Marc Benioff, CEO of Salesforce.com, speaks during a keynote at the Dreamforce 2023 conference in San Francisco on Sept. 12, 2023.
Marlena Sloss | Bloomberg | Getty Images
Salesforceannounced on Tuesday that its annual Dreamforce conference for customers and partners will remain in San Francisco for 2024.
The commitment to its hometown comes months after co-founder and CEO Marc Benioff told the San Francisco Chronicle that Dreamforce 2023 might be the last one in the city. Some other technology companies, such as Google and Oracle, have chosen to move their events elsewhere amid increased concerns of homelessness, drug use and theft in parts of the city.
“We signed an extensive agreement with the city that outlined the key pieces we knew we needed!” Benioff told CNBC in a text message. The event will take place from Sept. 17 through Sept. 19.
The agreement only extends to 2024, in keeping with Salesforce’s typical practice of communicating its plans with San Francisco one year out, according to a person familiar with the matter who asked not to ben named because the discussions were confidential.
Before announcing its intention to stay in San Francisco, Salesforce wanted to make sure it could rely on the city to provide a big enough police presence in the area and could keep the sidewalks sufficiently clean, the person said.
Dreamforce this year attracted about 40,000 attendees, and Benioff pointed to clean sidewalks and a general feeling of safety. Police officers and others had reportedly pushed unhoused people to migrate elsewhere. The crowd was much smaller than it was in 2019, when 171,000 people participated.
Headlined by OpenAI CEO Sam Altman and other guests, this year’s event was slated to produce more than $89 million in economic activity.
San Francisco Mayor London Breed thanked Benioff in a post on X, formerly known as Twitter, that included a photo of the two of them, clad in Golden State Warriors basketball apparel.
Benioff said on X that San Francisco is “now the AI capital of the world.” It’s home to OpenAI and other notable artificial intelligence startups, such as Adept AI and Anthropic. Salesforce used this year’s Dreamforce conference to show off AI capabilities integrating with technology from Anthropic and OpenAI.
San Francisco reported 620 accidental drug overdose deaths in 2022, down from 640 in 2021 and 725 in 2020. There were 7,754 homeless people in the city on Feb. 23, 2022, down from 8,035 on Jan. 24, 2019, municipal data showed. Banana Republic, Nordstrom and Whole Foods have closed locations downtown in recent months, adding to concerns.
Oracle Corp. shares dropped in extended trading Monday after the software company’s revenue forecast for the current quarter fell short of Wall Street expectations.
Oracle ORCL, +0.31%
shares, which had been down about 5% after hours when its earnings call started, dropped more than 9% after Oracle Chief Executive Safra Catz forecast its outlook for the quarter.
On the conference call with analysts, Catz forecast second-quarter earnings of $1.30 to $1.34 a share on revenue growth of 5% to 7%, or $12.89 billion to $13.13 billion.
Analysts surveyed by FactSet had estimated earnings of $1.34 a share on revenue of $13.28 billion.
Catz added that if “currency exchange rates remain the same as they are now,” currency should have a 2% positive effect on total revenue and a 3 cent-a-share positive effect on earnings.
Oracle reported fiscal first-quarter net income of $2.42 billion, or 86 cents a share, compared with $1.55 billion, or 56 cents a share, a year ago.
Adjusted earnings, which exclude stock-based compensation expenses and other items, were $1.19 a share, compared with $1.03 a share in the year-ago period.
Revenue rose to $12.45 billion from $11.45 billion in the year-ago quarter.
Analysts surveyed by FactSet had forecast earnings of $1.15 a share on revenue of $12.57 billion.
Oracle reported cloud services and license support revenue of $9.55 billion, while analysts, on average, had forecast $9.43 billion; and cloud license and on-premise license revenue of $809 million, while the Street expected $967 million.
Hardware revenue came in at $714 million, while analysts expected $748 million; and services revenue was $1.38 billion, while the Street expected $1.43 billion.
Oracle shares finished up 0.3% during Monday’s regular session to close at $126.71.
Oracle Corp. shares fell in the extended session Monday after the software company reported in-line revenue for the quarter, and earnings were slightly higher than expected.
Oracle ORCL, +0.31%
shares fell as much as 5% after hours, following a 0.3% rise in the regular session up to close at $126.71.
Oracle reported fiscal first-quarter net income of $2.42 billion, or 86 cents a share, compared with $1.55 billion, or 56 cents a share, a year ago.
Adjusted earnings, which exclude stock-based compensation expenses and other items, were $1.19 a share, compared with $1.03 a share in the year-ago period.
Revenue rose to $12.45 billion from $11.45 billion in the year-ago quarter.
Analysts surveyed by FactSet had forecast earnings of $1.15 a share on revenue of $12.45 billion.
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.
Check out the companies making headlines in midday trading.
Best Buy — Shares popped nearly 6% after the retailer’s fiscal second-quarter earnings beat on both the top and bottom lines. Adjusted earnings per share came in at $1.22, versus the $1.06 expected from analysts polled by Refintiv. Revenue was $9.58 billion, topping the consensus estimate of $9.52 billion. However, Best Buy lowered the top end of its revenue outlook for the year.
Big Lots — The discount retailer surged 26.7% after its earnings report came in better than analysts expected. Big Lots lost $3.24 per share, on an adjusted basis, less than the $4.11 forecasted by analysts surveyed by FactSet. Revenue exceeded the consensus estimate of $1.1 billion, coming in at $1.14 billion.
Coinbase, Marathon Digital, Riot Platforms — Stocks tied to the cryptocurrency industry soared after a court ruled against the Securities and Exchange Commission in a lawsuit about spot bitcoin ETFs. Shares of Coinbase, which is named as a custodial partner in several proposed bitcoin ETFs, jumped 13%. Bitcoin mining stocks also rose, with Marathon Digital surging 24% and Riot Platforms climbing 15%.
3M — Shares gained 2.6% after the company agreed to settle lawsuits regarding potentially defective U.S. military earplugs for $6.01 billion. The deal had grown into the largest mass tort litigation in U.S. history.
Heico — The engine and aircraft part maker retreated 3.1%. Despite beating expectations for revenue in the quarter, the company said its operating margin fell when compared with the same quarter a year ago.
Nvidia — The artificial intelligence stock rallied 4%, part of a broader ascent among technology stocks in Tuesday’s session. Morgan Stanley reiterated its overweight rating on the stock, noting its strong earnings report last week can be a positive signal for the AI supply chain.
PDD Holdings — U.S.-listed shares jumped 17.8%. The Chinese e-commerce company beat Wall Street expectations when reporting second-quarter earnings. It noted a positive shift in consumer sentiment during the quarter.
Oracle — Software giant Oracle climbed 2.9% following an upgrade from UBS to buy from neutral. UBS said the stock could have upside ahead due to tailwinds tied to artificial intelligence.
AT&T, Verizon — The telecommunication giants each added 2.3% on the back of a Citi upgrade to buy. The firm cited stabilization in the wireless environment and said the stocks’ valuations may be over-discounting potential costs tied to mitigating lead-covered cables.
Alphabet, General Motors — Google Cloud and General Motors said Tuesday they’re working together to explore artificial intelligence opportunities across the automaker’s business. Following the announcement, shares of Google Cloud’s parent company Alphabet and General Motors rose 3.5% and 0.6%, respectively, during midday trading.
Catalent — Catalent jumped more than 5% after the biotech company issued a solid revenue outlook and announced a deal with activist investor Elliott Investment Management. For fiscal 2024, Catalent forecasted revenue in the range of $4.30 billion to 4.50 billion, far above the $4.19 billion expected by analysts polled by FactSet. Additionally, Catalent agreed to name four new independent directors to its board, two of whom will be nominated by Elliott. It also agreed to a review of its business and strategy.
Ginkgo Bioworks — The biotechnology company’s stock popped more than 18% after announcing a five-year cloud and AI partnership with Google Cloud. As part of the deal, Ginkgo Bioworks will work to create new large language models for biology and biosecurity uses. Alphabet shares were last up more than 3%.
Rockwell Automation — The industrial stock gained nearly 2% after Wells Fargo upgraded the stock to equal weight from underweight. The Wall Street firm said it’s bullish on Rockwell’s earnings growth potential.
Airbnb — The vacation booking platform climbed 4.8%. Bernstein reiterated its outperform rating and said investors should buy the stock after a recent pullback in share prices.
Palantir – The software stock surged more than 5%. Bank of America reiterated its buy rating on Palantir, calling the company a “key player” in implementing secure AI despite the recent share pullback.
Splunk — Shares of the software company added 1.8% on Tuesday after Jefferies named the company a top pick in a Tuesday note. Jefferies said Splunk is now in position to deliver “mid-teens” increases in annual revenue after a management overhaul that began 18 months ago.
Futu Holdings — The Asian wealth management stock popped 10% following a double-upgrade to buy from underperform by Bank of America. The Wall Street bank said to expect more growth in overseas markets.
NextEra Energy Partners — The energy stock advanced 3.7% on the back of an upgrade from Raymond James to outperform from market perform. Raymond James said investors should buy the dip on the stock.
— CNBC’s Sarah Min, Samantha Subin, Yun Li, Hakyung Kim, Michelle Fox, Pia Singh and Jesse Pound contributed reporting
Mark Avallone, president of Potomac Wealth Advisors, and Jeff Kilburg, CEO of KKM Financial, join ‘The Exchange’ to discuss stocks falling after the Moody’s downgrade, the case for buying regional banks, consolidation in the VIX and owning tech in an equal weighted manner.
Mark Avallone, president of Potomac Wealth Advisors, and Jeff Kilburg, CEO of KKM Financial, join ‘The Exchange’ to discuss stocks falling after the Moody’s downgrade, the case for buying regional banks, consolidation in the VIX and owning tech in an equal weighted manner.
Not a great setup. There are too many articles and postings about how we are overdoing artificial intelligence, and how there’s not enough substance to justify recent market moves. There’s no question that the market, particularly the Nasdaq , has rallied endlessly on what amounts to the same information: Nvidia (NVDA) makes great cards; Adobe ‘s (ADBE) putting them to use; so is Meta Platforms (META) but we don’t know how; as are Microsoft (MSFT), Alphabet ‘s (GOOGL) Google and, most importantly, Oracle (ORCL); but don’t forget Broadcom (AVGO) and Marvell (MVRL). That’s worrisome, indeed. That’s why I am approaching this shortened week with a little trepidation There’s really nothing new that I can see short of analyst meetings from Samsara (IOT) and MongoDB (MDB), both loved, but both a little abstruse. They can’t move the needle. So, it seems to me this is the test week. Research right now is of no hope whatsoever. If a stock is up, we get price target boosts. If it is down, we get cuts. Nothing original, nothing against the grain. That’s been a major source of sustenance for a while now, but I think that we have had enough of it so perhaps that causes a pause. No matter, I think we get a pause, and we still don’t have a replacement for the AI theme. Do we go health care following President Joe Biden’s first campaign rally? Getting tougher. Financials ahead of the Federal Deposit Insurance Corporation penalties? Possibly, and a bunch of regional banks seem interesting. Have you seen that yield and price-to-earnings multiple on Truist, a truly good regional bank? The consumer-packaged-goods segment has been written off as past tense : Campbell ‘s (CPB) last quarter may be the template. Retail’s tough as nails: only Walmart (WMT) and Costco (COST) seem to pass muster. Transports? You are on your own because I think the Street is anxious to end the spell of revenge travel. How many times can you re-recommend the cruise ships? The industrials have been going up on the same thing for weeks now – a prospective Chinese stimulus plan that has not yet arrived and, perhaps, the Democrats’ infrastructure plan. I am not going to hide in oil and gas because I will be discovered in plain sight. Of course, there’s some hyperbole here, and heaven knows I am given to it. Still, I am worried about this week because for the first time in a bit I think we need to do some serious digesting. No, I just feel we have come to the point where I have more ideas to sell than buy. When I scan the market, I see many charts that are extended where, even though I like them, I wouldn’t be comfortable buying them. I am mindful that a stock like that of Adobe had a huge move into an excellent quarter and then raced up the hill even more on the numbers, supercharged by AI. That in itself is pretty amazing. But then, out of nowhere, sellers emerged and reversed much of the move. There’s some real fluff in the tape. I see fluff in a lot of places, maybe all but in the pathetic oils which seem to need a re-fill of the Strategic Petroleum Reserve pronto. At times like these, what I like to do is reflect on what it would take to put new money to work. We know now that we got no interest-rate hike from the Federal Reserve last week because the central bank seemingly didn’t know what to do – too many disparate folks trying to hammer out something they couldn’t, so why not postpone? But as I have been saying, we can’t seem to get unemployment up and wage growth down. The Fed knows you can’t get the stickiest part of inflation – rentals – down without more layoffs. We have them in tech and now finance, but not enough to make people abandon their homes or move back with their folks. That’s why I think they are really playing for time. They need more homes built, and they need the homebuilders to lose their discipline. To that I say, good luck. But what matters is that I feel we are fresh out of catalysts to go higher and that most stocks just don’t seem to be at levels that make sense to purchase. Why not just wait? That’s a tough one for most of us. We will want to jump at the first sign of a price break for fear of missing out. Yet, that, again, is worrisome. We don’t want to fear missing out. We want to buy things we want at our prices or else. Are these the prices we want for Microsoft? For Nvidia? So, let’s wait and see. I am willing to miss a percentage or two, maybe even three, to see if we can’t get a better basis on our stocks if we want to buy some. Given the market is officially overbought, I think I will wait until we have a couple of days down before it’s worth pulling the trigger. (Jim Cramer’s Charitable Trust is long NVDA, META, MSFT, GOOGL, COST. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Jim Cramer on Squawk on the Street, June 30, 2022.
Virginia Sherwood | CNBC
Not a great setup. There are too many articles and postings about how we are overdoing artificial intelligence, and how there’s not enough substance to justify recent market moves.
There’s no question that the market, particularly the Nasdaq, has rallied endlessly on what amounts to the same information: Nvidia (NVDA) makes great cards; Adobe‘s (ADBE) putting them to use; so is Meta Platforms (META) but we don’t know how; as are Microsoft (MSFT), Alphabet‘s (GOOGL) Google and, most importantly, Oracle (ORCL); but don’t forget Broadcom (AVGO) and Marvell (MVRL).
Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Tuesday’s key moments. ‘Don’t like the tape’ Stick with Apple Stay bullish on Wells Fargo 1. ‘Don’t like the tape’ U.S. stocks rose Tuesday, with the rate of inflation slowing to its lowest annual rate in more than two years in May, according to the Labor Department’s monthly consumer price index . The report bolstered investor hopes that the Federal Reserve would skip an interest-rate hike at its two-day policy meeting, which gets underway Tuesday. However, Jim Cramer urged caution. “I don’t like the tape here,” he said, noting some stocks seem to be on a one-way march higher, including Oracle (ORCL) and Adobe (ADBE). “Stop buying things that are up over-and-over again because of the same research,” he said. 2. Stick with Apple Speaking of research, Jim said he’s not a fan of the Apple (AAPL) downgrade at UBS, which on Monday night took its rating on the iPhone maker’s stock to neutral from buy. The firm bumped its price target on Apple shares to $190 each, from $180, implying 3.4% upside from the stock’s Monday close. UBS expressed concerns about slowing revenue growth in Apple’s key services segment, citing its analysis of App Store spending through May. The firm also said its surveys suggest demand for new iPhones in developed markets, including the U.S., has softened over the past six months. Jim said he believes Apple’s services revenue has actually accelerated and emphasized that iPhone demand in emerging markets, such as India, remains key to the Apple’s next chapter. Apple remains a stock that investors should own for the long term. 3. Stay bullish on Wells Fargo Wells Fargo (WFC) shares still look attractively valued, Jim said, despite their more-than-2% pop Tuesday. The stock is trading at less than 9-times forward earnings, compared with its five-year average of 11.4, according to FactSet. “People are choosing the bullish side of Wells, not the bearish side,” Jim said, contending that Wells Fargo CEO Charlie Scharf still has more opportunities to reduce expenses. Speaking at a conference earlier Tuesday, Wells Fargo CFO Mike Santomassimo said the bank expects upside to it outlook for net interest income. In April, Wells Fargo guided for net interest income to increase 10% in 2023. (Jim Cramer’s Charitable Trust is long AAPL and WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Tim Cook, chief executive officer of Apple Inc., beside an Apple Vision Pro mixed reality (XR) headset during the Apple Worldwide Developers Conference at Apple Park campus in Cupertino, California, US, on Monday, June 5, 2023.
Philip Pacheco | Bloomberg | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
All major stock indexes in the U.S. rose Monday, with the tech-heavy Nasdaq Composite enjoying the biggest jump.
China’s economy and stocks aren’t doing as hot as Japan’s. The Shanghai Composite fell around 0.1% and the yuan hit a 6-month low as the People’s Bank of China cut a short-term borrowing rate in an attempt to boost liquidity. Analysts think it’s a signal that the central bank will cut its medium-term and loan prime rate in the weeks ahead.
Goldman Sachs CEO David Solomon told CNBC that commercial real estate’s in such a bad shape that his bank will write down bad loans and drop valuations in its real estate investments. Still, Solomon said he’s “surprised” by the resilience of the U.S. economy.
JPMorgan Chase’s prepared to pay $290 million to settle a lawsuit brought against it by a victim of late sexual predator Jeffrey Epstein, a source told CNBC. However, the bank’s litigation with the U.S. Virgin Islands and its claims against Jes Staley, a former executive who was friends with Epstein, are still pending.
Hopes for a pause in interest rates helped to send stocks higher Monday. The technology sector, which is more sensitive to rate fluctuations, especially benefitted. (Higher rates today lower the value of tech’s growth tomorrow.)
Traders are betting there’s a 72% chance the Federal Reserve will keep rates unchanged at this week’s meeting, according to the CME Group’s FedWatch tool. That’s because economists think the consumer price index, coming out later today, will show May’s inflation slowing to just 0.1% from the previous month, or 4% year over year. That’s a “headline number [that] is going to feel good,” said Mark Zandi, chief economist at Moody’s Analytics.
The Nasdaq popped 1.53% to reach its highest level since April. The S&P 500 added 0.93%, further adding to the gains it’s accumulated over the past few days, and the Dow Jones Industrial Average climbed 0.56%.
Despite those big moves, it was a relatively light trading day. On an average day, 80.6 million shares of the SPDR S&P 500 ETF Trust, a tracker of the broad S&P 500 index, are traded. Yesterday, only 31.5 million exchanged hands. That’s probably wise, considering inflation data coming out tomorrow and the Fed meeting happening right after that. Tech greatly benefits from lower interest rates, but remember that the converse applies too.
The Nasdaq MarketSite in New York, US, on Friday, June 9, 2023. T
Michael Nagle | Bloomberg | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
JPMorgan Chase’s prepared to pay $290 million to settle a lawsuit brought against it by a victim of late sexual predator Jeffrey Epstein, a source told CNBC. However, the bank’s litigation with the U.S. Virgin Islands and its claims against Jes Staley, a former executive who was friends with Epstein, are still ongoing.
Goldman Sachs CEO David Solomon told CNBC his bank will write down bad loans and dropping valuations in Goldman’s commercial real estate holdings. That’ll have a negative impact on the bank’s earnings report in the current quarter.
Hopes for a pause in interest rates helped to send stocks higher Monday. The technology sector, which is more sensitive to rate fluctuations, especially benefitted. (Higher rates today lower the value of tech’s growth tomorrow.)
Traders are betting there’s a 72% chance the Federal Reserve will keep rates unchanged at this week’s meeting, according to the CME Group’s FedWatch tool. That’s because economists think the consumer price index, coming out later today, will show May’s inflation slowing to just 0.1% from the previous month, or 4% year over year. That’s a “headline number [that] is going to feel good,” said Mark Zandi, chief economist at Moody’s Analytics.
The Nasdaq popped 1.53% to reach its highest level since April. The S&P 500 added 0.93%, further adding to the gains it’s accumulated over the past few days, and the Dow Jones Industrial Average climbed 0.56%.
Despite those big moves, it was a relatively light trading day. On an average day, 80.6 million shares of the SPDR S&P 500 ETF Trust, a tracker of the broad S&P 500 index, are traded. Yesterday, only 31.5 million exchanged hands. That’s probably wise, considering inflation data coming out tomorrow and the Fed meeting happening right after that. Tech greatly benefits from lower interest rates, but remember that the converse applies too.
Larry Ellison, Oracle’s chairman and technology chief, speaks at the Oracle OpenWorld conference in San Francisco on September 16, 2019.
Justin Sullivan | Getty Images
Oracle shares climbed as much as 5% in extended trading on Monday after the software vendor announced fiscal fourth-quarter results and quarterly revenue guidance that exceeded Wall Street’s expectations.
Here’s how the company did:
Earnings: $1.67 per share, adjusted, vs. $1.58 per share as expected by analysts, according to Refinitiv.
Revenue: $13.84 billion, vs. $13.74 billion as expected by analysts, according to Refinitiv.
Oracle’s revenue grew 17% year over year in the quarter that ended on May 31, according to a statement. Net income reached $3.32 billion, or $1.19 per share, compared with $3.19 billion, or $1.16 per share, in the year-ago quarter.
CEO Safra Catz said on a conference call that she expects fiscal first-quarter adjusted earnings of $1.12 to $1.16 per share and 8% to 10% revenue growth. Analysts polled by Refinitiv had expected $1.14 in adjusted earnings per share on $12.34 billion in revenue, which implies 7.8% growth.
The company’s top source of revenue, cloud services and license support, jumped 23% to $9.37 billion. But revenue from cloud licenses and on-premises declined 15% to $2.15 billion.
Revenue from cloud infrastructure totaled $1.4 billion, which was up 76%, accelerating from 55% growth in the prior quarter. That part of Oracle is expanding faster than Microsoft and Google but it’s still much smaller than that of their rivals. Oracle’s gross margin in the unit will continue to expand, Catz said on the call.
Larry Ellison, Oracle’s chair and technology chief, said the ocmpany will introduce a generative artificial intelligence cloud service tied to a partnership with startup Cohere, which has agreed to using Oracle’s cloud infrastructure. Microsoft, which has a partnership with startup OpenAI, offers the Azure OpenAI Service, allowing organizations to deploy large language models for taking human input and generating human-like responses.
“This new service protects the privacy of our enterprise customers’ training data, enabling those customers to safely use their own private data to train their own private specialized large-language models,” Ellison said. Oracle has started using the tool internally, he said.
During the quarter, Oracle said more of its cloud services had received approval for use by U.S. defense and intelligence agencies.
Excluding the after-hours move, Oracle shares have climbed almost 43% so far this year, while the S&P 500 index is up around 13%.
The stock rose 6% in regular trading, its best day in a year, after Wolfe Research analysts upgraded the stock to the equivalent of a buy from a hold based on improving financials along with the company’s position in AI.
Shares of Oracle Corp. rose after hours Monday after the IT and cloud infrastructure provider reported fiscal fourth-quarter results that topped expectations, helped by a jump in cloud revenue that executives said positioned the company well for the year to come.
The company reported fourth-quarter net income of $3.32 billion, or $1.19 a share, compared with $3.19 billion, or $1.16 a share, in the same quarter last year. Revenue rose 17% to $13.84 billion, compared with $11.84 billion in the prior-year quarter.
Excluding stock-based compensation, amortization and other charges, Oracle earned $1.67 a share, compared with $1.54 a year ago.
Analysts polled by FactSet expected Oracle to report adjusted earnings per share of $1.58, on revenue of $13.74 billion.
Oracle also declared a quarterly cash dividend of 40 cents a share. Revenue from Oracle’s cloud software and infrastructure services rose 54% during the quarter.
“So, both of our two strategic cloud businesses are getting bigger — and growing faster,” Chief Executive Safra Catz said in a statement. “That bodes well for another strong year in FY24.”
Oracle shares ORCL, +5.99%
were up 4.8% after hours on Monday. The stock closed regular trading up 5.8% to $116.43, putting it at a record high.
Earlier on Monday, Wolfe Research upgraded Oracle, saying its cloud business could double its market share by 2025 “on the backs of architectural advantages, partnerships” and generative AI.
UBS analysts also said they expected Oracle to highlight its cloud-AI partnership with chip maker Nvidia Corp. NVDA, +1.84%,
which analysts say is set to benefit from more AI development. Those expectations were confirmed on Monday, when Oracle management name-checked Nvidia in its earnings release.
“Nvidia themselves are using our clusters, including one with more than 4,000 GPUs, for their AI infrastructure,” Larry Ellison, Oracle’s co-founder and chief technology officer, said in the release.
Shares of Oracle have marched 81.7% higher over the past 12 months. The S&P 500 Index SPX, +0.93%
has risen 15.7% over that period.
Microsoft‘s massive investment in OpenAI has put the company at the center of the artificial intelligence boom. But it’s not the only place where the software giant is opening its wallet to meet the surging demand for AI-powered services.
CNBC has learned from people with knowledge of the matter that Microsoft has agreed to spend potentially billions of dollars over multiple years on cloud computing infrastructure from startup CoreWeave, which announced Wednesday that it raised $200 million. That financing comes just over a month after the company attained a valuation of $2 billion.
CoreWeave sells simplified access to Nvidia’s graphics processing units, or GPUs, which are considered the best available on the market for running AI models. Microsoft signed the CoreWeave deal earlier this year in order to ensure that OpenAI, which operates the viral ChatGPT chatbot, will have adequate computing power going forward, said one of the people, who asked not to be named due to confidentiality. OpenAI relies on Microsoft’s Azure cloud infrastructure for its hefty compute needs.
Microsoft and CoreWeave both declined to comment.
The generative AI rush began late last year after OpenAI introduced ChatGPT to the public, demonstrating that AI can take human input and produce sophisticated responses. Many companies, including Google, have since rushed to add generative AI into their products. And Microsoft has been busy releasing chatbots for its own services, such as Bing and Windows.
With so much demand for its infrastructure, Microsoft needs additional ways to tap Nvidia’s GPUs. CoreWeave CEO Michael Intrator declined to comment about the Microsoft deal in an interview last month, but he said revenue has “gone up by many multiples from 2022 to 2023.”
Nvidia-backed startup Coreweave is based in Roseland, New Jersey, with 160 employees.
CoreWeave
CoreWeave’s announced funding on Wednesday from hedge fund Magnetar Capital was an extension of a $221 million round in April. Nvidia invested $100 million in the prior financing, Intrator said. CoreWeave was founded in 2017 and has 160 employees.
Nvidia’s stock price is up 170% this year. The company’s market cap briefly topped $1 trillion for the first time this week after it issued a forecast for the July quarter that was over 50% higher than Wall Street estimates.
The chipmaker’s growth will “largely be driven by data center, reflecting a steep increase in demand related to generative AI and large language models,” Colette Kress, Nvidia’s finance chief, said on last week’s earnings call. OpenAI’s GPT-4 large language model, trained with Nvidia GPUs on extensive online data, is at the core of ChatGPT.
Kress referred to CoreWeave by name on the call, and in March, Nvidia CEO Jensen Huang mentioned CoreWeave in his presentation at Nvidia’s GTC conference.
CoreWeave’s website claims the company can deliver computing power that’s “80% less expensive than legacy cloud providers.” Among other cards, CoreWeave offers Nvidia’s A100 GPUs, which developers can also find through the Amazon, Google and Microsoft clouds.
In addition, CoreWeave has available less expensive Nvidia A40 GPUs that are marketed for visual computing, while the A100 targets AI, data analytics and high-performance computing. Some CoreWeave clients have struggled to obtain enough GPU power on big clouds, Intrator said. At times prospects have asked for A100 or newer H100 GPUs from Nvidia, and the company has instead recommended A40 GPUs.
These “will do an excellent job at a very cost-effective price,” Intrator said.
Microsoft has had discussions with Oracle about the two companies renting servers from each other if they need added capacity, The Information reported earlier this month, citing an unnamed person.
As investors look for winners in the artificial intelligence boom, several software stocks stand out, including Microsoft and Oracle, according to Bank of America. The burgeoning interest in AI was further fueled by Nvidia ‘s recent blowout earnings, which briefly propelled the chip stock to a $1 trillion valuation Tuesday. The AI darling has gained a whopping 174% year to date. Given the “immense opportunity ahead for both vendors and investors,” Bank of America analysts have created a proprietary ranking system to identify potential AI beneficiaries in the software group. The rankings identify consensus AI leaders and software vendors, the firm said in a note Tuesday. Among the factors expected to contribute to success in AI are access to high volumes of quality data, market-leading install bases for ongoing data acquisition and highly specialized solutions embedded within enterprises, analyst Brad Sills said. “We have created a proprietary framework of analysis (based on 13 yes or no questions) that investors can use to predict potential AI beneficiaries. These questions address a wide range of topics including data advantages, disruption potential, resources for innovation, and go-to-market differentiation, among others,” he wrote. The firm then assigned points to the names, with nine being the maximum and the best-positioned for AI opportunities. These are among the stocks that topped the list. Microsoft is the only name that received the top score from Bank of America. The tech giant has invested billions of dollars in OpenAI and recently announced it will offer Bing as the default search engine in OpenAI’s ChatGPT chatbot. “Microsoft has confirmed a multiyear, multibillion dollar investment in OpenAI and partners with OpenAI to 1) power its own AI offerings and 2) offer OpenAI development services via Azure OpenAI. Microsoft expects AI services to contribute 1% growth to Azure in FQ4,” Sills wrote. Shares of Microsoft are up nearly 37% year to date. Oracle is another potential winner, according to Sills, who raised his price target to $112 per share from $95 Tuesday. The new target implies 6.5% upside from Tuesday’s close. The company has AI and machine learning built into its core offerings, said Sills. “We expect Oracle to incorporate gen AI more heavily into its application suites (such as Fusion and NetSuite),” he said. “Generative AI models could be finetuned using the company’s available data to suggest to users more robust recommended actions on the apps side.” Oracle can also fine-tune software, including those related to its digital assistant and document understanding, to make its cloud infrastructure “an increasingly compelling platform for AI-related workloads,” Sills noted. Shares have gained about 29% so far this year. Meanwhile, HubSpot ‘s stock soared nearly 77% year to date. The company’s ChatSpot, a conversational customer relationship management bot, connects marketing, sales and service professionals to HubSpot. Bank of America sees more investments in AI ahead. “The company has ratcheted up its commentary regarding incremental investments going to AI/ML,” Sills said. “For example, AI can help service professionals anticipate customer needs, suggest resolutions, and drive better outcomes.” HubSpot may also potentially use AI for data cleansing and email data capture, among other things, he said. — CNBC’s Michael Bloom contributed reporting.
Montana legislators approved a bill on Friday that would ban TikTok from being offered in the state in a 54-43 vote. The bill, SB 419, now goes to Montana Republican Governor Greg Gianforte for approval.
TikTok, which is owned by China’s ByteDance, is likely to take action to prevent the bill from becoming law. If implemented, it would be the first statewide ban of its kind.
Beyond Montana, federal lawmakers have for months been pushing an act that would ban TikTok across the country if ByteDance won’t sell its stake in the viral video app. That threat presents severe potential challenges to TokTok, and the company has invested millions of dollars into combating the effort.
The Montana bill cited likely Chinese surveillance and the potential theft of state intellectual property as some of the impetus behind the ban. Should a law be enacted, mobile app store providers like Apple and Google would be required to disable Tiktok downloads from within Montana, and TikTok would be prohibited from offering the platform to state residents.
The ban would take effect on Jan. 1, 2024.
“TikTok’s stealing of information and data from users and its ability to share that data with the Chinese Communist Party unacceptably infringes on Montana’s right to privacy,” the bill reads. Montana is one of the least-populated states in the U.S., with just over 1 million residents as of the 2020 census.
Gianforte knows the tech industry well. Prior to public office, he ran RightNow Technologies, a software company he founded in 1997. Oracle acquired RightNow in 2012 for $1.5 billion. As of 2018, Gianforte had an estimated net worth of over $189 million, according to OpenSecrets.org.
In 2020, Oracle agreed to provide backend technology to TikTok as part of an arrangement to keep the app, at the time, from being banned by the U.S. government. Oracle is currently the cloud hosting service for all of TikTok usage in the U.S.
Customers in Montana won’t be fined if they fail to abide by the ban or evade it. But companies, including TikTok, face a $10,000 fine per violation if they’re found to have skirted the ban.
State Sen. Shelley Vance, a Republican, sponsored the bill. Vance did not immediately respond to a request for comment.
TikTok said it opposes the bill, adding that there’s no clear path for the Montana government to enforce it or punish violators.
“The bill’s champions have admitted that they have no feasible plan for operationalizing this attempt to censor American voices and that the bill’s constitutionality will be decided by the courts,” TikTok said in a statement. “We will continue to fight for TikTok users and creators in Montana whose livelihoods and First Amendment rights are threatened by this egregious government overreach.”
TikTok and its parent company combined to spend more than $13 million on lobbying federal government officials since 2019 — an effort that appears to have fallen flat as lawmakers push proposals targeting the app’s ownership by a Chinese company or even seek to ban TikTok in the U.S. outright.
Weeks after Republican Rep. Ken Buck of Colorado and Sen. Josh Hawley of Missouri introduced legislation that would bar TikTok downloads nationwide, Buck’s staff received a call in February from Michael Beckerman, the head of the social media company’s U.S. public policy shop, according to a person close to Buck.
Beckerman pushed back on concerns from Buck’s staff that TikTok is harvesting customer data, and advocated for the company’s new initiative known as Project Texas, this person explained. Project Texas is TikTok’s effort to place its U.S. customer data into a secure hub managed by the tech giant Oracle, which is meant to ease U.S. government concerns that the informationcould be accessed by Chinese parent company ByteDance or members of the ruling party in China.
The lobbying comes amid a sustained effort by TikTok to play down fears raised by lawmakers who want to ban the app, which has 150 million monthly active users in the U.S.The company has tried to show it can address concerns about user information without an outright ban, but most lawmakersata contentious hearing about TikTok this monthseemed unconvinced Project Texas would adequately do so.
TikTok Chief Executive Shou Zi Chew looks on as he testifies before a House Energy and Commerce Committee hearing entitled “TikTok: How Congress can Safeguard American Data Privacy and Protect Children from Online Harms,” as lawmakers scrutinize the Chinese-owned video-sharing app, on Capitol Hill in Washington, March 23, 2023.
Evelyn Hockstein | Reuters
TikTok CEO Shou Zi Chew told U.S. lawmakers at the hearing that China-based employees at ByteDance may haveaccess to some U.S. data from the app. But he assured them employees would no longer have that data once Project Texas is complete.
The sustained lobbying pressure and Chew’s testimony so far have not stifled the effort on Capitol Hill to sever TikTok’s ties to its Chinese owner or limit access to the app.
Brooke Oberwetter, a spokeswoman for TikTok, did not deny any element of this story.She defended the work of TikTok’s team in Washington and said the company is trying to address lawmakers’ privacy and safety concerns.
“Our team in Washington is — and always has been — focused on educating lawmakers and stakeholders about our company and our service,” Oberwetter said. “We will continue our work to educate lawmakers and the American public about our progress in implementing Project Texas to address national security concerns, and we will continue to work with lawmakers, stakeholders, and our peer companies on solutions that address the industrywide issues of privacy and safety.”
One of the leading proposals targeting TikTok is the RESTRICT Act, introduced by a bipartisan group of senators led by Sens. Mark Warner, D-Va., and John Thune, R-S.D.. The bill, which does not yet have companion legislation in the House, would give the Commerce secretary the authority to evaluate national security risks related to certain technology transactions with firms or individuals in a select group of foreign adversary countries, including China. The Commerce secretary could recommend the president take action up to a ban.
Another proposal is the DATA Act, introduced by Rep. Mike McCaul, R-Texas. It would revoke protections that have typically shielded creative content from U.S. sanctions. It would also mandate the president impose sanctions on China-based companies that transfer Americans’ sensitive personal data to individuals or businesses in China. The proposal passed through the GOP-led House Foreign Relations Committee along party lines, with Democrats fearing it was rushed.
At the furthest end of the extreme is the legislation from Hawley and Buck that simply seeks to ban TikTok outright by directing the president to block transactions with ByteDance.
Since the call with Beckerman, Buck has not held back in calling the app a threat to national security. Buck’s staff members responded to Beckerman that they were still concerned about the company’s privacy, cybersecurity and national security policies, the person close to Buck said.
Another ally of the Colorado lawmaker said the lobbying money is wasted on trying to change Buck’s mind. “It’s like they’re lighting their money on fire,” a Republican strategist allied with Buck told CNBC.
Another GOP strategist familiar with TikTok’s lobbying efforts told CNBC that the company’s “last-minute blitz” to lobby Capitol Hill weeks before Chew’s testimony was “amateur hour.” The person said congressional offices at times declined meetings with company representatives, and that TikTok officials did not reach out to key lawmakers such as Hawley who have targeted the app.
Hawley has not eased his campaign to ban TikTok. He tried on Wednesday to win unanimous Senate support to fast-track his bill. Sen. Rand Paul, a Kentucky Republican who is now among the small group of lawmakers from both parties who have opposed the effort to bar access to the app, blocked Hawley’s legislation. While there are plenty of lawmakers who haven’t yet concluded a ban is necessary, only a handful have openly ruled it out.
Those who declined to be named in this story did so to speak freely about private conversations and meetings. A Hawley spokeswoman did not return a request for comment.
The interaction with Buck’s team represents just one of many instances when lobbyists for TikTok, or its China-based parent company ByteDance, have seen their campaigns fall on deaf ears on Capitol Hill, according to advisors and aides to congressional lawmakers. The fact that some lawmakers have showed little interest in hearing out TikTok executives is the latest sign the company may need more allies in Congress to prevent new restrictions on the app or a potential ban.
Warner met earlier this year with TikTok lobbyists, according to a person at the gathering at the senator’s office. The Virginia lawmaker and Thune later introduced their bill that would empower the Commerce secretary to take action against TikTok. The White House has since endorsed the bill and called for Congress to pass it so President Joe Biden can sign it.
Warner’s office did not return a request for comment.
TikTok appears to have ramped up its lobbying just ahead of Chew’s testimony in front of the House Committee on Energy and Commerce. The company flew TikTok influencers to Washington before the event.
The company also had allies in ahandful of Democratic lawmakers such as Rep. Jamaal Bowman, D-N.Y. A day before the hearing, he and popular content creators on the app held a news conference to oppose a potential ban.
But in private meetings, some of those same influencers told Bowman that there need to be regulations passed to protect their data across all social media platforms, including TikTok, while keeping the app intact, according to an aide familiar with the discussions.
Regardless of their impact on lawmakers, creators’ pleas to maintain access to TikTok in the U.S. have seemed to resonate with many American users who see the app as a source of entertainment, information and even income.During and after the hearing, TikTok users shared clips of lawmakers asking basic questions of the CEO, deriding Congress for what they saw as a lack of understanding of the technology.
But based on the five hours of tense questioning by members of both parties at the hearing, the creators’ appeals didn’t seem to offset the deep concerns lawmakers shared about the app’s connections to China, along with the addictive and potentially harmful qualities of its design.
“I don’t think they won over any lawmakers,” Alex Moore, communications director for Rep. Jan Schakowsky, D-Ill., said of TikTok’s pre-hearing lobbying. Bringing in TikTok creators to amplify the company’s message “hasn’t swayed my boss,” Moore added.
Still, Moore said his office has been hearing a lot from constituents since the hearing. Before the testimony, calls about TikTok would “trickle in,” he said. But after, “our phones were ringing off the hook,” with the majority of callers voicing opposition to a TikTok ban.
“We heard overwhelmingly that’s not what our constituents are interested in,” he said.
While often a call like that “starts out hot,”Moore saidconstituentswould tend to calm down once staff explained that Schakowsky wants comprehensive privacy legislation so as not to “let other companies off the hook” for similar data practices.
Schakowsky told CNBC immediately after the hearing that there will still likely be “further discussion” about how to address the concerns directly related to TikTok’s Chinese ownership. But Schakowsky, who co-sponsored the bipartisan privacy legislation that passed out of the committee last Congress, said she hopes the hearing brings renewed momentum to privacy protections that would apply to other large tech companies as well.
TiKTok’s and ByteDance’s lobbying efforts are directly linked.
ByteDance’s quarterly lobbying reports show all of their in-house lobbyists work for TikTok. They include Beckerman, who once worked as a policy director for former GOP Rep. Fred Upton of Michigan, along with Freddy Barnes, who had a stint in Republican House Speaker Kevin McCarthy’s office.
TikTok itself has hired its own legion of outside lobbyists. Its latest recruits include former Rep. Jeff Denham, R-Calif., and Ankit Desai, a former aide to Biden when he was a member of the U.S. Senate.
ByteDance and TikTok have combined to spend over $13 million on federal lobbying since 2019, according to lobbying disclosure reports and data reviewed by OpenSecrets.
The majority of the spending on lobbying related to the social app has come from ByteDance.The TikTok parent company spent $5.3 million on federal lobbying in 2022, a new record for the company, according to the nonpartisan OpenSecrets.
TikTok itself has spent just over $900,000 since 2020 on outside lobbying consultants.
ByteDance alsodonated over $400,000 last year to nonprofit groups allied with members of Congress for “honorary expenses,” according to a filing.
The document shows that ByteDance donated a combined $300,000 to the Congressional Hispanic Caucus Institute and Congressional Black Caucus Foundation, groups linked to predominantly Democratic caucuses in the House. Each of those organizations list Jesse Price, a public policy director at TikTok, as a member of either its board of directors or advisory council.
Beckerman, the leading TikTok lobbyist, signed the report showing the contributions ByteDance made.
TikTok and ByteDance have also targeted Biden’s executive office in the White House with lobbying since 2020, according to disclosure reports.
The White House did not respond when asked about further details on the lobbying effort.
The TikTok logo is displayed outside TikTok social media app company offices in Culver City, California, on March 16, 2023.
Patrick T. Fallon | AFP | Getty Images
TikTok is at risk of being banned in the U.S. if Chinese parent ByteDance won’t sell its stake. Millions of Americans who use the popular video app are left wondering what that means for them.
Some fans of the service may turn to virtual private networks (VPNs) to try and connect to TikTok should a ban take place, a workaround that can make it seem like their internet connection is coming from a different country. But that loophole may not be so easy to exploit.
related investing news
It’s not an issue yet, as there are still some ways a TikTok ban could be avoided or accessed legally in the U.S. Here are the key things under consideration.
The Committee on Foreign Investment in the U.S. (CFIUS) is the interagency body evaluating national security concerns around the app to determine how to minimize risk if it continues to operate domestically. The group can recommend to President Joe Biden that ByteDance’s 2017 acquisition of Musical.ly, a TikTok precursor, be unwound, forcing a sale of those assets.
TikTok has recommended a mitigation plan as an alternative to a forced sale. But that’s a longshot solution as CFIUS already threatened a ban if ByteDance won’t sell its stake.
A forced sale would be a complex step, requiring a years-old transaction to be unwound. The Trump administration pursued that route once before to no avail. The Chinese government would likely oppose it again, but it would need to be careful in its protests because the heart of its argument to the U.S. is that TikTok operates independently.
“That would be part of the calculus and how aggressively China would want to respond,” said Lindsay Gorman, a senior fellow for emerging technologies at the German Marshall Fund’s Alliance for Securing Democracy. Gormany previously served as a senior advisor at the Biden White House.
Should the U.S. ban TikTok, the mechanics on what happens from there get murky. Oracle is the cloud hosting service for all of TikTok usage in the U.S. Internet service providers like Comcast (NBC Universal’s parent company) and Verizon direct traffic to end users. And the app stores controlled by Apple and Google are the primary places for consumers to download the TikTok app.
Shannon Reaves, a partner in Stroock’s CFIUS compliance group, said any requirement on a third party would not come from CFIUS, which is tasked with evaluating foreign investments alone.
“There won’t be action from CFIUS as a result of this review that will be taken against third parties that are not a part of this transaction,” Reaves said. “So your Apples and your Googles and so forth, that that will not happen.”
The government may have to turn to legislation or executive orders to get app distributors, ISPs and cloud services to block access to TikTok.
While there will likely always be cracks that can be exploited by a subset of computer literate users, the typical consumer would find it difficult to access a government banned service, said Douglas Schmidt, an engineering professor at Vanderbilt.
“There will almost always be ways around this,” Schmidt said. “It would just be a lot more difficult for the average person to do it without getting an advanced degree in computer security or something.”
In other words, a VPN won’t be enough, in part because going that route would still likely require app store credentials, which will indicate a user’s location. Gerald Kasulis, a vice president at NordVPN, said there’s also technology available to detect when a user is trying to access an app with a VPN.
TikTok has sought to reassure the U.S. government that U.S. user data is stored outside of China. The company has developed an elaborate plan known as Project Texas that includes the vetting of its code in the U.S. and a separate board of directors for a domestic subsidiary, with members reviewed by the U.S. government.
TikTok CEO Shou Zi Chew, who’s set to testify before a U.S. House panel next week, told The Wall Street Journal that Project Texas would do just as much as divestment to resolve any security concerns.
But the mood in Washington isn’t moving in TikTok’s favor, and legislators have lost whatever trust they once may have had in China and its motives. That issue resurfaced earlier this year, when a suspected Chinese spy balloon was spotted flying across a large swath of the U.S. Biden ordered the military to shoot down the balloon last month.
When it comes to consumer technology, users have no idea what information is making its way to the Chinese government. And the U.S. government has a lot of work to do to provide clarity on what would happen if the app was to be banned.
“Even for someone who studies this stuff, it’s not easy to detach and detangle all these apps,” said Gorman. “As a society, we have not made the decision that the app stores, the Apple App Store or the Google Play Store, should be restricting apps based on the amount of information they collect. It can’t be put on any individual and it really does need to be addressed by governments.”
While many users may think their casual social media use would be of little interest to a foreign government, Schmidt said that data can have a surprising amount of value to bad actors.
“Having information about your habits and your interests and your interactions and where you go and what you do could be used for things like either phishing attacks to get access to more information, or for things like blackmail, if you’re doing things that you might not want other people to know about,” Schmidt said.
It’s unfamiliar territory for U.S. companies, in contrast to China, which blocks access to all sorts of content, including most major U.S. internet services.
“Trying to police data access is very, very difficult, especially when there’s suspicion that the folks who are doing this have a reason to do it,” Schmidt said. “And they’re heavily incentivized to collect this information and use it for all kinds of purposes.”
U.S. stocks ended sharply lower Friday as investors parsed mixed signals from the February jobs report amid ongoing concerns about contagion in the banking sector from the troubles at Silicon Valley Bank.
How stocks traded
The Dow Jones Industrial Average DJIA, -1.07%
dropped 345.22 points, or 1.1%, to close at 31,909.64, its fourth straight day of declines for its longest losing streak since December.
The S&P 500 SPX, -1.45%
fell 56.73 points, or 1.4%, to finish at 3,861.59.
Nasdaq Composite COMP, -1.76%
sank 199.47 points, or 1.8%, to end at 11,138.89.
For the week, the Dow sank 4.4%, S&P 500 dropped 4.5% and the Nasdaq shed 4.7%, according to Dow Jones Market Data. The Dow booked its worst week since June, the S&P 500 saw its biggest weekly percentage decline since September, and the Nasdaq had its biggest percentage slide since November.
What drove markets
U.S. stocks slumped amid investor concerns about the banking sector after the closure of Silicon Valley Bank by the Federal Deposit Insurance Corp and in the wake of the monthly employment report released Friday.
In a sign of investor anxiety, the CBOE Volatility Index VIX, +9.69%
was up Friday afternoon at almost 25, after jumping Thursday, according to FactSet data, last check.
“Bears came out of hibernation this week after waking up to a warning shot from the banking space,” said Adam Turnquist, chief technical strategist for LPL Financial, in emailed comments Friday, pointing to the collapse of Silicon Valley Bank.
Silicon Valley Bank was closed Friday by the California Department of Financial Protection and Innovation. The Federal Deposit Insurance Corp. was appointed receiver, with the bank becoming the first FDIC-backed institution to fail this year.
The SPDR S&P Regional Banking ETF KRE, -4.39%
was down more than 4% Friday afternoon, FactSet data show, while shares of Bank of America Corp. BAC, -0.88%
closed 0.9% lower, Citigroup Inc. C, -0.53%
slid 0.5% and JPMorgan Chase & Co. JPM, +2.54%
rose 2.5%.
Worries over the banking sector are “probably overshadowing” the positive aspects of the employment report, said Karim El Nokali, investment strategist at Schroders, in a phone interview Friday.
The U.S. employment report for February showed the labor market continued to grow at a robust pace last month, with the U.S. economy adding 311,000 jobs, more than the 225,000 that economists polled by the Wall Street Journal had expected.
But “if you dig a little deeper” into the report, average hourly earnings came in “a little lighter than expected” while labor-force participation ticked up, which are positive developments from an inflation standpoint, said El Nokali.
Average hourly wages grew by 0.2%, a slower rate than the 0.3% rate economists had expected. It was also less than the 0.3% increase in January. The unemployment rate ticked higher to 3.6%, helped by an increase in the labor-force participation rate.
“On the margin,” said El Nokali, the employment report was “positive for the equity market.” He said it would “probably argue more” for the Federal Reserve to raise its benchmark rate by 25 basis points at its policy meeting later this month, as opposed to a 50-basis-point hike that investors had been fearing leading up to the employment data.
Fed Chair Jerome Powell said earlier this week that the “totality” of jobs and inflation data would determine whether the central bank would go back to raising its policy interest rate by another 50 basis points at its meeting later in March.
After climbing earlier in the week, odds of a 50-basis-point rate hike by the Fed have moderated over the past 24 hours. Traders now see a 62% chance of the central bank raising its benchmark rate by 25 basis points, according to the CME FedWatch Tool.
Meanwhile, Treasury yields sank Friday.
The yield on the 2-year Treasury note TMUBMUSD02Y, 4.594%
dropped 31.4 basis points to 4.586%, while the 10-year Treasury yields fell 22.8 basis points to 3.694%, according to Dow Jones Market Data. The Treasury yield curve remains massively inverted, which has contributed to banks’ woes.
Companies in focus
SVB Financial Group, the parent of Silicon Valley Bank, saw its shares halted for volatility after falling 60% on Thursday. The bank was taken over by the FDIC helping to a broader selloff in regional and international U.S. banks that has weighed on the broader market.
Barnes & Noble Education Inc. BNED, +6.98%
climbed 7% after the company trimmed its third-quarter loss to 48 cents per share from a loss of 71 cents a year ago.
Oracle Corp. ORCL, -3.22%
shares dropped 3.2% after the software company’s fiscal third-quarter revenue fell short of Wall Street expectations. Adjusted earnings were $1.22 per share, compared to $1.13 in the year-ago period.
Gap Inc. GPS, -6.13%
shares slid 6.1% after the clothing retailer predicted first-quarter sales could fall “in the mid-single-digit range” compared to the same quarter last year. The company said it would lay off executives and thin management layers as part of a bid to cut $300 million in costs.
