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. Stocks fell Tuesday despite an early pop in tech stocks, led by Oracle ‘s 11% gain. The database software maker posted a fiscal 2025 first-quarter beat on the top and bottom lines Monday after the bell. The company is aggressively building out data centers to meet artificial intelligence demands from its customers. The Investing Club portfolio has lots of exposure to the AI buildout through its investments in Eaton , Dover , Broadcom and Nvidia , among others. Meanwhile, shares of Apple were down 1% following the company’s iPhone 16 event Monday. While the announcements on its new AI capabilities weren’t needle movers for the stock, they should be a long-term driver of growth. Bank stocks were also down Tuesday, with shares of JPMorgan falling 6.5% after the company offered a cautious outlook at a banking conference. Club stock Wells Fargo was being painted with a broad brush, falling 2%. At the conference, Wells made no change in its forecasts. Jim reiterated his favorable view on Wells Fargo, citing its 3% annual dividend yield and “incredibly cheap” valuation. Also on watch are proposals from the Fed’s vice chair for supervision that would lower the extra capital cushion required of big banks. Costco caught a downgrade Tuesday from Redburn Atlantic. The analysts went to a neutral rating from buy — calling the stock’s valuation too expensive. The analysts increased Costco’s price target to $890 per share from $860. But that’s only right at the level Costco was trading Tuesday. Analysts said the current risk/reward profile on the stock is “skewing less favorably given the even higher than normal expectations.” Jim said, however, “Costco has been expensive and always will be expensive,” suggesting it’s worth it. Stocks covered in Tuesday’s rapid fire at the end of the video were Southwest , Oracle , Johnson Controls , Boot Barn , and Goldman Sachs . (Jim Cramer’s Charitable Trust is long ETN, DOV, AVGO, NVDA, WFC, 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.
Tag: Palantir Technologies Inc.
-
Europe stocks close 2.2% lower amid global downturn as volatility index spikes to Covid-era high
LONDON — European markets fell sharply at the start of the new trading week, though pared losses towards the end of the session amid a global stock sell-off.
The regional Stoxx 600 index closed 2.17% lower, pulling back from declines of more than 3% as the technology sector clawed back some ground to end 0.9% lower.
All sectors and major bourses nonetheless finished in the red, with utilities and oil and gas stocks both losing over 3%.
Strategists pointed to several causes for the downturn across Europe, Asia and the U.S. which began last week, including fears of a U.S. recession and rapid Federal Reserve Rate cuts, the recent hawkish pivot by the Bank of Japan and crash in the yen “carry trade,” and an ongoing re-rating of the tech sector.
The VIX, a measure of expected market volatility, jumped more than 100% to 64.06 during Monday trade before cooling to around 35, still its highest level since 2020.
U.S. stocks saw steep losses through the morning, with the Dow Jones Industrial Average losing nearly 1,000 points, or 2.5%, as the tech-heavy Nasdaq Composite fell 2.6%.
Asia-Pacific markets had led the sell-off on Monday. Japan stocks entered a bear market, with the Nikkei 225 losing 12.4% to log its worst day since 1987.
The broad-based Topix also saw a rout, tumbling 12.23%, while heavyweight trading houses such as Mitsubishi, Mitsui and Co., Sumitomo and Marubeni all plunged more than 14%.
The yen, meanwhile, rose to its highest level against the dollar since January as U.S. Treasurys gained.
On the data front, demand for U.K. services rose in July, increasing to 52.5 from 52.1 the previous month, fresh purchasing managers’ index data showed Monday. Corresponding data for Italy and Spain also pointed to sustained growth in the sector but at a slower pace than previous months.
-
Elon Musk plans to give $45 million a month to pro-Trump super PAC, WSJ reports
Elon Musk attends ‘Exploring the New Frontiers of Innovation: Mark Read in Conversation with Elon Musk’ session during the Cannes Lions International Festival Of Creativity 2024 – Day Three on June 19, 2024 in Cannes, France.
Marc Piasecki | Getty Images
Elon Musk has said he is planning to pledge about $45 million a month to a newly formed super PAC backing former President Donald Trump‘s White House bid, the Wall Street Journal reported Monday, citing people familiar with the matter.
Musk had not given any money to that group, called America PAC, as of the end of June, according to a quarterly financial filing submitted to the Federal Election Commission on Monday evening.
It is unclear if he has donated in July. Emails to Musk’s associates were not immediately returned late Monday.
But the super PAC, which was formed in late May, has received contributions from other high-profile entrepreneurs, including Palantir co-founder Joe Lonsdale and crypto billionaires Cameron and Tyler Winklevoss, the filing showed.
Lonsdale donated $1 million to America PAC through Lonsdale Enterprises, an entity linked to the eponymous tech investor, multiple outlets reported.
The Winklevoss twins each donated $250,000 to the super PAC, the FEC filing showed.
Lonsdale could not immediately be reached for comment.
America PAC brought in $8.8 million and spent $7.8 million between its inception and the end of June, leaving it with just under $1 million in cash on hand, according to the FEC filing.
Musk, the CEO of Tesla and SpaceX and one of the world’s richest people, officially endorsed Trump on Saturday, minutes after the Republican presidential nominee survived an assassination attempt at a campaign rally.
The report of Musk’s pledge to help Trump defeat President Joe Biden came on the first day of the Republican National Convention in Milwaukee, where Trump secured enough delegates to officially become the GOP nominee.
Read the full report from The Wall Street Journal.
— CNBC’s Lora Kolodny contributed to this report.
-
CNBC Daily Open: Wall Street rattled over Fed worries
A trader works, as a screen displays a news conference by Federal Reserve Board Chairman Jerome Powell following the Fed rate announcement, on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 31, 2024.
Brendan McDermid | Reuters
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Wall Street retreats
U.S. stocks lost ground on Monday and Treasury yields rose amid lingering concerns that the Federal Reserve may not cut rates as much as expected. The blue-chip Dow fell over 200 points. The S&P 500 also slumped after hitting a record high last week. The Nasdaq Composite also dropped 0.2%.Oil’s supply crunch
The oil market faces a supply crunch by the end of 2025 as the world is not replacing crude reserves fast enough, according to Occidental CEO Vicki Hollub. About 97% of the oil produced today was discovered in the 20th century, she told CNBC.Palantir surges
Shares of Palantir spiked 19% in extended trading after the company reported revenue that topped analysts’ estimates. In a letter to shareholders, Palantir CEO Alex Karp said demand for large language models in the U.S. “continues to be unrelenting.”Red Sea tensions
Higher shipping costs due to tensions in the Red Sea could hinder the global fight against inflation, said the Organisation for Economic Co-operation and Development. Clare Lombardelli, chief economist at the OECD, told CNBC that shipping-driven inflation pressures remain a risk rather than its base case.[PRO] Banking allure
The banking sector offers attractive opportunities despite an increase in volatility, according to fund manager Cole Smead. “It’s the banks that made bad decisions that are making [other] banks look attractive in pricing,” Smead told CNBC, who picked two bank stocks that are in play.The bottom line
Investors are once again getting ahead of themselves on the Fed’s next move.
Markets were rattled after Federal Reserve Chair Jerome Powell reiterated the central bank is unlikely to rush to lower interest rates.
Wall Street has been parsing his hawkish comments, yet in essence what Powell said over the weekend was no different than what he shared at Wednesday’s press conference: that he wants to see more evidence that inflation is coming down to a sustainable level.
Still, the debate over the timing of rate cuts unsettled Fed watchers.
This sparked a sell-off spurred by higher bond yields. The yield on the 10-year Treasury spiked for a second day, trading around 4.163%. Typically, higher yields tend to indicate investors think the Fed will take longer to cut rates.
Fresh data out Monday also didn’t help. A new survey showed the U.S. services sector expand at a faster-than-expected clip in January.
This on top of the booming jobs report released Friday, fueled investor worries that rates may stay elevated for much longer.
Wall Street will now look ahead to the swath of Fed speakers this week. Perhaps they will shed more light on the path for rate cuts.
-
Palantir stock jumps 19% as AI demand drives revenue beat
Palantir co-founder and CEO Alex Karp arrives for a U.S. Senate bipartisan Artificial Intelligence Insight Forum at the U.S. Capitol in Washington, D.C., on Sept. 13, 2023.
Stefani Reynolds | AFP | Getty Images
Palantir shares surged more than 19% in after-hours trading on Monday after the company reported fourth-quarter earnings that beat analysts’ expectations for revenue. Full-year guidance for 2024 came roughly in line with Wall Street’s estimates.
Here’s how the company did:
- Earnings per share: 8 cents adjusted vs. 8 cents expected by LSEG, formerly known as Refinitiv
- Revenue: $608.4 million vs. $602.4 million expected by LSEG
Revenue in the fourth quarter increased 20% to $608.4 million from $508.6 million a year earlier. The company reported a net income of $93.4 million, or 4 cents per share, compared with $30.9 million, or 1 cent per share, in the year-ago quarter.
In a letter to shareholders, Palantir CEO Alex Karp said the company’s expansion and growth “have never been greater,” especially as demand for large language models in the U.S. “continues to be unrelenting.” Palantir has been rolling out its Artificial Intelligence Platform, or AIP, and Karp said the company carried out nearly 600 pilots with the technology in 2023, up from fewer than 100 in 2022.
“Our results reflect both the strength of our software and the surging demand that we are seeing across industries and sectors for artificial intelligence platforms,” Karp wrote.
Palantir said it expects to report between $612 million and $616 million in revenue during its first quarter, and forecast revenue for the full year of $2.65 billion to $2.67 billion. Wall Street was expecting sales of $617 million for the first quarter and $2.66 billion for the year.
Palantir, known for its defense and intelligence work with the U.S. government, said its U.S. commercial revenue grew 70% year over year. Palantir said its U.S. commercial customer count increased 55% from 143 customers to 221 customers.
In the prior period, Palantir reported its fourth straight quarter of profitability, which means it’s now eligible for inclusion in the S&P 500.
WATCH: Palantir shares climb after earnings show jump in commercial customers
-
How Tesla rose to retail investor stardom: 'It's always in people's minds'
Several Tesla electric vehicles are parked in front of a Tesla service center in the Kearny Mesa region, in San Diego, California, U.S., October 31, 2023.
Abhirup Roy | Reuters
Marko Sustic has bet big on Tesla this year.
The investor, who also happens to work in the European auto industry, bought Tesla shares nearly every month in 2023 and has almost doubled the size of his position over the course of the year. Sustic has no other electric vehicle holdings out of a belief that competitors won’t be able to beat Tesla’s technology.
“There is no catching up with them,” said the 32-year-old, who also has two Tesla cars at his home in Croatia. “It’s just a matter of time when the stock will explode.”
Sustic isn’t alone. Tesla, which entered the S&P 500 three years ago this week, is on pace to attract the largest flow of individual investor dollars of any security in 2023, according to data from Vanda Research. The firm calculates net inflows to find these favorites, subtracting the amount of stock sold from what was bought.
That means Tesla will eclipse even the SPDR S&P 500 ETF Trust (SPY), which tracks the largest stock market index in the world. This underscores the stock’s fast ascent to retail-investor glory, especially considering Tesla wasn’t even among the top 20 equities that individual investors bought before 2019, Vanda data shows.
A banner year
Tesla’s increasing favor among retail traders can be tied to its comeback in 2023, according to Christopher Schwarz, a finance professor at the University of California Irvine. After plunging 65% in 2022, the Elon Musk-led stock has more than doubled in 2023.
The stock has outperformed the market this year in tandem with other mega-cap technology equities dubbed the “Magnificent 7.” Many investors looking to play “disruptive” technology in this elite group have focused on Tesla and chipmaker Nvidia. But after more than tripling this year thanks to an appetite for all things tied to artificial intelligence, Schwarz said Nvidia may be too expensive for many individual investors.
Schwarz researches retail trader behavior, and thinks a lot of attention comes from Musk. The Tesla CEO’s contentious purchase of X, formerly known as Twitter, has brought increased media coverage as well as scrutiny of the billionaire business mogul, Schwarz said.
When faced with thousands of stocks to choose from, Schwarz said individual traders mainly look for names that grab their attention, are familiar and have saliency to current trends. Given Musk’s persona, the growing ubiquity of Teslas on the road and concerns about climate change, Schwarz said Tesla checks many boxes for everyday investors.
“It’s always in people’s minds to trade when they’re looking for something to trade,” Schwarz said.
Tesla over the last 5 years
‘That was a bargain’
Individual investors told CNBC that Tesla’s bumpy ride in recent years hasn’t made them doubt the company as much as it’s created opportunities to pick up shares at cheaper prices. To them, there’s little doubt Tesla’s share price will continue to surge.
One of those is Jeremy Ford, a construction contractor in Virginia who first bought Tesla shares as the pandemic took hold in 2020. He became interested when his wife considered — and ultimately ended up — purchasing a Tesla.
Ford has tried to time buying and selling shares to Tesla news over the past year. For example, he sold some stock before what turned out to be poor third-quarter delivery numbers, only to load back up ahead of the release of new details about Tesla’s electric pickup truck.
The 48-year-old now holds about the same number of Tesla shares as he did when 2023 began, but lowered his cost basis. Given an interest in disruptive technology, Ford reallocated some of those profits to new stakes in Palantir and Nvidia. The latter is tracking to see the fourth largest net inflows this year, while the former is not in the top 20, according to Vanda data.
Elon Musk speaks onstage during The New York Times Dealbook Summit 2023 at Jazz at Lincoln Center on November 29, 2023 in New York City.
Slaven Vlasic | Getty Images
Still, he’s all in on Tesla’s story, citing the push into robots and AI chips as cause for long-term optimism. His only serious concern would be if Musk left and the company’s performance worsened.
“If you can find a company that makes a product that people love, and it’s different than anything that other people have, then you have that chance to really make substantial money,” Ford said. “At some point, I do believe that I’ll look back at the price of the stock now and go, ‘Wow, that was a bargain.’”
‘Guts and heart’
Despite Tesla’s strong year on Wall Street and Main Street, others see challenges ahead. Roth MKM analyst Craig Irwin said profit margins could come under pressure from additional price cuts amid cooling growth.
But that may not dent individual investors’ enthusiasm. In fact, Irwin said the stock could be a beneficiary of turbulence in the electric vehicle industry, because any uncertainty would lead investors to companies like Tesla that have proven they can design, make and sell vehicles.
Given their affinity for the brand, Irwin said retail investors may also stick with Tesla longer than institutional investors. That could keep Tesla stock “levitating” above where it would otherwise be priced.
“Retail tends to trade on guts and heart,” Irwin said. “And a lot of people love Tesla.”
Changes in individual investor sentiment are so key to Tesla’s stock performance that hedge funds take note of these trends when evaluating what to do, the analyst noted earlier this year.
Irwin is in the majority on Wall Street in giving Tesla a neutral rating of no more than “hold,” neither recommending it be bought nor sold. Following 2023’s rebound, the average analyst surveyed by LSEG sees the stock falling about 13% over the next year.
Individual investors have often been the butt of the joke, with investing experts pointing to their inability to time the market and best allocate their money.
Yet individual traders have gained attention following the rise of short-squeezed “meme” stocks during the pandemic. Even as that craze fizzled, retail trading remains popular: Everyday investors put more than four times the amount of money into their 20 most-bought securities in 2023 than they did in all of 2018, according to Vanda data from early December.
For Schwarz, the UC professor, the flight to Tesla this year is complicated.
It’s concerning, he said, if individual investors are making bigger bets on single stocks than funds that invest in diversified indexes like the S&P 500 ETF. Still, while investments that spread bets across a pool of stocks is safer, trying to pick certain companies is more desirable than not being in the market at all, he said.
“Traders would be much better off if they just bought [the] index and forgot the password to their brokerage account,” he said. But, “even if Tesla doesn’t do as well as the market, it’s still better than probably just spending it on useless consumption and not participating.”
-
AI gave tech giants a $2.4 trillion boost to their market caps in 2023
CFOTO | Future Publishing via Getty Images
U.S. tech giants added $2.4 trillion to their market capitalizations in a year defined by the hype around generative artificial intelligence, according to a new report from venture capital firm Accel.
Accel, in its annual Euroscape report, said the share price values of big technology firms such as Apple, Microsoft, Alphabet, Amazon and Nvidia rose by an average of 36% year over year.
Nvidia joined the trillion-dollar club for the first time, with the U.S. chip giant now worth over $1 trillion. Nvidia’s high-performance chips power many advanced generative AI models, which produce new content from huge volumes of training data.
The world’s biggest technology companies added $2.5 trillion to their market capitalizations in 2023, according to Accel data.
Accel
Accel’s Euroscape index, which includes massive cloud and software-as-a-service (SaaS) names such as Salesforce, Palantir and Unity, rose 29% in the year to date.
The Euroscape index, which tracks several publicly-listed cloud stocks, is up 29% year-to-date, according to Accel.
Accel
Last year, the picture for cloud and SaaS was grim. Companies saw $1.6 trillion wiped off their value as investors rotated out of high-growth tech stocks, according to Accel. Now, there are signs the pressure is easing.
Faster recovery than after dotcom bust
The tech-heavy Nasdaq Composite returned to 80% of its all-time high within 18 months, according to Accel, marking a faster bounce back than than after the dotcom bust in the 1990s.
The Nasdaq recovered 80% of its all-time high within 18 months.
Accel
It took the Nasdaq around 14 years to reach that milestone, Accel said.
It took the Nasdaq Composite 14 years to recover 80% of its 2000 peak.
Accel
Public multiples for Euroscape companies are also back to a 10-year pre-Covid average of 7.1-times next-twelve-months revenue. Funding for cloud and SaaS companies in Europe, Israel and the U.S. has also reverted to pre-Covid levels.
Public SaaS and cloud company multiples have reverted back to their 10-year, pre-Covid average, according to Accel.
Accel
“We are in a very different time than 2000,” Botteri told CNBC.
“If you look back at 2000, it really took a long time … for the Nasdaq to get back to 80% of its peak. And now, after the 2021 reset, it only took 18 months to get there.”
The year of AI
AI was the primary technology driving the performance of cloud and SaaS in 2023, according to Accel — and it’s not difficult to see why.
The world has been abuzz with talk about generative AI tools like OpenAI’s ChatGPT, Google’s Bard and Anthropic’s Claude.
“Generative AI is something that is really redefining software,” Philippe Botteri, partner at Accel, told CNBC on a call Friday.
“Any software company is leveraging generative AI, whether they’re just a startup or a new company or an existing company … You should really think about this as something that is pervasive.”
The U.S. led the way in generative AI funding deals, with the likes of OpenAI and Anthropic raising billions. OpenAI raised the biggest sum — $10 billion — and Inflection came second with $1.3 billion raised.
The number of new unicorns created in 2023 has reverted back to pre-Covid levels — however, AI is a bright spot with a majority of the unicorns now generative AI companies.
Accel
In Europe, three of the biggest generative AI company rounds came out of France — Hugging Face ($235 million), Poolside ($126 million) and Mistral AI ($113 million).
The number of unicorn companies reverted to pre-Covid levels, with AI taking up a much greater proportion of new billion-dollar companies. In Europe and Israel, 40% of new unicorns were in generative AI; in the United States, it was 80%.
Shifting focus to profitability
This year has been a tough one for tech, with fundraising and valuations dropping sharply as investors grew wary of the sector.
Tech companies tend to prioritize growth and expansion over short-term profits. But investors have been shifting money away from high-growth bets amid higher interest rates, which make the cost of capital more expensive.
Accordingly, the growth rates of Euroscape companies fell from an average of 68% in the first quarter of 2021 to 23% in the second quarter of 2023.
Free cash flow increased on average from -9% to +5% in the same period.
Big Tech takes a beating
This year, deal-making activity from tech giants hit a snag as regulators clamped down on those firms over concerns that they’d become too large.
There were only 10 transactions involving a Big Tech company this year, Accel noted. That’s down sharply from prior years. In 2021, acquisitions led by FAANG (Facebook, Amazon, Apple, Netflix and Google) hit 27, and in 2022 there were 26 Big Tech deals.
The number of Big Tech-led acquisitions declined sharply in 2023 — down from 26 last year.
Accel
One deal that faced a lot of pressure from regulators was Microsoft’s blockbuster bid to acquire Activision Blizzard, the massive video game studio behind hit titles “Call of Duty,” “Candy Crush” and “Crash Bandicoot.”
The two companies finally sealed the deal last week after British regulators gave their blessing. But that was only after a protracted fight between the two parties.
-
Startup investors are fueling a boom in U.S. defense tech as China standoff opens doors at home
Hadrian Automation CEO Chris Power
Hadrian Automation
When President Joe Biden announced an executive order last month limiting U.S. investment in critical technologies in China, the venture capital community hardly blinked.
That’s because many U.S. startup investors have already retreated from China, after years of political mudslinging between the world’s two largest economies led to increased sanctions and trade restrictions.
But with the door to the Chinese tech market closing, VCs are seeing new opportunities on their home turf. The U.S. government is actively promoting investments in semiconductors and broader industrial development, and investors are finding a widening talent pool invigorated to take on tough challenges in light of world events, with an explicit focus on protecting U.S. values.
“VCs are saying, ‘Where’s the most stable places to invest? And quite frankly, where’s the talent?’” said Gilman Louie, co-founder of venture firm Alsop-Louie Partners. He’s also CEO of America’s Frontier Fund, which says in its mission statement that it’s “committed to reinvigorating our nation’s innovation and manufacturing prowess in critical frontier technology sectors.”
“In uncertain times, when there’s unpredictability and global stress, whether you’re a U.S. investor or a foreign investor, you want to come to America to invest,” Louie said.
Once seen as a vast market of opportunity for U.S. tech companies and investors, China is now filled with more risk than reward and is increasingly viewed as a rival in developing key technologies, including advanced artificial intelligence and quantum computing, that will drive global markets in the decades to come.
Last year, the U.S. announced export controls aimed at limiting Beijing’s ability to produce advanced military systems, and more recently the Biden administration restricted the ability for U.S. investors to back critical tech in China.
Meanwhile, lawmakers passed the Chips and Science Act, which promised to pump tens of billions of dollars into semiconductor manufacturing in the U.S. The goal is to reduce international dependence on chips that are key to development of electronics, cars and medical equipment and are becoming more important to national security with the rapid evolution of AI.
Lindsay Gorman, senior fellow for emerging technologies at the German Marshall Fund’s Alliance for Securing Democracy, said she’s seen a “new crop of venture capitalists” in the last few years that prioritize U.S. tech competition with China and U.S. national security.
“Ten, 15 years ago, these geopolitical lines were not part of the equation,” Gorman said.
Louie added that he doesn’t “know of a single major fund out there that isn’t thinking about disruptive tech investing in the U.S., investing in defense tech, investing in microelectronics and AI in the next generation and next iteration.”
In Torrance, California, just south of Los Angeles, Hadrian Automation is building efficient factories to help space and defense companies get parts faster and cheaper. CEO Chris Power, who started the company in 2020, said he’s seeing increased interest from large growth funds that have typically invested in software.
“Everyone’s kind of standing up their own their own practices to support the market,” Power said. Hadrian’s early backers include Lux Capital and Peter Thiel’s Founders Fund, which have longer histories of investing in manufacturing and deep science.
Palmer Luckey, Founder @ Oculus VR Andutil Industries, during day two of Collision 2019 at Enercare Center in Toronto, Canada.
Stephen McCarthy | Sportsfile | Getty Images
VC funding in aerospace and defense tech has shot up in recent years, according to data compiled by PitchBook for CNBC. In 2019, 69 companies in the sector raised a total of $1.7 billion in value. In 2021, that jumped to 119 deals worth $6.4 billion. Last year, which was the worst for tech stocks since 2008, saw a slight slippage in the space to $5.6 billion, though the number of deals was the same as 2022, according to PitchBook.
The posterchild for U.S.-focused defense tech is Anduril Industries, co-founded in 2017 by Oculus Rift designer Palmer Luckey. The company, which ranked seventh on the latest CNBC Disruptor 50 List and has been valued at $8.4 billion by private investors, develops autonomous technology for national security and warfare.
On Thursday, Anduril announced the acquisition of Blue Force Technologies, which develops autonomous aircraft for defense and commercial customers.
While Anduril started with a focus on military contracts, other startups have navigated their way there.
Not just about patriotism
Saildrone, which makes unmanned ships, was originally focused on monitoring environmental data for fisheries and agencies like the National Oceanic and Atmospheric Administration.
It later became clear to CEO Richard Jenkins that the company needed to expand its aperture to bring in more revenue, since the government wasn’t spending enough on science to make the business work. Bilal Zuberi, a partner at early investor Lux, asked the company if it would consider selling its products to the Navy or Coast Guard.
Zuberi said Jenkins came to him with a key concern. He was unsure how his team would react if the environmental company they joined began selling to the defense sector. Zuberi talked about how he sees the opportunity differently. Saildrone’s technology can help prevent greater human casualty by, for example, learning of certain precise moves by the Chinese government in advance so the U.S. could send a warning signal and avoid a greater conflict.
Jenkins decided to make the pitch to his team. He told staffers he had a “pretty firm line on not weaponizing the platforms,” and keeping the focus on data collection tools. He also said the company wasn’t foregoing its climate work.
Saildrone didn’t lose any employees as a result of the shift.
Saildrone autonomous boats rove the seas, collecting data about weather, ships, fish and more.
“There was a perception that the technology industry doesn’t understand the importance of national security and what it takes to protect our democracy,” Zuberi said. “And then the military doesn’t care about the technology that we’re developing. I think that perception has somewhat been shattered.”
Zuberi said that for industry leaders it doesn’t have to be about patriotism. They can just look at the untapped potential in defense tech.
“It’s not like the last five years, suddenly investors woke up more patriotic than they used to be,” Zuberi said. “I think they just realized that there’s a big business opportunity here that they want to access.”
‘To work in defense was certainly taboo’
Paul Kwan, managing director of venture firm General Catalyst, had a similar observation.
“What’s changed around tech the last few years is people want to work on stuff that makes a difference and has a bigger impact on the world,” said Kwan, who has written about the firm’s “renewed” focus on “modern defense and intelligence.”
While tech workers at companies including Google and Salesforce have made headlines in the past for protesting their employers’ defense contracts, the topic is more nuanced now in the startup world.
“As a technologist, to work in defense was certainly taboo,” said Kyle Harrison, general partner of Contrary Capital. “I think the conversation has been more open. I think there’s still people that feel very strongly about it, for and against. But it used to be nobody really talked about it, where now people are acknowledging that it’s really difficult to protect a lot of the values that you think are important if your defense apparatus is from the ’80s.”
Part of the movement is driven by an awareness of the Russian war in Ukraine, several VCs said, which has highlighted the role defense can play in protecting values of democracy.
US President Joe Biden arrives to speak on rebuilding US manufacturing through the CHIPS and Science Act at the groundbreaking of the new Intel semiconductor manufacturing facility near New Albany, Ohio, on September 9, 2022.
Saul Loeb | AFP | Getty Images
“You have an aggressor nation, taking land and causing death and destruction to civilians,” said Raj Shah, managing partner of Shield Capital, adding that tech workers “want to do something to help and they want to have meaning in their lives. And photo-sharing apps are only so important.”
As Lux co-founder Josh Wolfe said, “Do you want to build software that has people clicking on ads, or do you want to do things that have a lasting impact on the safety and security of the American people and helping to reduce human suffering around the world?”
It’s not just shifting sentiment within the tech community. There’s also a growing openness from the U.S. defense community to procuring technology from newer players.
“The government’s becoming a better customer,” said Shah, who previously served as managing partner of the Defense Department’s Defense Innovation Unit (DIU), which seeks to accelerate the use of emerging technologies. “It actually makes business sense to solve important security problems.”
Power, the CEO of Hadrian, said the narrative of “Silicon Valley hates the government and the government hates Silicon Valley” is gone, even though he says “I don’t think it was ever true.”
“People are viewing selling software to the government as a real market opportunity versus something that may or may not happen or would take them ten years,” Power said.
One area where the shift in mindset has become abundantly clear in the past year or two, Power said, is in recruiting. In the past, some potential prospects expressed little interest in manufacturing, but now Power said he finds many more people who are compelled to solve these problems.
Wolfe said that trend permeates throughout his portfolio.
“Money follows talent,” Wolfe said. “And talent is going into hard tech.”
WATCH: Chipmaking nations such as the U.S. are teaming up against China
-
Stocks making the biggest moves midday: Best Buy, Big Lots, Coinbase, Nio and more
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.
Nio — The Chinese electric vehicle maker slid 5.8% after posting a wider quarterly loss than anticipated. Industry giant Tesla climbed more than 5.4%.
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
-
Palantir announces $1 billion buyback program, stock rises after earnings
Palantir Technologies Inc. matched expectations with its latest quarterly results Monday while announcing a new $1 billion buyback authorization.
The software company posted its third quarter in a row of GAAP profitability, recording second-quarter net income of $28 million, or 1 cent a share, whereas Palantir
PLTR,
-1.15%
racked up a net loss of $179.3 million, or 9 cents a share, in the year-earlier period. Analysts tracked by FactSet were modeling GAAP earnings per share of 1 cent.Palantir logged adjusted earnings per share of 5 cents, in line with the FactSet consensus.
Revenue rose to $533 million from $473 million and also met the FactSet consensus. The company notched $232 million in commercial revenue, up 10% from a year before, along with $302 million of government revenue, up 15%.
After initially falling following the report, Palantir shares rose 2.6% in after-hours trading.
“We continue to see unprecedented demand,” Chief Revenue Officer Ryan Taylor told MarketWatch. That includes both “top-of-funnel” conversations with new customers and others expanding their use of Palantir software, as momentum builds for the company’s artificial-intelligence offerings.
Taylor added that Palantir’s U.S. government work has “never been stronger.”
See also: Palantir is ‘the Messi of AI,’ says analyst who thinks its stock can jump 45%
Palantir also announced that its board of directors has approved a stock-buyback program of up to $1 billion. The move comes as the company posted $285 million in adjusted free cash flow during the first half of the year and finished the second quarter with $3.1 billion in cash and equivalents on its balance sheet.
“Our cash flow, balance sheet and the authorization of a billion-dollar buyback show what we believe in for the future of this company,” Chief Financial Officer David Glazer told MarketWatch. The belief is that “AI is a massive opportunity.”
Added Chief Executive Alex Karp in a shareholder letter: “The scale of the opportunity that lies ahead has increased significantly in recent months. And we intend to capture it.”
He noted that the company is in talks with more than 300 additional enterprises about using Palantir’s AI platform, “all of which are searching for an effective and secure means of adapting the latest large language models for use on their internal systems and proprietary data.”
For the third quarter, Palantir expects $553 million to $557 million in revenue, along with GAAP profitability. Analysts tracked by FactSet were modeling $553 million,
Palantir also expects to report GAAP net income for its fourth quarter. It further models upwards of $2.212 billion in full-year revenue, while analysts were looking for $2.210 billion.
Shares of Palantir are up 180% so far this year.
-
Palantir announces $1 billion buyback program, stock rises after earnings
Palantir Technologies Inc. matched expectations with its latest quarterly results Monday while announcing a new $1 billion buyback authorization.
The software company posted its third quarter in a row of GAAP profitability, recording second-quarter net income of $28 million, or 1 cent a share, whereas Palantir
PLTR,
-1.15%
racked up a net loss of $179.3 million, or 9 cents a share, in the year-earlier period. Analysts tracked by FactSet were modeling GAAP earnings per share of 1 cent.Palantir logged adjusted earnings per share of 5 cents, in line with the FactSet consensus.
Revenue rose to $533 million from $473 million and also met the FactSet consensus. The company notched $232 million in commercial revenue, up 10% from a year before, along with $302 million of government revenue, up 15%.
After initially falling following the report, Palantir shares rose 2.6% in after-hours trading.
“We continue to see unprecedented demand,” Chief Revenue Officer Ryan Taylor told MarketWatch. That includes both “top-of-funnel” conversations with new customers and others expanding their use of Palantir software, as momentum builds for the company’s artificial-intelligence offerings.
Taylor added that Palantir’s U.S. government work has “never been stronger.”
See also: Palantir is ‘the Messi of AI,’ says analyst who thinks its stock can jump 45%
Palantir also announced that its board of directors has approved a stock-buyback program of up to $1 billion. The move comes as the company posted $285 million in adjusted free cash flow during the first half of the year and finished the second quarter with $3.1 billion in cash and equivalents on its balance sheet.
“Our cash flow, balance sheet and the authorization of a billion-dollar buyback show what we believe in for the future of this company,” Chief Financial Officer David Glazer told MarketWatch. The belief is that “AI is a massive opportunity.”
Added Chief Executive Alex Karp in a shareholder letter: “The scale of the opportunity that lies ahead has increased significantly in recent months. And we intend to capture it.”
He noted that the company is in talks with more than 300 additional enterprises about using Palantir’s AI platform, “all of which are searching for an effective and secure means of adapting the latest large language models for use on their internal systems and proprietary data.”
For the third quarter, Palantir expects $553 million to $557 million in revenue, along with GAAP profitability. Analysts tracked by FactSet were modeling $553 million,
Palantir also expects to report GAAP net income for its fourth quarter. It further models upwards of $2.212 billion in full-year revenue, while analysts were looking for $2.210 billion.
Shares of Palantir are up 180% so far this year.
-
Palantir Stock Spikes After Analyst Says to Buy ‘The Messi of AI’
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. -
Tech leaders are calling for an A.I. pause because they have no product ready, Palantir CEO says
Palantir headquarters in Palo Alto, California, US, on Wednesday, May 10, 2023.
David Paul Morris | Bloomberg | Getty Images
Palantir’s boss Alex Karp opposes the idea of a pause in artificial intelligence research, in contrast to an open letter from the Future of Life Institute signed by some of the biggest names in the tech industry.
The letter, which has garnered over 31,000 signatures including names like Tesla CEO Elon Musk and Apple co-founder Steve Wozniak, called for a pause on AI research on models larger than GPT-4, which powers tools such as ChatGPT.
The letter also said that if “such a pause cannot be enacted quickly, governments should step in and institute a moratorium.”
Speaking to BBC Radio in an interview broadcast Thursday, Karp said he is of the view that “many of the people asking for a pause, are asking for a pause because they have no product.”
He added, without naming anyone, that this is because “people who have nothing to offer want to study AI,” but by taking a pause, this could lead to adversaries stealing a lead in not only commercial applications, but also military applications.
To him, “studying this and allowing other people to win both on commercial areas and on the battlefield” is a really bad strategy.
When asked if what he wanted was an “A.I. race” akin to the arms race of the Cold War, Karp simply stated that “there is already an A.I. arms race, it’s just we’re ahead, [and] it’s not like if we slow down, the AI race will stop.”
He pointed out that the “single most important event” in this race is not large language models like GPT-4, but instead how AI has been utilized in military applications.
Karp points out that Ukrainian forces have used Palantir technologies to gain a technological edge over invading Russian forces. A report from The Times in December 2022 revealed that Palantir’s AI has allowed Ukraine to increase the accuracy, speed and deadliness of its artillery strikes despite having comparatively smaller artillery forces. Palantir sells software to governments and private sector organizations which help them analyze large quantities of data.
The advent of this AI-powered software on the battlefield “just throws down a gauntlet to every single country in the world,” Karp said. He added, “especially [to] our adversaries, they cannot afford for us to have this advantage. And so, the race is on. There’s only a question of do we stay ahead or do we cede the lead.”
-
Palantir stock roars more than 20% higher after second straight earnings surprise
Palantir Technologies Inc. delivered a surprise profit for the second quarter in a row Monday, while also topping revenue expectations, sending shares more than 20% higher in after-hours trading.
The software company reported first-quarter net income of $17 million, or 1 cent a share, whereas Palantir PLTR posted a loss of $101 million, or 5 cents a share, in the year-earlier quarter. Analysts tracked by FactSet were expecting a loss of a penny a share on a GAAP basis. The stock closed with a 4.7% gain at $7.76 in Monday’s…
-
Lawmakers meet with Apple, Disney CEOs as part of talks on competition with China
High-profile tech and media executives shared their experiences of working in and competing with China with lawmakers who visited California this week.
A delegation of about 10 members of the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party made the trip west to meet with industry leaders and subject matter experts about key areas of concern when it comes to dealing with China.
Over the three-day trip that kicked off on Wednesday, lawmakers were scheduled to meet with Disney CEO Bob Iger and Apple CEO Tim Cook, as well as high-level executives from Google, Microsoft, Palantir and Scale AI. Also on the agenda were events with a group of producers, screenwriters and former studio executives who have experience working with China, as well as with venture capitalists and Stanford University experts, according to a source close to the committee.
The trip highlights the key role tech and media industries play in America’s increasingly complex relationship with China. While these industries often rely on the massive audiences and workforces available in China, dependence on the country raises concerns of human rights and free speech issues because of the government’s censorship controls, as well as supply chain risks.
The trip comes on the heels of a historic meeting in California between House Speaker Kevin McCarthy, R-Calif., and Taiwanese President Tsai Ing-wen on Wednesday. That meeting, which former Speaker Nancy Pelosi, D-Calif., also praised, enraged the leadership of the Chinese Communist Party. The Chinese government called the meeting a “provocation” and promised “resolute actions.”
In Hollywood, the group of lawmakers from the select committee learned about a range of topics related to competition with China. In a meeting with Disney’s Iger and later at a dinner with unnamed studio executives, censorship of creative content was a big focus, according to the source familiar with the committee’s activities. Executives discussed dealing with self-censorship to try to ensure a movie won’t offend the Chinese government even before filming begins, as well as edit requests they receive from the government in order to show films in the country.
In Silicon Valley on Thursday, according to the source, Microsoft President Brad Smith gave a presentation about artificial intelligence, warning that there is a narrow gap between the U.S. and China in the development of generative AI, which has been made popular by tools such as ChatGPT. He also discussed rare earth mineral mining and processing, which make up key components in certain tech devices. Smith and executives from Google, Palantir and ScaleAI attended a luncheon with committee members.
Lawmakers also met with experts from Stanford University, including those from the Gordian Knot Center for National Security Innovation, according to center founding member Steve Blank. In a phone call following the discussion Thursday, Blank said he communicated the need for a defense strategy that involves more public-private partnerships across different industries to get the U.S. up to speed with China. Blank said he was impressed by the bipartisanship and interest he saw from lawmakers in attendance.
“In general, the questions they asked, you would have been very proud to be an American sitting in that room,” Blank said. “They were bipartisan, and they were to the point and they were very smart. These people understand the issues, and they’re trying to help the country be better.”
Rep. Ro Khanna, D-Calif., a committee member who represents Silicon Valley, told CNBC in a phone interview ahead of the trip on Tuesday that he was excited for his colleagues to visit his home district. Khanna said it’s always valuable for lawmakers to spend time learning about cutting-edge technologies such as AI, quantum computing and climate tech to better understand how to both regulate and foster it.
“I think it would be wise for every member of Congress to spend a week in Silicon Valley,” Khanna said. “Technology is going to define so many fields from the economy to national security to our issues of citizenship, and we need people to be immersed in it, at least understanding it.”
Khanna and others have described the purpose of the trip as primarily a fact-finding mission. While the conversations will likely inform future policymaking and hearings, lawmakers entered the meetings aiming to learn from industry executives on the ground.
The group was also slated to meet with venture capitalists on Thursday, including Andreessen Horowitz, Khosla Ventures and SV Angel. Khanna expected the VCs would discuss how the government could “better collaborate with the private sector” to stay ahead of China in key areas of emerging technology.
On Friday, lawmakers were set to discuss cryptocurrency with experts at Stanford before traveling to Cupertino to meet with Cook at Apple’s headquarters, according to the source familiar with the committee’s plans.
Khanna said he anticipated the business leaders would inform the policymakers of any progress they’ve made in diversifying their supply chains out of China and how they use export revenue from China to invest in the U.S. When it comes to the meeting with Apple’s CEO, Khanna said he expected Cook would “speak candidly about the supply chain issues,” including the complexities and progress of diversifying production outside of China.
In a phone interview partway through the trip on Thursday, Rep. Haley Stevens, D-Mich., said she saw common themes between the sorts of challenges the tech and media industries face when it comes to China and those facing the automotive industry in her home state.
“Every meeting we’ve been in, in my opinion, has related back to Michigan’s economy and our ability to manufacture as a country,” Stevens said. “One of the themes that I came into the committee with as a manufacturing champion and as someone who understands the interrelatedness between manufacturing and tech is: What else do we need to do to incentivize and grow industrial policy in the United States of America?” Stevens said. She pointed to the passage of the Chips and Science Act as an example of incentivizing domestic semiconductor manufacturing.
“Now, we’re looking at other areas specific to supply chain vulnerabilities and weaknesses that are going to impact our economy and, aside from chips, we want to be competitive in quantum and artificial intelligence,” Stevens said.
— CNBC’s Steve Kovach contributed to this report.
-
Amazon’s cloud unit faces cost-sensitive customers as economic fears mount
Amazon Web Services has been the biggest growth engine for its parent company over much of the past decade, taking business from some of the largest tech vendors in the world.
But as corporations face the most daunting economic environment since the 2008 financial crisis, those massive checks they’re writing to AWS for their tech infrastructure are getting greater scrutiny.
Peter Kern, CEO of online travel company Expedia Group, sees the cloud as an area where his company can reduce its fixed costs. In recent years, Expedia has moved considerable parts of its operations to AWS from on-premises data centers.
“We haven’t fully optimized the cloud,” Kern said during the company’s earnings call last month. “We’ve moved a lot of technology into the cloud, but we have a lot of work to do.”
U.S. stocks are poised to close out their worst year since 2008. Central bankers have continued to lift interest rates to address rising prices, prompting skittishness about economic deterioration by consumers and businesses. Executives are in cash-preservation mode to appease Wall Street and make sure they’re in position to weather a potential recession.
The National Football League, which uses AWS to produce statistics and schedules, is making conservative plans around costs, said Jennifer Langton, the NFL’s senior vice president of health and innovation.
“We are not recession proof,” Langton told CNBC during an interview at AWS’ annual Reinvent customer conference in Las Vegas this week. The league is negotiating with AWS on the terms of a renewed multi-year agreement, and there are some areas her organization wants to prioritize, she said.
Amazon knows customers are facing challenges. In some cases, Amazon cloud employees reach out to clients to see how it can help optimize spending, said David Brown, AWS’ vice president responsible for the core EC2 computing service. At other times, customers contact AWS, he said.
AWS is coming off its slowest period of expansion since at least 2014, the year Amazon started reporting on the group’s finances. It also missed analysts’ estimates. Still, the division recorded growth of 27.5%, outpacing Amazon’s overall growth of 15%. And it generated $5.4 billion in operating income, accounting for more than 100% of profit for its parent company.
With such a hefty cash balance, AWS can afford to accommodate customers in the short term if it means more business in the future. The company did the same thing during the pandemic in 2020, when Amazon sent some users an email with an offer of financial support.
AWS isn’t the sole big cloud provider that’s dealing with customers’ budget constraints. In the third quarter, Microsoft’s Azure consumption growth moderated as the company helped clients optimize existing workloads, finance chief Amy Hood said in October. Amazon leads the market in cloud computing, with an estimated 39% share.
“If you’re looking to tighten your belt, the cloud is the place to do it,” AWS CEO Adam Selipsky said during his keynote presentation in front of over 50,000 people on Tuesday. Selipsky said that moving IT jobs to the cloud could help budget-strapped organizations save money, citing customers Agco and Carrier Global.
Not everyone agrees. Last year, investors Sarah Wang and Martìn Casado of venture firm Andreessen Horowitz published an analysis, showing that a company could trim its computing costs by half or more by bringing workloads from the cloud back to on-premises data centers.
Amazon is trying to give customers options to reduce costs. It offers Graviton computing instances based on energy-efficient Arm-based chips, a less expensive alternative to instances using standard AMD and Intel processors.
“Customers of every size have adopted Graviton, and they’re achieving up to 40% better price performance simply by shifting their workloads to Graviton instances,” Selipsky said. He said AT&T‘s DirecTV unit was able to eliminate 20% of computing costs by adopting current-generation Graviton chips.
Selipsky told CNBC’s Jon Fortt in an interview that AWS teams are working with customers that are trying to become more efficient.
“We do see some customers who are doing some belt-tightening now,” Selipsky said. One example is data analytics software maker Palantir, which said last month its operating profit in the third quarter was higher than expected primarily because of cloud and deployment efficiencies.
Other companies are in on the trend. NetApp and VMware have acquired startups to help businesses streamline their cloud spending. On the Reinvent exhibition floor, several companies were promoting their cost-trimming capabilities.
Zesty, which announced a $75 million funding round in September, added Sainsbury and Silicon Laboratories to its customer list in the current quarter. The company’s technology can automatically adjust the amount of storage space a company is using to avoid waste.
CEO Maxim Melamedov said Zesty picked up a bunch of new leads at its Reivent booth, where the startup was handing out candy, socks and stuffed animals and giving visitors the chance to win AirPods.
“Some of my guys lost their voices,” Melamedov said. “We are 15 people constantly on our feet. We’re constantly talking.”
WATCH: AWS CEO Adam Selipsky on impact of slowing economy, cloud consumption
-
Palantir stock falls after slight earnings miss
A person poses in front of a banner featuring the logo of Palantir Technologies (PLTR) at the New York Stock Exchange (NYSE) on the day of their initial public offering (IPO) in Manhattan, New York City, U.S., September 30, 2020.
Andrew Kelly | Reuters
Shares of Palantir fell more than 10% Monday after the company released third-quarter earnings that missed analyst estimates for earnings but beat on revenue.
Here’s how the company did:
- EPS: $0.01, adjusted, vs. $0.02 expected by analysts, according to Refinitiv.
- Revenue: $478 million vs. $470 million expected by analysts, according to Refinitiv.
Palantir’s revenue for the quarter increased 22% year over year, and its U.S. commercial revenue grew 53%. The software company, which is known for its work with the government, said its US commercial customer count increased 124% year over year, growing from 59 customers to 132.
In a letter to shareholders, Palantir CEO Alex Karp said the company is in the “early stages of a significant transformation.”
Karp said Palantir anticipates regional markets within the U.S., such as the Midwest, Southeast, Texas and New England, could develop into billion-dollar businesses. However, Karp said that countries in continental Europe have been less willing to introduce “software systems that challenge existing habits.”
“We have found that large institutions in the United States have been far more willing to investigate the most significant sources of systemic dysfunction within their organizations, which in the current moment often relate to the ability or rather inability of an institution to metabolize its own data,” he said.
Palantir said it expects to report between $503 million and $505 million in revenue during the fourth quarter, on a par with analyst estimates of $503 million according to StreetAccount.
“We are building the digital infrastructure that makes continued industrial progress in late capitalism possible,” Karp said in the letter. “The metaverse and other idiosyncratic pursuits of the technocratic elite may be luxury goods. But foundational data platforms are not.”
