Can AI Make Big Tech Boom?
Nasdaq futures rose Tuesday morning ahead of Big Tech’s earnings bonus, which begins when Microsoft and Alphabet report second-quarter results after the closing bell. One question is uppermost in many investors’ minds: Is the hype surrounding artificial intelligence that has sent the tech giant’s stock prices skyrocketing in recent months justified, or is it another bubble on the verge of becoming another?
Wall Street is deeply divided over the AI rally. Mike Wilson, Chief US Equity Strategist, Morgan Stanley apologized to customers On Monday, he wrote that his pessimistic stock market calls failed to recognize the boom in AI-related stocks. (Chip maker Nvidia, for example, has tripled the value of its stock since January.) And Citigroup analyst For such companies stick to their bullish thesis.
On the other hand, Marko Kolanovic, chief market strategist at JPMorgan Chase, is unrelated That technical enthusiasm will help markets avoid sharp declines this year.
All eyes on Microsoft and Alphabet Who are at the forefront of the commercialization of generative AI, the technology behind chatbots like ChatGPT has captured the public’s imagination. Both are incorporating AI into a wide range of their products, with Microsoft – which has invested billions in OpenAI – hoping the technology can help Get an edge on Google In core businesses such as search.
Meta’s turn is Wednesday. The parent company of Facebook and Instagram is also betting big on the technology, including making the code of its most advanced AI projects free for public use. (Analysts also want to know more about how Meta plans to make money from Threads, which is Twitter’s new rival, a company rebranded as X.)
Macroeconomic factors are still putting pressure on these companies. Inflation and an uncertain outlook took a toll on them last year, as customers cut back on software purchases and spending on advertising, prompting them to lay off thousands of employees.
Recent data shows that inflation is starting to ease, which has driven these stocks higher in recent weeks, but investors will want to see evidence that the sector is past the worst. The Fed is widely expected to raise interest rates by a quarter percentage point at its rate-setting meeting on Wednesday, but Wall Street is not sure whether the central bank will stop there or continue to raise borrowing costs and risk a recession.
And it won’t just be limited to tech stocks. This is the busiest week of the current earnings season, with 39 percent of S&P 500 companies announcing results. The next few days will take a critical look at the overall health of corporate America. Consumer giants including Coca-Cola and McDonald’s and industrial giants like Boeing will be reporting.
What’s going on over here
Unilever says that inflation is at its peak. This followed a rally in the consumer goods giant’s shares on Tuesday morning Reported strong sales outlook in the second halfThe company anticipates that the slow rise in prices will lead to an increase in consumer purchases. But it warned that the war in Ukraine could drive up prices of agricultural commodities, pushing up costs.
UBS agrees to pay $387 million in fines over Credit Suisse’s wrongdoings. UBS reached a settlement with US and British regulators to resolve an investigation into monitoring failures that led to the collapse of investment firm ArcGos in 2021, with Credit Suisse losing $5.5 billion. UBS bought its ailing rival this year, leaving it in legal trouble.
Senators open new investigation into Leon Black’s relationship with Jeffrey Epstein. The Senate Finance Committee is probing whether a $158 million payment made by Mr Black to a disgraced financier for tax and estate planning services was part of a tax-evasion scheme, The Times reports. Separately, the US Virgin Islands accused JPMorgan Chase of reimbursement of a former executiveJess Staley, for visits to see Epstein.
The IRS ends surprise visits to homes and businesses. The agency said it would stop the practice, which was a mainstay of its efforts to collect unpaid taxes. The move comes as the IRS is rethinking its operations, and faces increasing political scrutiny and threats to its employees from Republicans.
The US is reportedly investigating Abu Dhabi’s takeover bid for Fortress Investment Group. The Committee on Foreign Investment in the United States is investigating whether the $3 billion deal by Mubadala, an Emirati sovereign wealth fund, raises national security concerns, according to The Financial Times. At issue is the UAE’s relations with China.
Crypto Has Major Questions About The SEC
Cryptocurrencies and climate change have been linked as issues before in terms of how carbon-intensive the production of new digital tokens is. But the crypto industry is also hoping to adopt the legal principle at the core of last year’s Supreme Court ruling involving the Environmental Protection Agency.
Coinbase is taking advantage of EPA damages as a legal defense. Last summer, the Supreme Court struck down one of the Environmental Agency’s emissions rules citing the so-called leading question doctrine, a doctrine that states Congress has not given regulators the power to decide important political or economic issues on their own.
Now, Coinbase is arguing that the SEC cannot prosecute it because it does not have the power to regulate crypto. In addition, the exchange says, Congress is actively working on legislation to regulate its industry. “It has never been more clear that the Supreme Court has a special focus on key questions and the role of regulators in our economy,” Paul Grewal, Chief Legal Officer at Coinbase, told DealBook.
The SEC argues that Coinbase is missing the point. The agency’s lawyers wrote in a recent court filing that the EPA case was about rule making, the regulator has no power to prosecute. Critics say it’s unclear whether regulating crypto counts as a major question, given that the industry’s total market capitalization is less than that of Apple, Microsoft or Alphabet.
Business advocates appear unfazed by those arguments. “The key question theory seems to be made for in crypto at the moment,” Katie Hawnthe crypto investor and former federal prosecutor tweeted recently.
Separately, the US Chamber of Commerce, which represents businesses more broadly, has expressed an eagerness to use leading-question arguments in court to limit the power of the proposed Federal Trade Commission ban on non-compete clauses.
‘Barbenheimer’, by the numbers
Led by “Barbie” and “Oppenheimer”, the North American box office had its biggest weekend since 2019 and the fourth best ever. Here’s how the event matched up to the other weekend showings, each of which was dominated by a single blockbuster.
Has X’s debut made its mark?
Although Elon Musk’s rebranding of Twitter as X came as a surprise over the weekend, the sudden name change is going about as well as could be expected these days. Users and advertisers were divided on the wisdom of the move, which removed the company’s long-standing bird logo, even though the removal of old signage caused some consternation.
The change was immediately reflected at Twitter’s headquarters. According to The Times, inside the San Francisco office, the X logo was projected in the cafeteria, while conference rooms were renamed with words such as “EXPOSER” and “S3XY”.
But efforts to remove the Twitter name from the building ran into difficulties when the San Francisco Police Department barred workers from performing “unauthorized acts”. As of this morning, the letters “er” are visible from the street.
People are unable to agree on whether this move will cost the company dearly. Skeptics remove Twitter’s name and famous bird logo – which Twitter once identified as one of its most recognizable asset -could cost $20 billion in value, (from them: Esther Crawfordformer Twitter executive who was for a while among Mr. Musk’s top lieutenants.) Some users lamented the switch to the more generic-sounding X.
Others said the rebranding could help the company shed the burden of years associated with the Twitter name, a view shared by none other than jack dorsey, co-founder of the company. Some advertising executives said the change would not meaningfully drive away potential advertisers, while others said Musk at least managed to drum up publicity for his platform after Meta Threads’ stellar debut.
Speaking of meta… Facebook’s parent company has an X trademark in relation to social networking, although it is related to a distinctive blue and white logo. Mr Musk’s company now uses a black-and-white mark, although trademark lawyers said it relied on a simple letter almost certainly invited legal challenges,
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A Saudi football team owned by the state’s sovereign wealth fund has made a record $332 million offer to sign French star Kylian Mbappe. (NYT)
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Blackstone’s flagship real estate fund agreed Simply Sell Self Storage to $2.2 billion as it continues to limit investor withdrawals. (Bloomberg)
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Johnson & Johnson said it plans to Reduce your stake in KenviewThe consumer-health business grew at least 80 percent through exchange offers this year. (CNBC)
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