Tech stocks close out best first half in 40 years, powered by Apple rally and Nvidia boom
Apple CEO Tim Cook stands next to the new Apple Vision Pro headset is displayed during the Apple Worldwide Developers Conference on June 05, 2023 in Cupertino, California.
Justin Sullivan | Getty Images
The last time technology stocks had a better first half, Apple was touting its Lisa desktop computer, IBM was the most-valuable tech company in the U.S. and Mark Zuckerberg hadn’t been born.
On Friday, the Nasdaq wrapped up the first six months of the year with a 1.5% rally, bringing its gains so far for 2023 to 32%. That’s the sharpest first-half jump in the tech-heavy index since 1983, when the Nasdaq rose 37%.
It’s a startling achievement, given what’s happened in the tech industry over the past four decades. Microsoft went public in 1986, sparking a PC software boom. Then came the internet browsers of the 1990s, leading up to the dot-com bubble years and the soaring prices of e-commerce, search and computer-networking stocks. The past decade saw the emergence of the mega-cap, trillion-dollar companies, which are now the most valuable enterprises in the U.S.
While those prior eras featured sustained rallies, none of them had a start to the year rivaling 2023.
Even more stunning, it’s happening this year while the U.S. economy is still at risk of slipping into recession and reckoning with a banking crisis, highlighted by the collapse in March of Silicon Valley Bank, the financial nucleus for much of the venture and startup world. The Federal Reserve also steadily increased its benchmark interest rate to the highest since 2007.
But momentum is always a driver when it comes to tech, and investors are notoriously fearful of missing out, even if they simultaneously worry about frothy valuations.
Coming off a miserable 2022, in which the Nasdaq lost one-third of its value, the big story was cost-cutting and efficiency. Mass layoffs at Alphabet, Meta and Amazon as well as at numerous smaller companies paved the way for a rebound in earnings and a more realistic outlook for growth.
Meta and Tesla, which both got hammered last year, have more than doubled in value so far in 2023. Alphabet is up 36% after dropping 39% in 2022.
None of those companies were around the last time the Nasdaq had a better start to the year. Meta CEO Zuckerberg, who created the company formerly known as Facebook in 2004, was born in 1984. Tesla was founded in 2003, five years after Google, the predecessor to Alphabet.
As 2023 got going, attention turned to artificial intelligence and a flood of activity around generative AI chatbots, which respond to text-based queries with intelligent and conversational responses. Microsoft-backed OpenAI has become a household name (and was No. 1 on CNBC’s Disruptor 50 list) with its ChatGPT program, and dollars are pouring into Nvidia, whose chips are used to power AI workloads at many of the companies taking advantage of the latest advancements.
Nvidia shares soared 190% in the first half, lifting the 30-year-old company’s market cap past $1 trillion.
“I think you’re going to continue to see tech dominate because we’re still all abuzz about AI,” said Bryn Talkington, managing partner at Requisite Capital Management, in an interview with CNBC’s “Closing Bell” on Thursday.
Talkington, whose firm holds Nvidia shares, said the chipmaker has a unique story, and that its growth is not shared across the industry. Rather, large companies working on AI have to spend heavily on Nvidia’s technology.
“Nvidia not only owns the shovels and axes of this AI goldrush,” Talkington said. “They actually are the only hardware store in town.”
Remember the $10,000 Lisa?
Apple hasn’t seen gains quite so dramatic, but the stock is still up 50% this year, trading at a record and pushing the iPhone maker to a $3 trillion market cap.
Apple still counts on the iPhone for the bulk of its revenue, but its latest jump into virtual reality with the announcement this month of the Vision Pro headset has helped reinvigorate investor enthusiasm. It was Apple’s first major product release since 2014, and will be available starting at $3,499 beginning early next year.
That sounds like a lot, except when compared to the price tag for the initial Lisa computer, which Apple rolled out 40 years ago. That PC, named after co-founder Steve Jobs’ daughter, started at $10,000, keeping it far out of the hands of mainstream consumers.
Apple’s revenue in 1983 was roughly $1 billion, or about the amount of money the company brought in on an average day in the first quarter of 2023 (Apple’s fiscal second quarter).
Tech was the clear story for the equity markets in the first half, as the broader S&P 500 notched a 16% gain and the Dow Jones Industrial Average rose just 2.9%.
Investors looking for red flags heading into the second half don’t have to look far.
Global economic concerns persist, highlighted by uncertainty surrounding the war in Russia and Ukraine and ongoing trade tensions with China. Short-term interest rates are now above 5%, meaning investors can get risk-free returns in the mid-single digits from certificates of deposit and high-yield savings accounts.
Another sign of skepticism is the absence of a tech IPO market, as emerging companies continue to sit on the sidelines despite brewing enthusiasm across the industry. There hasn’t been a notable venture capital-backed tech IPO in the U.S. since late 2021, and investors and bankers tell CNBC that the second half of the year is poised to remain quiet, as companies wait for better predictability in their numbers.
Jim Tierney, chief investment officer of U.S. concentrated growth at AllianceBernstein, told CNBC’s “Power Lunch” on Friday that there are plenty of challenges for investors to consider. Like Talkington, he’s unsure how much of a boost the broader corporate world is seeing from AI at the moment.
“Getting to AI specifically, I think we have to see benefit for all companies,” Tierney said. “That will come, I’m just not sure that’s going to happen in the second half of this year.”
Meanwhile, economic data is mixed. A survey earlier this month from CNBC and Morning Consult found that 92% of Americans are cutting back on spending as inflationary pressures persist.
“The fundamentals get tougher,” Tierney said. “You look at consumer spending today, the consumer is pulling back. All of that suggests that the fundamentals are more stretched here than not.”
WATCH: CNBC’s full interview with Ron Insana and Jim Tierney
Technology
Elon Musk’s Neuralink filed as ‘disadvantaged business’ before being valued at $9 billion
Jonathan Raa | Nurphoto | Getty Images
Elon Musk’s health tech company Neuralink labeled itself a “small disadvantaged business” in a federal filing with the U.S. Small Business Administration, shortly before a financing round valued the company at $9 billion.
Neuralink is developing a brain-computer interface (BCI) system, with an initial aim to help people with severe paralysis regain some independence. BCI technology broadly can translate a person’s brain signals into commands that allow them to manipulate external technologies just by thinking.
Neuralink’s filing, dated April 24, would have reached the SBA at a time when Musk was leading the Trump administration’s Department of Government Efficiency. At DOGE, Musk worked to slash the size of federal agencies.
MuskWatch first reported on the details Neuralink’s April filing.
According to the SBA’s website, a designation of SDB means a company is at least 51% owned and controlled by one or more “disadvantaged” persons who must be “socially disadvantaged and economically disadvantaged.” An SDB designation can also help a business “gain preferential access to federal procurement opportunities,” the SBA website says.
Musk, the world’s wealthiest person, is CEO of Tesla and SpaceX, in addition to his other businesses like artificial intelligence startup xAI and tunneling venture The Boring Company. In 2022, Musk led the $44 billion purchase of Twitter, which he later named X before merging it with xAI.
Jared Birchall, a Neuralink executive, was listed as the contact person on the filing from April. Birchall, who also manages Musk’s money as head of his family office, didn’t immediately respond to a request for comment.
Neuralink, which incorporated in Nevada, closed a $650 million funding round in early June at a $9 billion valuation. ARK Invest, Peter Thiel’s Founders Fund, Sequoia Capital and Thrive Capital were among the investors. Neuralink said the fresh capital would help the company bring its technology to more patients and develop new devices that “deepen the connection between biological and artificial intelligence.”
Under Musk’s leadership at DOGE, the initiative took aim at government agencies that emphasized diversity, equity and inclusion (DEI). In February, for example, DOGE and Musk boasted of nixing hundreds of millions of dollars worth of funding for the Department of Education that would have gone towards DEI-related training grants.
Technology
Defense manufacturing startup Hadrian closes $260 million funding round led by Peter Thiel’s Founders Fund
Defense manufacturing startup Hadrian on Thursday announced the closing of $260 million Series C funding round led by Peter Thiel‘s Founders Fund and Lux Capital.
The machine parts company said it will use the funding to build a new 270,000 square foot factory in Mesa, Arizona, and expand its Torrance, California, location as it looks to beef up its shipbuilding and naval defense capabilities.
“What we really need in this country is this quantum leap above China’s manufacturing model,” said CEO Chris Power in an interview with CNBC’s Morgan Brennan. “It’s about supercharging the worker versus replacing them.”
Defense tech startups like Hadrian are disrupting the mainstay defense contracting industry, which is led by leaders such as Northrop Grumman and Lockheed Martin, and battling it out to boost U.S. defense production while scooping up Department of Defense contracts.
An overall view of the manufacturing line in a Hadrian Automation Inc. factory.
Courtesy: Hadrian Automation, Inc.
Hadrian said the Arizona space will be four times the size of its California facility and start operations by Christmas. The factory will create 350 local jobs. The Hawthrone, California-based company said it is working on four to five new facilities to support production over the next year to support Department of Defense needs.
Hadrian said it uses robotics and artificial intelligence to automate factories that can “supercharge American workers.”
Power said demand is rapidly growing, but the lack of U.S.-based talent is a major hurdle to building American dominance in shipbuilding and submarines.
Using its tools, the company said it can train workers within 30 days, making them 10 times more productive. Its workforce includes ex-marines and former nurses who have never set foot in a factory.
An overall view of the manufacturing line in a Hadrian Automation Inc. factory.
Courtesy: Hadrian Automation, Inc.
“We have to do a lot more … but certainly we’re able to keep up with the scale right now, and grateful to our team and customers for letting us go and do that,” he said. “As a country, we have to treat this like a national security crisis, not just the economics of manufacturing.”
The fresh raise also includes investments from Andreessen Horowitz and new stakeholders such as Brad Gerstner’s Altimeter Capital.
The company closed a $92 million funding round in late 2023.
WATCH: Startup Hadrian raises $260 million to expand its AI-powered factories to meet soaring demand
An overall view of the manufacturing line in a Hadrian Automation Inc. factory.
Courtesy: Hadrian Automation, Inc.
The Kuka arm is seen at a Hadrian Automation Inc. factory.
Courtesy: Hadrian Automation, Inc.
Attendees walk through an exposition hall at AWS re:Invent, a conference hosted by Amazon Web Services, in Las Vegas on Dec. 3, 2024.
Noah Berger | Getty Images
Amazon is laying off some staffers in its cloud computing division, the company confirmed on Thursday.
“After a thorough review of our organization, our priorities, and what we need to focus on going forward, we’ve made the difficult business decision to eliminate some roles across particular teams in AWS,” Amazon spokesperson Brad Glasser said in a statement. “We didn’t make these decisions lightly, and we’re committed to supporting the employees throughout their transition.”
The company declined to say which units within Amazon Web Services were impacted, or how many employees will be let go as a result of the job cuts.
Reuters was first to report on the layoffs.
In May, Amazon reported a third straight quarterly revenue miss at AWS. Sales increased 17% to $29.27 billion in the first quarter, slowing from 18.9% in the prior period.
Amazon said the cuts weren’t primarily due to investments in artificial intelligence, but are a result of ongoing efforts to streamline the workforce and refocus on certain priorities. The company said it continues to hire within AWS.
Amazon CEO Andy Jassy has been on a cost-cutting mission for the past several years, which has resulted in more than 27,000 employees being let go since 2022. Job reductions have continued this year, though at a smaller scale than preceding years. Amazon’s stores, communications and devices and services divisions have been hit with layoffs in recent months.
AWS last year cut hundreds of jobs in its physical stores technology and sales and marketing units.
Last month, Jassy predicted that Amazon’s corporate workforce could shrink even further as a result of the company embracing generative AI.
“We will need fewer people doing some of the jobs that are being done today, and more people doing other types of jobs,” Jassy told staffers. “It’s hard to know exactly where this nets out over time, but in the next few years, we expect that this will reduce our total corporate workforce.”
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