Goldman Sachs issues warning over AI exuberance
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Welcome to this week’s edition of The Pilane Capital newsletter where we spotlight the top tech news stories to help you become a better large-cap tech investor. Did someone send you this newsletter? Sign up here.
⚠️ Goldman Sachs issues warning over AI exuberance: in a new note, the investment bank states that Amazon, Meta, Microsoft, and Alphabet have spent a combined $357 billion on capex/R&D over the past twelve months, a “significant portion" allocated to AI. The bank is watching downward revenue revisions for signs that AI spending isn't paying off. If those results don't materialize, they anticipate stock losses ahead for the market's biggest leaders and de-ratings.
🗠 Dow Jones hits record intraday high: 40,200: The Dow Jones Industrial Average rose over 450 points on Friday as markets piled back into renewed hopes for rate cuts from the Federal Reserve in September, even as US Producer Price Index (PPI) wholesale inflation accelerated faster than expected in June.
🏦 Citigroup, Wells Fargo, and JPMorgan Chase beat expectations: ‘Bank Friday’ saw three major US banks beat the Street’s expectations on earnings and revenue. On the downside, the banks set aside more money for future loan losses; they expect credit conditions to worsen.
🥤 PepsiCo beats on earnings, misses on revenue: declining demand in North America for its drinks and snacks, the firm’s fortunes are tied to the American consumer facing more pressure lately - it all points to a rate cut by the Fed in, most speculate in September.
💰 US inflation cools in June: from May to June, prices declined by 0.1% and rose 3% over the 12 months to June, as lower petrol prices helped to deliver the slowest price inflation in a year.
🖥️ Taiwan Semiconductor Manufacturing Co beats on revenue: revenue came in at T$673.51 billion ($20.67 billion), according to Reuters v estimates of T$654.27 billion.
🎊 Two upgrades for Nvidia: UBS analysts upgraded their price target for the stock to $150 from $120. Meanwhile, Wolfe Research analysts also lifted their price to $150 from $125. The tech trade got a nice tailwind.
The house view: overall a good week for markets with the tech trade still intact despite wobbles from Tesla which represents circa 6% of the the Index (see below).
The Goldman Sachs note is food for thought since most commentators have argued that a slowdown in the economy would precipitate a correction rather than a lack of tangible results from AI spending.
See you next week.
D J Thomas
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