Making sense of this crazy world
A difficult time for equities
Stocks have declined as oil prices have jumped again, not helped by the ongoing concerns about the AI outlook.
Brent Crude rose above $114 after deadly attacks in Saudi Arabia hit oil supplies. Bonds were the recipient, with 10-year US bond yields falling and bond prices rising.
Tech stocks led the equity downturn as they came under pressure amid renewed AI valuation fears. Meta’s results were strong but despite this their shares tumbled by circa 7% over fears of runaway expenditures. Asia also followed suit as there was a flight to safety.
As reported on Bloomberg, Blackstone Inc. President Jon Gray, pushed back on the notion there’s an AI bubble, just days after billionaire Ken Griffin said investors are “almost certainly” in the midst of one. “When you think about a bubble, you think about building capacity and then hoping demand comes. With AI, you’re building capacity, and you’re hoping you can keep up with demand “, said Gray.
We’ll take a look at the different spending strategies of Meta and Tesla as an example of why it’s important not to generalise.
Grabbing the headlines has been the announcement from the government that everyone should stockpile three days of food, due to potential cyber attacks on food suppliers, yet they say there is no need to panic. So, what do many people do… panic. I think it’s fair to say most people have three days of food in their house anyway, even if it consists of those old tins of rice pudding!
Whether we like it or not, the world is operating in a new paradigm with AI, robots and automated driverless vehicles – and this is just the tip of the iceberg.
This week’s content:
- Meta posts strong results but their stock price tumbles
- Tesla pulls back on their spending
- Barclays to axe 5,000 jobs next year
- Chinese stocks move into bear market territory
- The two-headed challenge
- When is a good time to invest?
- Conclusion
Meta posts strong results but their stock price tumbles
Meta’s quarterly earnings report was encouraging, but investors were spooked by the statement that the company is now set to spend between $135 billion and $145 billion. Mark Zuckerberg told investors that the company’s wager on AI is delivering desirable results.
The company sold off initially by circa 7%, ironically wiping around $115 billion from its market value, not far off the amount they are looking to spend. Most tech stocks followed their decline to greater or lesser extents.
Tesla pulls back on their spending
Tesla reported the opposite to Meta, saying they are pulling back on their capital expenditure after their investment over the last quarter disappointed with around 40% less than the market expected.
Despite not spending as much, Tesla beat analysts’ estimates and suggested this was, in part, due to rising customer demand for its automated driving software. According to Bloomberg, Tasha Keeney, an analyst, says Robotaxis are the future for Tesla. She suggests the company is well positioned over its peers and the Cybercab is cheaper to operate compared with Waymo’s next-generation vehicle.
This week we also had the announcement from Elon Musk that both SpaceX and Tesla have formed special committees to explore a possible merger, but said no agreement has been reached. He said he’s not allowed to participate in talks but supports a deal while warning that it may not materialise. He also cited the challenge of getting enough support from Tesla shareholders.
Continues…
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