Jen-Hsun Huang, president and chief executive officer of Nvidia Corp., speaks during the company’s event at Mobile World Congress Americas in Los Angeles, California, U.S., on Monday, Oct. 21, 2019.
Patrick T. Fallon | Bloomberg | Getty Images
Forget about the debt ceiling. Tech investors are in buy mode.
The Nasdaq Composite closed out its fifth-straight weekly gain on Friday, jumping 2.5% in the past five days, and is now up 24% this year, far outpacing the other major U.S. indexes. The S&P 500 is up 9.5% for the year and the Dow Jones Industrial Average is down slightly.
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Excitement surrounding chipmaker Nvidia’s blowout earnings report and its leadership position in artificial intelligence technology drove this week’s rally, but investors also snapped up shares of Microsoft, Meta and Alphabet, each of which have their own AI story to tell.
And with optimism brewing that lawmakers are close to a deal to raise the debt ceiling, and that the Federal Reserve may be slowing its pace of interest rate hikes, this year’s stock market is starting to look less like 2022 and more like the tech-happy decade that preceded it.
“Being concentrated in these mega-cap tech stocks has been where to be in this market,” said Victoria Greene, chief investment officer of G Squared Private Wealth, in an interview on CNBC’s “Worldwide Exchange” Friday morning. “You cannot deny the potential in AI, you cannot deny the earnings prowess that these companies have.”
To start the year, the main theme in tech was layoffs and cost cuts. Many of the biggest companies in the industry, including Meta, Alphabet, Amazon and Microsoft, were eliminating thousands of jobs following a dismal 2022 for revenue growth and stock prices. In earnings reports, they emphasized efficiency and their ability to “do more with less,” a theme that resonates with the Wall Street crowd.
But investors have shifted their focus to AI now that companies are showcasing real-world applications of the long-hyped technology. OpenAI has exploded after releasing the chatbot ChatGPT last year, and its biggest investor, Microsoft, is embedding the core technology in as many products as it can.
Google, meanwhile, is touting its rival AI model at every opportunity, and Meta CEO Mark Zuckerberg would much rather tell shareholders about his company’s AI advancements than the company’s money-bleeding metaverse efforts.
The chipmaker, known best for its graphics processing units (GPUs) that power advanced video games, is riding the AI wave. The stock soared 25% this week to a record and lifted the company’s market cap to nearly $1 trillion after first-quarter earnings topped estimates.
The story for Nvidia is based on what’s coming, as its revenue in the latest quarter fell 13% from a year earlier because of a 38% drop in the gaming division. But the company’s sales forecast for the current quarter was roughly 50% higher than Wall Street estimates, and CEO Jensen Huang said Nvidia is seeing “surging demand” for its data center products.
Nvidia said cloud vendors and internet companies are buying up GPU chips and using the processors to train and deploy generative AI applications like ChatGPT.
“At this point in the cycle, I think it’s really important to not fight consensus,” said Brent Bracelin, an analyst at Piper Sandler who covers cloud and software companies, in a Friday interview on CNBC’s “Squawk on the Street.”
“The consensus is, on AI, the big get bigger,” Bracelin said. “And I think that’s going to continue to be the best way to play the AI trends.”
Microsoft, which Bracelin recommends buying, rose 4.6% this week and is now up 39% for the year. Meta gained 6.7% for the week and has more than doubled in 2023 after losing almost two-thirds of its value last year. Alphabet rose 1.5% this week, bringing its increase for the year to 41%.
One of the biggest drags on tech stocks last year was the central bank’s consistent interest rate hikes. The increases have continued into 2023, with the fed funds target range climbing to 5%-5.25% in early May. But at the last Fed meeting, some members indicated that they expected a slowdown in economic growth to remove the need for further tightening, according to minutes released on Wednesday.
Less aggressive monetary policy is seen as a bullish sign for tech and other riskier assets, which typically outperform in a more stable rate environment.
Still, some investors are concerned that the tech rally has gone too far given the vulnerabilities that remain in the economy and in government. The divided Congress is making a debt ceiling deal difficult as the Treasury Department’s June 1 deadline approaches. Republican negotiator Rep. Garret Graves of Louisiana told reporters Friday afternoon in the Capitol that, “We continue to have major issues that we have not bridged the gap on.”
Treasury Secretary Janet Yellen said later on Friday that the U.S. will likely have enough reserves to push off a potential debt default until June 5.
Alli McCartney, managing director at UBS Private Wealth Management, told CNBC’s “Squawk on the Street” on Friday that following the recent rebound in tech stocks, “it’s probably time to take some of that off the table.” She said her group has spent a lot of time looking at the venture market and where deals are happening, and they’ve noticed some clear froth.
“You’re either AI or you’re not right now,” McCartney said. “We really have to be ready to see if we don’t get a perfect debt ceiling, if we don’t get a perfect landing, what does that mean, because at these kinds of levels we are definitely pricing in the U.S. hitting the high note on everything and that seems like a terribly precarious place to be given the risks out there.”
Elon Musk says he won’t vote for Biden over Trump, calls Haley ‘pro-censorship’
Elon Musk, chief executive officer of Tesla Inc., during a fireside discussion on artificial intelligence risks with Rishi Sunak, UK prime minister, not pictured, in London, UK, on Thursday, Nov. 2, 2023. Sunak convened this week’s AI summit in an effort to position the UK at the forefront of global efforts to stave off the risks presented by the rapidly-advancing technology, which in the prime minister’s own words, could extend as far as human extinction. Photographer: Tolga Akmen/EPA/Bloomberg via Getty Images
Bloomberg | Bloomberg | Getty Images
“I would not vote for Biden,” Musk said during a wide-ranging interview with Andrew Ross Sorkin at the DealBook Summit in New York. “I’m not saying I’d vote for Trump.”
When asked what he’d do if those were the two nominees, Musk said, “This is definitely a difficult choice here.”
Musk, who says he supported Barack Obama’s candidacy, has moved rightward in his politics in recent years, writing in a tweet last year that “today’s Democratic Party has been hijacked by extremists.”
While he hasn’t endorsed a specific candidate for the 2024 election, Musk said last year that Florida Governor Ron DeSantis was his preferred choice at the time. He also hosted DeSantis’s campaign launch on X, formerly Twitter. More recently, Musk has said that Vivek Ramaswamy is “looking like a strong candidate.”
Musk told Sorkin on Wednesday that he disagrees with Ramaswamy on climate issues, but he shares some of the candidate’s views on government overreach and censorship. DeSantis’s name did not come up in the interview.
When asked if he could support Nikki Haley among the Republicans, Musk said no and described the former South Carolina governor as a “pro-censorship candidate.”
In terms of which party is more favorable towards freedom of speech, Musk said that “on balance, the Democrats appear to be more pro-censorship than Republicans,” which he characterized as a change from the past.
“We certainly get more complaints from the left than the right,” Musk said.
Elon Musk claims advertisers are trying to ‘blackmail’ him, says ‘Go f— yourself’
Tesla and SpaceX’s CEO Elon Musk reacts during an in-conversation event with British Prime Minister Rishi Sunak in London, Britain, Thursday, Nov. 2, 2023.
Kirsty Wigglesworth | Reuters
Speaking at the 2023 DealBook Summit in New York on Wednesday, Elon Musk, the owner of social media site X (formerly Twitter), scoffed at advertisers threatening to leave the platform because of antisemitic posts he amplified there.
“If somebody’s gonna try to blackmail me with advertising? Blackmail me with money? Go f—yourself.” He added, “Don’t advertise.”
He also implied that fans of his, and of X, would boycott those advertisers in kind. He specifically took aim at Disney.
“The whole world will know that those advertisers killed the company and we will document it in great detail,” Musk threatened.
He also told interviewer Andrew Ross Sorkin, “I have no problem being hated. Hate away.”
In recent weeks, Musk has promoted and sometimes verbally endorsed what the White House called “antisemitic and racist hate” on X, formerly Twitter, the social media platform he owns and runs as CTO.
He called those tweets, “one of the most foolish if not the most foolish thing I’ve ever done on the platform.”
“I’m sorry for that tweet or post,” he said. He added, “I tried my best to clarify, six ways to Sunday, but you know at least I think over time it will be obvious that in fact, far from being antisemitic, I am in fact philosemitic.”
His inflammatory posts on the social media platform led large advertisers, including Disney, Apple, and many others, to suspend campaigns there, and drove some famous users away from the platform, including Paris Mayor Anne Hidalgo.
Musk, who is also the CEO of Tesla and SpaceX, has denied that he is antisemitic, and said that on X, “Clear calls for extreme violence are against our terms of service and will result in suspension.”
He also traveled to Israel this week, where he met and spoke with Prime Minister Benjamin Netanyahu. When Netanyahu said he wanted to “deradicalize” and “rebuild” Gaza, Musk offered to help. Musk told Sorkin on stage that his visit to Israel was planned before his tweets, and were not part of an “apology tour.” Previously, Musk had said he wanted to bring SpaceX satellite communications service to Israel and humanitarian organizations in Gaza.
Musk’s personal account on X currently displays a follower count of more than 164 million — though tech blog Mashable reported in August that a majority of Musk’s listed followers appeared to be inauthentic or inactive accounts.
Earlier on Wednesday, the UAW launched campaigns aimed at Tesla and 12 other automakers in the U.S. Sorkin asked Musk what that means for his EV business.
Musk espoused negative general views about unions and said they create a “lords and peasants” atmosphere at companies, and “naturally try to create negativity,” pitting workers against management.
He said, “Many people at Tesla have come up, gone from workign on the line to being in senior management and there is no lords and peasants — everyone eats at the same table.”
He also added, “If Tesla gets unionized, it will be because we deserve it and we failed in some way.”
At one point, Sorkin asked, “Do you feel like anybody has leverage over you?”
Musk replied, “If we make bad products that people don’t want to use, the users will vote with their resources and use something else. My companies are overseen by regulators. SpaceX, Starlink, Tesla – are overseen by cumulatively by…a few hundred regulators because we’re in 55 countries.”
Later, he noted that he complies with nearly all the regulations levied upon his companies, but “once in awhile” he disagrees with a regulation and would object to it and disobey. “I’m incredibly rule-following,” he claimed.
Sorkin asked, “How do you think about the leverage that the Chinese have over you?” alluding to Tesla’s factory there and the company’s reliance on Chinese consumers for a percentage of its sales. Sorkin added, “Is it hypocritical for you to be doing business in China, or other countries, as it relates to X and other things that don’t follow this free speech path that you have espoused?”
The CEO replied, “The best that the platform can do is adhere to the laws of any given country. Do you think there’s something more we can do than that?”
He later added that he believes the Chinese electric car companies are extremely competitive, and said that many people believe the top ten EV companies in the world will be Tesla and nine Chinese makers.
On OpenAI and its recent boardroom struggles, Musk said he had talked to a lot of people but had not found out what precisely led to the recent firing and then re-hiring of CEO Sam Altman. He also said he has “mixed feelings” about Altman personally, hinting that he feels like the OpenAI CEO has too much power. “The ring of power can corrupt.”
When it was founded, OpenAI’s original board included both Altman and Musk, but Musk left in 2018 after poaching a star engineer from the company to run Autopilot software engineering at Tesla.
Musk also said that he’s worried about the danger of AI harming humanity, and that he was “having trouble sleeping at night” because of it.
This is breaking news. Please check back for updates.
FTC Chair Lina Khan defends her track record when it comes to blocking mergers and doesn’t subscribe to Amazon Prime
Federal Trade Commission Chair Lina Khan speaks during The New York Times annual DealBook Summit in New York City on Nov. 29, 2023.
Michael M. Santiago | Getty Images
Federal Trade Commission Chair Lina Khan defended her track record in court when it comes to blocking mergers, saying she believes the agency should take big swings and she’s “quite pleased” with the work it has done so far under her tenure, which started in June 2021.
Speaking at The New York Times DealBook Summit on Wednesday, Khan said that whenever the FTC brings a case, “you want to win it,” but that whenever there’s a loss, the agency will “try to figure out what went wrong.”
The FTC has had some high-profile losses during Khan’s tenure, including a failed attempt to block Facebook parent Meta from buying virtual reality company Within Unlimited. It also lost a fight to stop Microsoft‘s $69 billion acquisition of gaming giant Activision Blizzard, though the agency is still appealing the court ruling.
Under her leadership, Khan said the FTC has brought 11 cases against mergers, and in five instances, the companies abandoned their plans after the agency filed suit. There were 14 deals that were dropped during the FTC’s investigation, she added.
“Big picture, of course the two cases that we lost we would’ve wanted to win, but we’re quite pleased overall with our efforts,” Khan said on stage.
Khan is in the middle of what could be a career-defining antitrust case. In September, the FTC and 17 states sued Amazon, accusing the retail giant of wielding its “monopoly power” to artificially rise prices, degrade quality for shoppers and stifle competition. The lawsuit was long anticipated, as Khan rose to prominence for her 2017 Yale Law Journal article, “Amazon’s Antitrust Paradox.”
Khan argued in the piece that the prevailing antitrust framework at the time, which focused primarily on monopolies’ harm to consumers, failed to capture the ways tech giants such as Amazon are able to dominate in the digital world even while offering lower prices and more selection to consumers.
The agency has also taken aim at Amazon’s Prime service, alleging it tricked users into signing up for the program and intentionally complicated the cancellation process. Amazon has disputed both of the FTC’s lawsuits, calling them “wrong on the facts and the law.”
In the interview Wednesday, Khan said she doesn’t subscribe to Prime, which costs $139 a year and includes perks such as free shipping, access to streaming content and discounts on Whole Foods groceries.
Asked why she hasn’t subscribed to Prime, Khan replied, “I just haven’t.”
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