment that includes design tools like Photoshop. But he said the company’s moves in generative AI could be “a significant growth driver.” Adobe this year unveiled Firefly, an AI image and text-enhancement model that can be incorporated into Adobe’s software. Moskowitz said that “while very early, our checks indicate an already high level of large customer interest in GenAI projects, including Firefly for Enterprise.” However, he said the company’s $20 billion acquisition of online design platform Figma was still “a big question mark,” as costs and regulatory scrutiny accumulate.

    The number to watch

    Oracle results, supply situation: Cloud and IT-network developer Oracle Corp.
    ORCL,
    +0.98%
    reports results on Monday. Like much of the tech world, Wall Street sees the company as an AI play. But UBS analysts said that as businesses race to secure the components that power AI, Oracle could have an “underappreciated edge” over rivals.

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  • Super-rare super blue moon tonight: What time will it appear? 

    Super-rare super blue moon tonight: What time will it appear? 

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    Talk about something happening once in a blue moon — Wednesday night’s lunar event won’t be repeated for another 14 years.

    The Aug. 30 moon will be the biggest and brightest full moon of the entire year, a so-called super blue moon. Tonight’s moon is an especially rare one for several reasons: 

    • It’s a full moon, meaning it’s as close as we get to seeing the sun illuminate the entire side of the moon. This happens once or sometimes twice a month.

    • It’s also a blue moon, which means two different things. First, it’s a monthly blue moon, or the second full moon of the month, which is how a blue moon is commonly defined. But it’s also a seasonal blue moon, as NASA notes, meaning it’s the third full moon in an astronomical season that has four full moons. But despite the colorful name, the moon itself will not appear blue.

    • Finally, this also a supermoon, meaning the moon appears larger — about 14% larger, according to NASA — and brighter than usual, even to the naked eye. This is because its orbit is at its closest point to the Earth — a moment known as its perigee, when the moon is just 226,000 miles from us — at the same time that the moon is full.

    Supermoons are slightly more common than blue moons, NASA says. While about 25% of all full moons are supermoons, just 3% of full moons are blue moons. That’s why the phrase “once in a blue moon” is used to describe a rare event. And the length of time between super blue moons is even more irregular. On average it’s 10 years, according to NASA, but it sometimes stretches as long as 20 years. After tonight, we won’t see another until we get a pair of super blue moons in January and March 2037.

    Tonight’s super blue moon, NASA adds, also coincides with the Hindu Raksha Bandhan festival, also known as Rakhi or Rakhi Purnima, which celebrates the bond between brothers and sisters. And it falls near the middle of the month for many lunisolar and lunar calendars, such as the Chinese, Islamic and Hebrew calendars, which carries some spiritual significance. It comes during Elul in the Hebrew calendar, for example, which is a time of preparation for the High Holy Days of Rosh Hashanah and Yom Kippur.

    Related: Nobel Prize-winning economist Robert Shiller draws a link between moon landing and remote work

    Now that you know what the super blue moon is, how can you catch it? 

    The super blue moon will be officially full at 9:36 p.m. Eastern time on Wednesday, Aug. 30. That is when the moon will be 180 degrees from the sun, or completely opposite the sun in the sky over the Earth, Space.com explains.

    The super blue moon will set on Thursday morning just before the sun rises at around 6:46 a.m. Eastern. 

    If you want to catch the moon looking especially huge, it’s recommended that you catch the moon either rising in the east in the evening or setting in the west in the early morning. This is because when the moon is nearest to the horizon, a “moon illusion” makes it seem bigger. Photographers can exaggerate this illusion by taking pictures of the moon low on the horizon, using a long lens and having buildings, mountains or trees in the frame, NASA says. If you’re angling for that perfect shot, you can find the rising and setting times for your area using the U.S. Navy’s moonrise calendar. 

    If the sky is overcast in your area or buildings or other obstacles block your view, you can catch the action online instead. The Virtual Telescope Project will be providing a free livestream of the super blue moon rising over Rome beginning at 11:30 p.m. Eastern on Aug. 30.

    In other lunar news, India became the fourth country to successfully land a spacecraft on the moon last week. You can watch the Indian rover explore the moon’s south pole here.

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  • Nvidia’s stock soars after AI boom pushes chip giant to record earnings and blowout forecast

    Nvidia’s stock soars after AI boom pushes chip giant to record earnings and blowout forecast

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    Nvidia Corp. shares rallied in the extended session Wednesday after the maker of graphics processing units that is leading the AI-hardware charge reported a 141% surge in data-center sales and record results.

    Nvidia
    NVDA,
    +3.17%
    shares rallied 9% after hours, following a 3.2% rise in the regular session to close at $471.16, less than 1% below the stock’s record closing high of $474.94, set on July 18, according to FactSet data. A close at such levels on Thursday would mean a new record high for the stock.

    The Santa Clara, Calif.-based company reported second-quarter net income of $6.19 billion, or $2.48 a share, compared with $656 million, or 26 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $2.70 a share, compared with 51 cents a share in the year-ago period.

    Revenue surged to a record $13.51 billion from $6.7 billion in the year-ago quarter, driven by a 141% leap in data-center revenue to $10.32 billion.

    Analysts surveyed by FactSet had forecast earnings of $2.08 a share on revenue of $11.19 billion, and data-center sales of $8.03 billion.

    Nvidia forecast third-quarter revenue of $15.68 billion to $16.32 billion.

    Analysts had estimated third-quarter earnings of $2.40 a share on revenue of $12.59 billion, with $9.15 billion of that from data-center sales. For the year, Wall Street, on average, expects earnings of $8.29 a share on $44.54 billion in revenue, a 71% increase from fiscal 2023’s $26.97 billion, with $32.41 billion of that in data-center sales.

    “Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI,” said Jensen Huang, founder and chief executive of Nvidia, in a statement. “Leading enterprise IT system and software providers announced partnerships to bring Nvidia AI to every industry. The race is on to adopt generative AI.”

    Right after the report, Lopez Research analyst Maribel Lopez told MarketWatch that Nvidia’s “numbers prove just how much money there is in the AI hardware opportunity.”

    “While cloud companies are selling AI services, Nvidia is walking away with a bulk of the revenue and profits,” Lopez said. “Nvidia’s minting cash with no apparent slowdown in sight.”

     Nvidia shares are up more than 222% on a year-to-date basis, compared with a 42% surge in the PHLX Semiconductor Index
    SOX,
    a 15.5% rise by the S&P 500
    SPX
    and a 31% gain by the tech-heavy Nasdaq Composite
    COMP
    over the same span.

    Read: Will AI do to Nvidia what the dot-com boom did to Sun Microsystems? Analysts compare current hype to past ones.

    Nvidia, which has stood as the largest publicly traded chip maker by market cap since February, having traded that title back and forth with Taiwan Semiconductor Manufacturing Co.
    TSM,
    +2.15%
    since late 2020, closed above the $1 trillion mark officially for the first time on June 14. Nvidia ended Wednesday with a valuation of $1.164 trillion, and one analyst thinks it could be the most valuable U.S. company in a few years.

    Nvidia currently stands as the fifth-largest U.S. company by market cap behind Apple Inc.
    AAPL,
    +2.19%    ,
    Microsoft Corp.
    MSFT,
    +1.41%    ,
    Alphabet Inc.
    GOOG,
    +2.71%

    GOOGL,
    +2.55%
    and Amazon.com Inc.
    AMZN,
    +0.95%    .
    While all have a big stake in the future of AI, the latter three companies are scrambling to outfit their cloud-service provider data centers with new AI gear amid tight supply.

    While Nvidia is considered the overwhelming leader in the AI chip market, Advanced Micro Devices Inc.
    AMD,
    +3.57%
    is considered a distant second. AMD’s data-center numbers declined in the company’s recent earnings report, although the company didn’t have comparable AI chip sales in its results.

    Shares of AMD and TSMC were both up more than 3% after hours Wednesday.

    See also: Nvidia ‘should have at least 90%’ of AI chip market with AMD on its heels

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  • How Nvidia’s Jensen Huang may be driving Fed rate-hike expectations

    How Nvidia’s Jensen Huang may be driving Fed rate-hike expectations

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    “‘You could ask who is really running the show? Jerome Powell or Jensen Huang? Amazingly, it may not be Powell, but Jensen Huang who is driving Fed expectations.’”


    — Ben Emons of NewEdge Wealth.

    Those are the words of Ben Emons, a senior portfolio manager and the head of fixed income at NewEdge Wealth in New York, who identifies reasons why artificial-intelligence leader Nvidia Corp.
    NVDA,
    -2.77%
    is demonstrating central-bank-like powers.

    It starts with the idea that the Santa Clara, California-based chip designer — which reports fiscal second-quarter earnings on Wednesday — acts as a bellwether for AI-capital expenditures that are likely to boost productivity across the U.S. economy. And in the bond market, a surge of AI-related expectations is translating into higher real yields, which reflect inflation-adjusted growth in gross domestic product and productivity, he said.

    Read: Nvidia’s stock snaps losing streak and sits 1% below record close as earnings optimism builds

    Higher real yields in the U.S. are a key reason why 10-
    BX:TMUBMUSD10Y
    and 30-year Treasury yields
    BX:TMUBMUSD30Y
    climbed to multi-year highs through Monday. Real yields, as measured by rates of Treasury inflation-protected securities, offer a glimpse of how the market expects the U.S. to perform when inflation isn’t a factor.

    Read: Rise in Treasury yields is almost entirely due to one factor, strategist says

    “The bigger macro story behind Nvidia as the bellwether of artificial intelligence is the role it plays in the economy, which is proving to be stronger than anyone thought it would be,” Emons said via phone on Tuesday. “People connect AI to productivity and productivity leads to growth, and to some extent this is impacting interest-rate expectations today.”

    Amid growing anticipation over Nvidia’s upcoming earnings announcement and Friday’s speech by Federal Reserve Chairman Jerome Powell in Jackson Hole, Wyo., “the probability of a rate hike is creeping higher,” the senior portfolio manager wrote in a note this week. “With each additional dollar increase of NVDA EPS estimates, the probability of a hike by November goes up. NVDA is gaining Fed-like power.”

    Need to Know: Nvidia may be the AI stock for now, but here are the picks for later, says Goldman Sachs

    A chart provided by Emons shows how the median estimate of analysts for Nvidia’s earnings-per-share in the fiscal second quarter has been rising alongside the market-implied probabilities of a November Fed rate hike.


    Source: Bloomberg, Nvidia

    In addition, the yield on one of Nvidia’s own corporate bonds, issued in 2020 and maturing in April 2040, has been rising in relation to the 10-year TIPS or real yield “because of the company’s broader effect on the economy,” Emons said.


    Source: Nvidia, U.S. Treasury

    As University of Pennsylvania Wharton School finance professor Jeremy Siegel explained in a separate interview with MarketWatch, real interest rates track real growth. Improving productivity and stronger growth “mean the Fed won’t be able to cut rates as much as it would otherwise be able to.”

    On Tuesday, Treasury yields finished mixed, while Nvidia’s shares closed down by 2.8%, as traders and investors await the company’s earnings report on Wednesday followed two days later by Powell’s remarks.

    Analysts expect Powell to address what’s known as the real neutral rate of interest — or the inflation-adjusted level which is likely to prevail when the economy is operating at full strength and price gains are stable — as a way of justifying the higher-for-longer theme in U.S. interest rates.

    See also: How higher-for-longer rates are playing out as 10-year yield hits 15-year high

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  • Nvidia may be the AI stock for now, but here are the picks for later, says Goldman Sachs

    Nvidia may be the AI stock for now, but here are the picks for later, says Goldman Sachs

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    Wall Street looks ready to build on Monday’s gains, the first in five sessions for the S&P 500
    SPX
    and Nasdaq Composite
    COMP.
    That’s as expectations build around Nvidia, which has had a lackluster August, to knock it out of the park with earnings on Wednesday.

    Investors have had months to focus on AI darlings such as Nvidia. In our call of the day, Goldman Sachs takes a look at stocks to trade after the big AI trade. A team led by strategists Ryan Hammond and David Kostin complied a basket of companies with the biggest potential long-term earnings per share boost from the impact of AI adoption on labor productivity.

    Their analysis indicates that following widespread AI adoption, EPS for the median stock in that basket could be 72% higher than the baseline, versus 19% for the median Russell 1000 stock.

    “We estimate the potential productivity-related EPS boost from increased revenues or increased margins, using a combination of company-level estimates of the share of the wage bill exposed to AI automation and the labor cost to revenue ratio,” said the Goldman team.

    Since early 2023, when AI emerged as a theme for investors, they note their long-term basket of stocks has outperformed the equal-weight S&P 500 by just 6 percentage points, far less than near-term beneficiaries such as Nvidia
    NVDA,
    -0.49%    ,
    Microsoft
    MSFT,
    +0.94%
    or Meta
    META,
    +0.51%    .


    Goldman Sachs Investment Research

    “The estimated AI-driven earnings boost is likely to occur over the next few years, but should be reflected in stock valuations sooner. However, the eventual share price impact will depend on the ability of companies to use AI to enhance earnings,” said Goldman.

    While unable to pin it exactly, Goldman expects AI adoption will start to a have a “meaningful macro impact” between 2025 and 2030, with regulatory constraints and data privacy concerns likely to slow widespread adoption. Nearly 75% of CEOs see AI take-up impacting companies or cutting labor needs within the next five years, even if they don’t right now.

    Firms with the biggest workforce exposure to AI and larger and more innovative ones, will likely adopt generative AI earlier than others, say the strategists. They say to “expect valuation multiples for these companies to increase first as the adoption timeline crystallizes, even if actual adoption and the associated EPS boost is occur later.”

    Goldman’s estimates on the potential earnings boost for those long-term AI beneficiaries consist of several factors: the share of each company’s wage bill exposed to AI automation, how much of a company’s wage bill is exposed to AI automation and labor cost as a share of revenue.

    “For the typical Russell 1000 stock, 33% of the wage bill is potentially exposed to AI automation and labor costs currently represent 14% of total sales. The potential boost from higher sales would increase earnings by 11% and reduced labor costs would increase earnings by 26%, all else equal,” say the strategists.

    Here is a taster of their long-term AI beneficiaries basket:


    Goldman Sachs

    And a few more:


    Goldman Sachs

    Read: U.S. stocks may bounce this week, but summer selloff is only halfway done, analysts warn

    The markets

    U.S. stocks
    SPX

    COMP
    are trading mixed. The yield on the 10-year Treasury
    BX:TMUBMUSD10Y
    is steady at 4.33%.

    For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

    The buzz

    Microsoft
    MSFT,
    +0.94%
    has proposed a Ubisoft license to win U.K. regulatory approval for its Activision Blizzard
    ATVI,
    +1.09%
    buyout. Activision shares and Ubisoft
    UBI,
    +9.93%
    surged in Paris.

    On the heels of a 7% surge, EV-maker Tesla
    TSLA,
    +2.77%
    is up 1.8%.

    Opinion: SoftBank’s Arm is going public, but it faces a rapidly growing threat

    Lowe’s shares
    LOW,
    +3.34%
    are up after the DIY retailer’s earnings topped expectations, though it notes lower discretionary demand.

    Among Monday’s late earnings news: Fabrinet
    FN,
    +27.25%
    is up 18% after the high-tech manufacturing services company upbeat forecast, with new AI products helping drive results. Videoconferencing group Zoom Video Communications
    ZM,
    -4.15%
    is up 4% after reporting an earnings jump and guidance.

    Read: Why Amazon is this analyst’s top internet stock pick

    The world’s biggest miner BHP
    BHP,
    -0.98%
    reported a 58% slump in annual profit amid tumbling commodity prices in part due to China’s economic troubles. U.S.-listed shares are up 4%.

    Arm Holdings filed its long-awaited IPO, which could be the year’s biggest. The chip designer aims to raise up to $10 billion with a valuation of $60 billion to $70 billion.

    Existing home sales for July are due at 10 a.m., with several Fed speakers throughout the day: Richmond Fed President Tom Barkin at 7:30 a.m. and Chicago Fed President Austan Goolsbee and Fed. Gov. Michelle Bowman both at 2:30 p.m.

    Best of the web

    ‘Own what the Mother of All Bubbles crowd doesn’t.’ This market strategist expects stagflation and is investing for it now.

    New video shows the day police raided 98-year old Kansas newspaper owner’s home.

    Hitler’s birth house in Austria will be turned into a police station with a human rights training center.

    The tickers

    These were the top tickers on MarketWatch as of 6 a.m.:

    Ticker

    		 Security name
    TSLA,
    +2.77%         		Tesla
    NVDA,
    -0.49%         		Nvidia
    AMC,
    -17.31%         		AMC Entertainment
    NIO,
    -1.87%         		Nio
    APE,
    -11.32%         		AMC Entertainment Holdings preferred shares
    TTOO,
    -6.13%         		T2 Biosystems
    GME,
    -3.63%         		GameStop
    AAPL,
    +0.63%         		Apple
    MULN,
    -19.19%         		Mullen Automotive
    AMZN,
    +0.15%         		Amazon.com

    The chart

    Is tech dancing to the beat of its own drum? The Chart Report flagged this one from Scott Brown, founder of Brown Technical Insights, showing performance of the Technology Select Sector SPDR ETF
    XLK
    :


    @scottcharts

    “It’s only been a week, but consensus and conventional wisdom suggest higher yields are bad for Growth/Tech stocks. Meanwhile, Tech is acting like it never got the memo. It’s still too early to tell if Tech is trying to tell us something, but Scott points out that the sector is facing a crucial test this week at the March 2022 highs (around $163). $XLK is solidly above $163 after today’s bounce, but where it ends the week will likely hinge on $NVDA, as the company releases earnings on Wednesday evening,” says Patrick Dunuwila, editor and co-founder of The Chart Report. 

    Random reads

    “We are the champions.” Spain erupted in celebrations to welcome its Women’s World Cup victors. And England’s Lionesses got a 1,000 soccer-ball tribute.

    No, Tropical Storm Hilary didn’t flood Dodger Stadium.

    These thirsty beer-drinking thieves are raccoons.

    Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

    Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton.

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  • Regulators open floodgates for driverless taxis in San Francisco, whether they’re wanted or not

    Regulators open floodgates for driverless taxis in San Francisco, whether they’re wanted or not

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    State regulators on Thursday opened the floodgates for more robotaxis on the streets of San Francisco.

    After a contentious, seven-hour meeting, the California Public Utilities Commission — which oversees taxis and autonomous vehicles, among things — approved two resolutions to broadly expand driverless taxi service from Alphabet’s
    GOOG,
    +0.05%

    GOOGL,
    +0.02%
    Waymo and GM’s
    GM,
    -5.79%
    Cruise.

    On a pair of 3-1 votes, regulators approved allowing Waymo and Cruise to offer fared driverless rides across San Francisco, at all hours of the day, with an unlimited number of vehicles.

    While the driverless vehicles are already ubiquitous on city streets, San Francisco is now set to become the first U.S. city with two fleets of robotaxis that will be able to fully compete with taxis and ride-hailing services.

    “Today’s permit marks the true beginning of our commercial operations in San Francisco,” Tekedra Mawakana, co-CEO of Waymo, said in a blog post.  “We’re incredibly grateful for this vote of confidence from the CPUC, and to the communities and riders who have supported our service.” 

    Waymo said it expects “incredibly high demand,” and will be expanding its robotaxi service incrementally.

    Cruise CEO Kyle Vogt said he was “thrilled” by the votes. “It’s a huge milestone for the AV industry, but even more importantly a signal to the country that CA prioritizes progress over our tragic status quo,” he tweeted.

    The expansion was opposed by San Francisco city officials, who say autonomous-driving technology is not ready for prime time, and that the companies need to be more transparent in how they operate. On Wednesday, the city’s fire department released details of 55 incidents so far this year where driverless cars interfered in emergency scenes.

    Read more: Driverless cars are driving San Francisco crazy — ‘They are not ready for prime time’

    That’s just the tip of the iceberg: Jeffrey Tumlin, the head of San Francisco’s transportation agency, told MarketWatch in July that the city was seeing “up to 90 incidents per month … of varying degrees, some are minor, some are major obstructions.” Those included instances of autonomous cars stopping in the middle of traffic, crashes and other driving hazards.

    While acknowledging the positives of driverless technology — which its advocates say is much safer than human drivers — Tumlin said the city would like a more gradual expansion of autonomous cars, with limitations, like the next level of a “learner’s permit.”

    Regulation of autonomous vehicles, however, is up to the state.

    The PUC meeting had been delayed twice, and Thursday’s meeting featured public comment from more than 150 people voicing their opinions on both sides of the issue.

    PUC Commissioner Genevieve Shiroma was the sole dissenter on Thursday’s votes, which were absent one member. She told the hearing that there was no rush to make a decision, and advocated delaying the vote again. She noted that Cruise and Waymo claim to have maintained a good safety record, but that there were discrepancies about the data submitted to regulators. “Passengers should not be endangered, first responders should not be prevented from doing their jobs,” she said.

    Alice Reynolds, the president of the CPUC, argued that this was an incremental approval, echoing comments by Commissioner John Reynolds, a former managing counsel at Cruise who did not recuse himself from voting, that the California DMV has already given the companies a permit to operate.

    “We do expect the autonomous-vehicle companies to engage with first responders,” Reynolds said. “In the meantime the resolutions before us to meet our requirements.”

    Teamsters vice president Peter Finn blasted the decision, saying it was “irresponsible and shows a complete disregard for public safety.”

    “Public safety decisions should not be made by regulatory bodies that are in the pocket of Big Tech,” Finn said in a statement, adding that the Teamsters support pending state legislation that would require a trained human operator in autonomous vehicles weighing over 10,000 pounds, which would include most trucks.

    A number of companies have autonomous cars driving on San Francisco streets, but only Cruise and Waymo had been approved for taxi service, with limitations. Earlier this week, the two companies disclosed how many driverless vehicles they operate in San Francisco: Cruise runs 100 vehicles during the day and 300 at night, while Waymo has 250 robotaxis operating.

    That number could soon grow significantly.

    Cruise’s Vogt said in an earnings call last month that Cruise could add “several thousand” robotaxis to San Francisco in an effort to create a disruptive service resembling Uber.

    Therese Poletti contributed to this report.

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  • Apple’s Tim Cook explains why he won’t showboat around AI

    Apple’s Tim Cook explains why he won’t showboat around AI

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    ““We tend to announce things as they come to market, and that’s our M.O.””


    — Apple CEO Tim Cook

    If Apple Inc.’s Thursday earnings call sounded a bit different than other recent ones from Big Tech players, perhaps that was due to a noticeable lack of artificial-intelligence discussion.

    In fact, AI didn’t come up at all on Apple’s
    AAPL,
    -0.73%
    call until an analyst brought up the topic in the question-and-answer portion, commenting that Apple executives “don’t talk too much” about their AI strategy or investments, unlike many tech peers.

    See also: Apple sees sales decline for third quarter in a row — and says performance could be similar this quarter

    “If you take a step back, we view AI and machine learning as core fundamental technologies that are integral to virtually every product that we build,” Chief Executive Tim Cook replied. AI helps power recently announced software features like live voicemails and the ability to replicate your voice digitally, as well as somewhat older features like automatic crash detection and fall detection.

    AI technology has been “absolutely critical to us,” Cook said, and Apple has “been doing research across a wide range of AI technologies, including generative AI, for years,” something the company plans to continue.

    But don’t necessarily expect Apple to start showboating around its AI efforts going forward: Cook said that Apple’s “M.O.” simply is to announce products when they’re ready for consumers.

    “Apple’s reticence in being dragged into the AI hype is on-brand,” Forrester principal analyst Dipanjan Chatterjee said in emailed comments. “A maniacal focus on what Apple does for its customers and not how it does it is rooted so deeply in the brand’s DNA.”

    In all, there were just six mentions of AI or artificial intelligence on Apple’s earnings call, all of which came during the Q&A exchange with Deutsche Bank analyst Sidney Ho. Compare that to 90 mentions of those terms on Alphabet Inc.’s
    GOOG,
    +0.10%

    GOOGL,
    +0.05%
    earnings call last week, 73 mentions on Microsoft Corp.’s
    MSFT,
    -0.26%    ,
    and 62 mentions on Meta Platforms Inc.’s
    META,
    -0.36%    ,
    according to MarketWatch’s review of transcripts provided by AlphaSense/Sentieo.

    Read: Microsoft and Google can’t stop talking about AI, and this chart proves it

    Amazon.com Inc.
    AMZN,
    +0.55%    ,
    which joined Apple in posting results Thursday, falls somewhere in the middle. The topic of AI garnered 34 mentions on Amazon’s call.

    Whereas Apple has been consistent with its scant mentions of the technology, Amazon executives have been ramping up the rhetoric: AlphaSense/Sentieo data shows just one AI mention on the earnings call Amazon held in February 2022, and then no mentions until the term came up 12 times on its April 2023 call. Volume was of course up considerably from there on Thursday’s call.

    See also: The ‘stabilization’ of AWS may have been the most significant number for Amazon’s earnings

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  • Palantir Stock Spikes After Analyst Says to Buy ‘The Messi of AI’

    Palantir Stock Spikes After Analyst Says to Buy ‘The Messi of AI’

    [ad_1]



    Palantir Technologies


    shares were getting a major boost Friday after Wedbush technology analyst Dan Ives launched coverage of the AI software company with an Outperform rating, setting a target price of $25. Ives contends Palantir is well-positioned to take market share in both the commercial and government analytics software markets.

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  • Digital advertising is Meta and Google’s world, and everyone else is coping with it

    Digital advertising is Meta and Google’s world, and everyone else is coping with it

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    There are two certainties in the tech world when it comes to digital advertising: Google and Meta. And then there’s everyone else.

    Through economic thick and thin, Google and Meta are the gold standards by virtue of broad reach (billions of people globally), product dominance (in search and social media, respectively) and in their positions in the lightning-fast AI race. This week’s earnings results for Alphabet Inc.
    GOOGL,
    +2.46%

    GOOG,
    +2.42%
    and Meta Platforms Inc.
    META,
    +4.42%
    proved that emphatically once again.

    Both companies rebounded from recent wobbly digital ads sales of their own through gigantic consumer reach and aggressive plans to parlay AI into ad sales. Google has developed (or dabbled) in some form of AI for at least seven years, and in a conference call with analysts Wednesday, Meta Chief Executive Mark Zuckerberg said his company will focus in the near term on AI to develop agents, ad features in existing products like Instagram and Reels, and internal productivity and efficiency. “We want to scale them, but they are hard to forecast,” he admitted.

    Read more: Meta’s stock jumps after AI, ad momentum drive earnings and revenue higher

    And: Alphabet earnings push stock up 6%, fueled by strong ad sales and strides in AI

    Conversely, for companies consigned to the also-ran category, such as Snap Inc.
    SNAP,
    +3.39%
    and X — the former Twitter — the news was bleak. Snap forecast disappointing third-quarter sales amid a spending push to draw advertisers.

    “We continue to believe it will take multiple quarters of improved execution for many investors to get more comfortable with the story longer term,” JP Morgan analysts said in a note on Snap earlier this month.

    Digital-advertising leader Google sought to remind everyone it has been doing AI a long time while Microsoft Corp.
    MSFT,
    +2.31%    ,
    a major investor in ChatGPT pioneer OpenAI, tempered its approach, Josh Wetzel, chief revenue officer at OneSignal, said in an interview. “AI’s greatest immediate value may be for Facebook advertising,” he said, pointing to it as an efficient and effective tool after Facebook encountered issues with data-privacy changes Apple Inc.
    AAPL,
    +1.35%
    made to mobile devices.

    Read more: Alphabet earnings remind Wall Street of Google’s AI prowess

    “Meta’s solid quarter adds further evidence to the view that advertisers are choosing to spend their budget on the so-called market leaders, such as Facebook and Instagram, at the expense of the smaller social-media networks, like Snap,” said Jesse Cohen, senior analyst at Investing.com.

    Jon Oberlander, executive vice president of social at digital-marketing agency Tinuiti, added: “It is, to some extent, still Meta/Google’s game, especially for performance advertisers, as the ROI and scale advertisers can find in the mid-lower funnel gap above other platforms.”

    At the same time, Forrester analyst Kelsey Chickering said linear television ad revenue will slow between now and 2027 to about $65 billion from $70 billion as traditional TV continues to lose the under-25 crowd that has fled to streaming services and creator-heavy platforms like Snapchat and TikTok.

    Digital advertising is on track to grow in the high single digits, or more, in 2023, slightly ahead of June’s forecast estimates from GroupM and Magna of around 8% each, according to Brian Wieser, head of Madison and Wall, a media and advertising consultancy for investors.

    Most of that growth will benefit Google, Meta, and Microsoft’s LinkedIn, according to data from Emburse. Conversely, Emburse found ad spending on Twitter/X has plunged 54% from a year ago in May, before Elon Musk bought the company.

    “Google, Meta and LinkedIn are platforms where people go to consume information, search for ideas, or give context to what they experiencing in their personal or work lives,” Emburse Chief Experience Officer Johann Wrede said.

    While Alphabet CEO Sundar Pichai boasted Wednesday of “continued leadership in AI and our excellence in engineering and innovation are driving the next evolution of Search” and other services, as well as improved YouTube ad sales, Meta’s addition of potential X-killer Threads could dramatically inflate its ad sales going forward.

    Zuckerberg sees potential in Threads long term despite a plunge in its user sign-ups because X is hemorrhaging advertising clients, and this week reportedly slashed ad costs to lure business customers.

    “The launch of Threads holds great promise for Meta. While there are currently no ads on the app, it’s inevitable that they will come and the ability to use data from other Meta properties for targeting is a highly lucrative proposition for brands,” Aaron Goldman, chief marketing officer at Mediaocean, said in an email.

    That translates to more near-term pain for smaller platforms such as Snap and X, which are posting negative growth, Michael Nathanson of SVB MoffettNathanson warned in a note Wednesday.

    “The truth is that Alphabet started integrating machine learning and artificial intelligence into their products and ad solutions close to a decade ago,” he said. Snap and others are scrambling to catch up.

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  • ServiceNow Posts Strong Earnings and Adds New AI Tools. But the Stock Is Lower.

    ServiceNow Posts Strong Earnings and Adds New AI Tools. But the Stock Is Lower.

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    ServiceNow


    posted better-than-expected results for its latest quarter and lifted its full-year outlook.

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  • Microsoft earnings top estimates, but stock falls as execs detail AI’s costs

    Microsoft earnings top estimates, but stock falls as execs detail AI’s costs

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    Microsoft Corp. easily topped profit and revenue expectations for its latest quarter, though its shares were moving more than 3% lower in extended trading Tuesday after the company discussed the year ahead.

    The technology giant has won favor on Wall Street for its positioning in the artificial-intelligence revolution, though Chief Financial Officer Amy Hood said on Tuesday’s earnings call that “even with strong demand and a leadership position,” Microsoft’s
    MSFT,
    +1.70%
    “growth from our AI services will be gradual.” Microsoft’s AI for its Azure cloud-computing business needs to ramp, and the company is working toward the general availability of its Copilot productivity product.

    Microsoft’s AI revenue impacts will thus be weighted toward the second half of the new fiscal year that just began, she continued. Meanwhile, she expects that Microsoft’s capital expenditures will rise sequentially each quarter “as we scale to meet demand signals.”

    Hood’s commentary came as Microsoft posted fiscal fourth-quarter results Tuesday afternoon that showed a 15% jump in revenue for the company’s cloud-computing segment, which it calls Intelligent Cloud. Revenue for the segment came in at $24.0 billion, while analysts had been anticipating $23.8 billion. The growth rate was 17% on a currency-neutral basis.

    The company said revenue for Azure and other cloud services was up 26%, or 27% in constant currency. Microsoft’s forecast had been for 26% to 27% in constant-currency Azure sales growth, while the company posted 31% constant-currency growth on the metric in the March period. The FactSet consensus was for 27% growth in constant currency.

    “While we believe the Street was hoping for Azure growth more in the ~28% range, we believe the consumption part of the business held up well,” Evercore ISI analyst Kirk Materne said in a note to clients.

    For the September quarter, Microsoft anticipates 25% to 26% in constant-currency Azure growth.

    The cloud migration is still in the “early innings,” Chief Executive Satya Nadella said on the call, while also highlighting a “new world of AI driving a set of new workloads.”

    “We think of that, again, being pretty expansive from a TAM [total addressable market] opportunity and we’ll play it out,” he continued, though the company is also up against the “law of large numbers” given the massive scale of its cloud business.

    The company generated fiscal fourth-quarter net income of $20.1 billion, or $2.69 a share, compared with $16.7 billion, or $2.23 a share, in the year-earlier period. Analysts tracked by FactSet were modeling $2.55 a share.

    Overall revenue for Microsoft climbed to $56.2 billion from $51.9 billion, whereas analysts had been expecting $55.5 billion.

    See also: Microsoft bulls are excited as company reveals pricing for AI offering

    Microsoft logged $18.3 billion in revenue for its productivity and business processes unit, up 10% from a year before, or up 12% in constant currency. That part of the business includes LinkedIn and both commercial and consumer versions of Office. Analysts had been looking for $18.1 billion.

    Revenue for the More Personal Computing segment, which includes Windows and Xbox content and services, dropped 4% to $13.9 billion and was off 3% on a constant-currency basis. The FactSet consensus was for $13.6 billion.

    Nadella, meanwhile, expressed optimism about the eventual opportunities brought upon by Microsoft’s Copilot offerings.

    “I do think people are going to look at how can they complement their [operating-expense] spend with essentially these Copilots in order to drive more efficiency and, quite frankly, even reduce the burden and drudgery of work on their OpEx and their people and so on,” he said.

    Evercore’s Materne called the overall results “solid” amid “a lot of macro headwinds.”  Microsoft’s investment story “gets stronger in [the second half of the calendar year] as some optical headwinds reverse and [comparisons] soften, and Microsoft’s position in the enterprise market continues to get stronger as customers look to consolidate spending,” he wrote.

    Read: Amazon finally is nearing a bottom on this key measure, analyst says

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  • With Microsoft, Meta and Alphabet earnings hanging on AI, more investors are asking: ‘How are you going to pay for that?’

    With Microsoft, Meta and Alphabet earnings hanging on AI, more investors are asking: ‘How are you going to pay for that?’

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    Shares of big tech companies have coasted through this year on AI euphoria, but as Microsoft Corp., Alphabet Inc. and Meta Platforms Inc. prepare to report results this week, some investors are starting to ask how much those AI advancements might actually cost.

    Those questions have surfaced after several months during simply saying “AI” on earnings calls appeared to be enough for investors. If the economy sours though — as some expect in the second half of this year or next year — big tech’s AI ambitions could go with it.

    “Given the exorbitant costs associated with the development, hosting and serving of AI products, many investors are concerned about the potential for [fiscal 2024] commentary regarding a material increase,” Jefferies analyst Brent Thill wrote, according to a MarketWatch earnings preview for Microsoft’s
    MSFT,
    -0.89%
    results.

    Microsoft and Alphabet Inc.
    GOOGL,
    +0.69%

    GOOG,
    +0.65%    ,
    which both report on Tuesday, have been in heated competition in the world of online search and digital advertisements, as Microsoft leans more on its massive investments in research lab OpenAI to muscle up its own search capabilities. But a Deutsche Bank analyst said that so far, Google appears to have the upper hand in that battle.

    Still, for Microsoft, after a broader pullback in IT spending earlier this year, analysts have found more to like about its cloud-computing business — namely market-share gains, generally-sturdy demand, and whatever ways AI can fit into the equation. Wolfe Research analyst Alex Zukin, in a recent note, said he believed “the focus will turn from what is good enough, to how good can it be,” as Microsoft moves deeper into AI.

    “How good can it be?” might also be a question for Meta
    META,
    -2.73%    ,
    which reports second-quarter results on Wednesday.

    Shares of the social-media company have more than doubled in value so far this year. JMP analyst Andrew Boone, in a recent note, cited likely improvements in Meta’s digital ad segment, better engagement, and a broader advertising backdrop that “appears to be stable” after a slowdown in spending, Still, there are signs that the initial user attraction to Threads, Meta’s answer to Twitter, has fizzled.

    This week in earnings

    For the week ahead, 166 companies in the S&P 500 index report results, including 12 from the Dow, according to FactSet. Among them are Domino’s Pizza Inc.
    DPZ,
    -0.62%    ,
    which now plans to deliver pizza via Uber Eats after years of chafing at third-party delivery apps. Industrials General Electric Co.
    GE,
    -0.82%
    and 3M Co.
    MMM,
    +0.04%
    also report, after 3M agreed to pay $10.3 billion to settle accusations it was responsible for so-called “forever chemicals” in drinking water.

    Quick-service restaurant chains Chipotle Mexican Grill Inc.
    CMG,
    +0.20%
    and McDonald’s Corp.
    MCD,
    -0.51%
    also report, with BofA analysts expecting an “almost normal” quarter for the industry, after spending at chain restaurants grew last month and costs for some ingredients started to ease following two years of supply disruptions. Auto makers General Motors Co.
    GM,
    -1.81%
    and Ford Motor Co.
    F,
    -0.71%
    also report, and while parts shortages that have constrained vehicle production have shown signs of fading, so has electric-vehicle “euphoria.”

    The calls to put on your calendar

    Visa, Mastercard: Earlier this month executives from the big banks said U.S. consumers are generally doing OK despite still-rampant inflation, although perhaps less OK than in prior months. This week credit-card giants Visa Inc. and Mastercard Inc. report results on Tuesday and Thursday, respectively. The profit, sales and credit-card volume figures from Visa
    V,
    -0.15%
    and Mastercard
    MA,
    -0.14%
    will offer more specifics on consumer spending, as vacations and concerts compete with more expensive and more pressing needs, like groceries and other bills.

    Shares of Visa and Mastercard are up so far this year, but some analysts said there could be more room investors to step in. SVB MoffettNathanson analyst Lisa Ellis recently said shares of both companies were hovering at “unusually attractive” levels.

    The number to watch

    Mattel outlook, and anything ‘Barbie’-related: The “Barbie” movie hit theaters nationwide on Friday. And after an epic marketing campaign, Mattel Inc.’s investors, banking on the film to drive a rebound for the toy maker during the second half of this year, will be zeroed in on the box-office results following the film’s debut on Friday.

    Expectations for the film are huge. And when Mattel
    MAT,
    -0.42%
    reports second-quarter results on Wednesday, executives could offer the first answers to some big questions: Has the film helped revive toy sales? Sales for anything else? Will the “Barbenheimer” effect help or hurt financials?

    The film — directed by Greta Gerwig, written Gerwig and Noah Baumbach, and starring Margot Robbie and Ryan Gosling — brings together two writers with indie bona fides and two actors with mainstream starpower. Reviews so far have been favorable, and Barbie is already Mattel’s most profitable franchise. But the movie isn’t directly geared toward children, movie theaters have struggled to get back on track after pandemic lockdowns, and toy demand through this year has been weak after ballooning during the pandemic. And some analysts don’t expect “Barbie” to do much for Mattel’s stock.

    Emily Bary and Jon Swartz contributed reporting to this story.

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  • Wall Street’s most AI-enthusiastic bank delivers machine-generated research notes

    Wall Street’s most AI-enthusiastic bank delivers machine-generated research notes

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    JPMorgan Chase & Co., the largest U.S. bank, has been wading into artificial intelligence to a greater extent than its rivals and is now producing a series of research notes that are AI-generated.

    The move represents something of a step forward in an area that’s been seen as ripe for disruption — investment research — at a time when the AI revolution is taking hold on Wall Street. At JPMorgan, AI is being used to create short summaries of human-produced reports and to link those reports inside the firm’s Cross Asset Spotlight.

    Questions remain over how far machine-generated research can go in replacing humans, and regulations on it are still in the early stages — putting pressure on Wall Street banks to be completely transparent about how their research is being put together. Research reports are generally subject to rules from Finra, or the Financial Industry Regulatory Authority, which require that a qualified registered principal approves a report prior to distribution to the public. Banks may also include legal or compliance approvals as part of their process. Through a spokeswoman, JPMorgan
    JPM,
    -0.23%
    declined to comment for this article.

    In a disclaimer attached to JPMorgan’s Cross Asset Spotlight note, primary authors Thomas Salopek and Federico Manicardi cited the large amount of content that investors need to sift through in constantly-moving markets as part of the reason that AI is being used. Salopek and Manicardi said they can produce an AI-generated summary of the most relevant and recent analyst reports on a particular topic or event — as they did on Tuesday with a focus on earnings, China, the soft-landing scenario, and AI’s impact on U.S. interest rates.

    “What seems to be going on here is that they’re using an AI-based system to build a summary publication of existing human-generated reports that are already out there,” said Michael Wagner, co-founder and chief operating officer of Omnia Family Wealth, a multifamily office based in Miami, which oversees more than $2.5 billion and is already using AI to assist with its client conversations.

    “It certainly is still relatively unusual, but I think analyst jobs are safe for now,” Wagner said in an email to MarketWatch. “It’s an interesting development that shows how AI-driven automation could impact labor markets. If relatively repetitive ‘knowledge work’ can be automated in this fashion, banks and law firms may not need as many lower-level employees as they do today.”

    New York-based JPMorgan has been leading Wall Street’s shift toward AI in a number of different ways. From February through April, the bank advertised more than 3,600 jobs globally that are all related to AI, according to Bloomberg. In May, it filed a patent application for its own software, known as IndexGPT, which can be used for analyzing and selecting securities for its clients. And JPMorgan has also created a tool that scans speeches by Federal Reserve officials to detect policy shifts and potential trading signals.

    WSJ: Pro Take: JPMorgan’s Fedspeak Evaluator Is Unsure About This Week’s Rate Decision

    Rivals of JPMorgan haven’t gone quite as far. Representatives of BofA Securities
    BAC,
    +1.06%    ,
    Citi
    C,
    -0.64%    ,
    and Deutsche Bank
    DB,
    +0.66%
    said their organizations haven’t produced any AI-generated research notes.

    Goldman Sachs
    GS,
    +0.96%
    has written about the economic and market impacts of AI, but hasn’t used the technology to write text for its research yet, according to economist Joseph Briggs and chief global strategist Praveen Korapaty. Morgan Stanley
    MS,
    +0.25%
    declined to comment through a spokeswoman.

    As of Friday afternoon, U.S. stocks
    DJIA,
    +0.20%

    SPX,
    +0.25%

    COMP,
    +0.06%
    were heading higher as investors prepared for a major rebalancing of the Nasdaq-100 index and the expiration of trillions of dollars of stock option contracts. Meanwhile, Treasury yields were mixed ahead of next week’s policy announcement by the Federal Reserve.

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  • The Next Challengers Joining Nvidia in the AI Chip Revolution

    The Next Challengers Joining Nvidia in the AI Chip Revolution

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    What to Read Next

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