Breakfast on Wall Street: Big AI
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Great AI
The exclusive $3 trillion market cap club has a new member…and a new antitrust investigation. The new investigation into Nvidia (NVDA), Microsoft (MSFT) and Microsoft-backed OpenAI will explore the dominant roles the companies play in the artificial intelligence sector, according to THE New York Times. The Department of Justice and the Federal Trade Commission will be involved in the investigation, as advances in generative AI threaten to upend the world as we know it (or so they say).
Background : The probe tracks the meteoric rise of Nvidia (NVDA), which is up 150% Since the beginning of the year and +770% since early 2023. It joins several other recent regulatory investigations surrounding artificial intelligence, including consumer protection risks at OpenAI and in-depth reviews of deals with AI startups. Previously, the DOJ and FTC have been at the forefront of policing big tech, saying other Magnificent 7 players like Alphabet (GOOG, GOOGL), Amazon (AMZN), Apple (AAPL), and Meta (META) had all violated anti-monopoly laws.
As they exert their power and stock prices rise, the weighting of the new AI giants gives them more influence in the market. Microsoft, Nvidia, Alphabet and Apple now account for nearly a quarter of the S&P 500 (SP500), sparking countless discussions among investors about concentration. “Nvidia is currently making money from AI, and companies like Apple and Meta are spending on AI,” noted Jake Dollarhide of Longbow Asset Management. “There’s a lot of retail money piling up in what they see as a direct uptick.”
What to watch: In the past, Apple (AAPL) had also been a member of the $3 trillion club, and the stock is poised to regain admission. The iPhone maker, which has been lagging behind in the AI ​​race, reportedly unveiled a partnership with OpenAI at WWDC on Monday that will integrate ChatGPT into the iPhone’s operating system. Are more antitrust lawsuits on the horizon? We’ll find out soon, but for now, Big AI only seems to be getting bigger. Take part in the WSB sentiment survey exploring Mag 7 stocks and AI. (12 comments)
Start of rate cuts
A day after Canada cut its benchmark interest rate for the first time in four years, investors are bracing for a similar move in the euro zone. The ECB is expected to cut its deposit rate by 25 basis points to 3.75% at its meeting today, as inflation eases slightly above the 2% target. This reduction would be the first since September 2019, although the prospects for further easing remain unclear. It would also mark a significant divergence from the Federal Reserve, which is not yet confident about rate cuts given persistent inflation. (1 comment)
Be set on fire!
It finally happened. Boeing’s (BA) CST-100 Starliner took off Wednesday morning on its first crewed mission, carrying astronauts Barry Wilmore and Sunita Williams to the International Space Station. The launch was a final test before certifying the spacecraft for regular manned trips to the ISS. Note that Boeing’s program is seven years behind the success of SpaceX (SPACE), which has recorded nine crewed launches since 2020. Both publishers were hired under similar NASA contracts in 2014. (9 comments)
Lone Star Stocks
Texas is looking to grab some of New York’s financial clout, with TXSE Group planning to launch the Texas Stock Exchange. The company completed its first capital raise with participation from more than two dozen investors, including BlackRock (BLK) and Citadel Securities. The fully electronic National Securities Exchange aims to provide more stability and predictability regarding listing standards and associated costs compared to Nasdaq (NDAQ) and NYSE (ICE), which have been criticized for adding more rules and increased compliance costs. (14 comments)
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