Morning Reads

Morning Reads




While Meta's (META) heavy AI spending and light revenue outlook alarmed investors, huge investments in the new technology from other Big Tech players Alphabet (GOOGGOOGL) and Microsoft (MSFT) are paying off. Both companies reported earnings that topped expectations across the board, cementing their dominance in the AI field and convincing investors that their huge AI bets are reaping more immediate returns.

Search strength: Alphabet surged by double digits AH on Thursday - GOOG +11.4%, GOOGL +11.6% - after its Q1 results easily cleared analyst expectations, with strong performance particularly at YouTube. The tech giant also rewarded investors with its first ever dividend and announced a $70B stock buyback. "Our results reflect strong performance from Search, YouTube and Cloud," said CEO Sundar Pichai. "We are well under way with our Gemini era and there’s great momentum across the company." He also noted that Google's AI offerings boosted core search results in the quarter.

AI cloud boost: Microsoft (MSFT) rose 4.4% AH on Thursday, as the tech giant's Q3 results beat expectations, helped by AI adoption across its cloud services, and its forecast largely matched Street estimates. "Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry," said CEO Satya Nadella. To note, the company's AI-driven spending in the quarter was about $1B more than what analysts expected, but that didn't deter investors as it appears warranted given huge customer demand.

SA commentary: Investing Group Leader Ahan Vashi said while Alphabet is spending big on AI, it is on track to generate around $80B free cash flow in 2024. However, he is moving to the sidelines as its "valuation is now too rich, and long-term risk/reward warrants a rating downgrade." SA analyst Livy Investment Research noted that Microsoft has a "lofty" valuation premium relative to its Magnificent 7 and broader tech sector peers. "However, we remain confident in further upside potential, given its expansive reach into AI opportunities across different layers of the value chain." (89 comments)

Inflation fears

Don't expect the inflation picture to get much, if any, better when the Commerce Department releases its March data for personal income and outlays today. Economists expect both the PCE price index and core PCE, which excludes volatile food and energy prices, to rise 0.3% M/M in March. To note, Q1 GDP didn't rise as much as expected, but PCE inflation came in hotter, unnerving investors. "This implies upside risks to the key monthly core PCE deflator and makes a near-term rate cut even less likely," said ING Economic and Financial Analysis. Even so, Treasury Secretary Janet Yellen affirmed that the fundamentals are in line with inflation continuing back down to normal levels. (10 comments)

Net neutrality

The Federal Communications Commission has voted to bring back net neutrality rules that had been repealed in 2017 under Trump's administration. The rules would prohibit internet providers from favoring or limiting certain kinds of traffic across the network, by re-establishing the treatment of internet providers as Title II common carriers. The FCC also used its new authority to block certain Chinese firms from providing broadband services in the U.S. over national security concerns. The FCC's decision "will deter investments and innovation necessary to connect all Americans," said Jordan Crenshaw, senior vice president, U.S. Chamber of Commerce Technology Engagement Center. (3 comments)

NBA streaming

Discussions are ongoing for the National Basketball Association's next round of media packages, which will be effective after the 2024-2025 season, and competition is heating up. Amazon (AMZN) and Google's (GOOGGOOGL) YouTube are vying for a new NBA streaming package. Meanwhile, Comcast's (CMCSA) NBCUniversal has set its sights on a major TV deal currently held by Disney's (DIS) ESPN and Warner Bros. Discovery's (WBD) TNT. Both Disney and Warner have pitched paying much more while airing fewer games under a new pact. The companies' exclusive negotiating window to renew their contracts has expired, allowing the NBA to negotiate with other suitors. (3 comments)

Today's Markets

In Asia, Japan +0.8%. Hong Kong +2.1%. China +1.2%. India -0.8%.
In Europe, at midday, London +0.5%. Paris +0.3%. Frankfurt +0.7%.
Futures at 7:00, Dow +0.1%. S&P +0.7%. Nasdaq +1%. Crude +0.7% to $84.11. Gold +0.8% to $2,360.20. Bitcoin +0.9% to $64,172.
Ten-year Treasury Yield unchanged at 4.70%.

Today's Economic Calendar

Personal Income and Outlays
10:00 Consumer Sentiment
1:00 PM Baker Hughes Rig Count

Companies reporting earnings today »

What else is happening...

US2Y yield tops 5%, US10Y yield hits five-month high after GDP data.

Bristol-Myers (BMY) to cut 2,200 jobs as part of $1.5B cost savings plan.

Anglo American (OTCQX:AAUKF) rejects BHP's $39B takeover offer.

Intel (INTC) stumbles as weak guidance and AI, foundry issues weigh.

Cannabis stocks outperform as pressure mounts for rescheduling weed.

Microsoft (MSFT)-backed cybersecurity firm Rubrik soars 21% in debut.

PG&E (PCG) CEO: Warren Buffett 'got it wrong' on California wildfire risk.

Paramount (PARA) sinks amid report deal with Skydance is getting closer.

Hertz (HTZ) slides 20% as depreciating Teslas (TSLA) dent bottom line.

Cleveland-Cliffs (CLF) CEO still interested in acquiring U.S. Steel (X).

BOJ keeps interest rate unchanged; yen hits weakest level in 34 years.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

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