On today’s episode of the Morning Brief, co-hosts Madison Mills and Brad Smith explore the AI chip race, Roaring Kitty’s potential E-Trade ban, and trending tickers. The show then delves into the stock reactions of names such as Bath & Body Works (BBWI), Boeing (BA), and Stanley Black & Decker (SWK).
Yahoo Finance’s Ines Ferré joins the show to break down oil trends after crude (CL=F, BZ=F) prices plunged to a four-month low following OPEC+’s extension of production cuts.
This article was written by Gabriel Roy
Video Transcript
It’s 9 a.m. here in New York City.
I’m Brad Smith alongside Madison Mills this morning.
This is Yahoo Finances flagship show.
The morning brief brought to you by invest stock futures, feeling some pressure this morning, a weaker than expected reading on the manufacturing sector pushing major averages lower the data weighing on market sentiment and the feds path forward for the fresh read on the labor market.
The latest data on unemployment layoffs and job openings is set to be released at 10 a.m. Eastern investors looking for signs of a resilient labor market ahead of this Friday’s critical jobs report.
Let’s get to it with the three things that you need to know.
This.
Tuesday morning, your road map for the trading day.
Yahoo Finances and as for how we have more oil prices slide to a four month low as OPEC plus is output decision comes across bearish.
The Oil Alliance agreeing to extend most of its oil reductions into 2025 in a move to support prices.
But analysts are concerned the phase out is premature amid concerns of slowing demand going into next year.
Plus A I chip wars are on fire intel the latest to announce a new processor out of the Computex conference in Taipei, Taiwan.
The Zion six is designed for data center applications and is meant to give intel a boost next to competitors like NVIDIA and A MD, which also unveiled their own chips at the event.
And we’re also taking a look at a possible ban on war and Kitty Keith Gill, the man better known as war kitty who ignited the 2021 name frenzy is at risk of having his account ban on Morgan Stanley’s E trade.
And that’s according to the Wall Street Journal, this comes after Gill revealed he spent nearly $175 million building a position in gamestop using the E trade platform raising concerns over potential market manipulation.
Well, our top story trading for the month of June off to a slow start.
Futures are in the red this morning as we’re taking a look at the dow futures right now down by about 2/10 of a percent.
The NASDAQ 100 futures lower by about 2/10 of a percent.
The S and P 500 futures also lower right now here.
And this is of course, coming on weak manufacturing data causing investors to fear a downturn as the fed weighs its path forward on rate cuts here as we’ve made it through the Lion’s share and really the majority of the earnings season.
If companies trickling out here and there, we’re gonna break those down for you in just a little bit.
So stay tuned for that, especially if you’re into fragrant candles.
But at the end of the day, one of the huge things that we’re gonna be watching over the course of this week as well and the set up to today’s trading activity as we’re taking a look at some of that sector activity coming into the start of trade.
Here is going to be where the economic data, especially on payrolls jobs that continues to move the Fed’s thinking or at least what the market’s anticipation of the Fed’s thinking might look like.
Yeah, absolutely.
Brad.
It’s really interesting to see out of the market movement particularly yesterday, right?
We saw a little bit of a sell off after that soft data that we saw from manufacturing.
And then of course, the last 10 minutes of the trading day, the most important we saw a little bit of dip buying activity, taking a look at what we’re seeing in the tech sector prior to the open.
At least we are seeing some of the big names getting a little bit of pressure.
So that’s likely to be something that’s going to cause some pressure on the overall index, particularly the NASDAQ as we head into the open.
But we’re also seeing a little bit of a sell off in the Treasury space as well.
So an indication that this market confused like all of us about when the Fed is going to be cutting back on rates but also looking at the oil market, crude oil sliding to a four month low today, this coming after OPEC agreed to extend most of its oil output cuts into next year.
Still leaving room on the table for members to roll back voluntary cuts coming up in November.
Now that is earlier than a lot of analysts who had spoken with us had assumed.
So for more on this, we’ve got Yahoo finance is very own and as for a with more and as yeah, Madison and OPEC Plus is agreeing to extend most of its production cuts into 2025 in a detailed plan.
However, the Oil alliance said it will begin unwinding some additional voluntary reductions starting in October.
Now that’s what primarily has sent the oil market spiraling down yesterday and today, with some analysts predicting that unwinding any cuts this year would be bearish for oil prices weaker than expected.
Ism manufacturing data, as you guys just mentioned at the top of the show has also raised concerns about the resiliency of the US economy.
We are off about 13% of the April peak from oil prices.
We are still positive for oil prices this year, but we have seen a downward trend in those prices.
And the expectation is that if plus starts phasing out these cuts, these voluntary additional cuts, which is about 2.2 million barrels per day of additional voluntary cuts if they start phase them out monthly, starting later this year, you could see an oversupply.
So there’s concerns of oversupply in the market coming at a time where demand is.
We’re not sure where demand will be by the end of the year guys.
All right, you’ve been all across this one.
Thanks so much for tracking it and bringing the latest on that.
All right, the chip war, we’re also tracking that this morning.
The chip war is heating up Intel shares.
They are moving higher free market after announcing new data center chip.
Now, the unit is designed for high performance computing for A I data centers and introducing an A I accelerator as well.
Intel has been lagging far behind some of those chip maker competitors like NVIDIA and A MD.
Intel’s new products though.
Are they enough to take some market share from the chip giants to break it all down?
We’ve got Yahoo finance reporter Dan Howley here with us, our tech DH Dan, what do we know about this?
And is it significant enough for Intel to take some market share?
Yeah, Brad, these, these are kind of the the announcements have largely been telegraphed.
The we have the, the Zion six that’s the data center uh uh chip.
It’s not necessarily an A I accelerator like what you would get from NVIDIA uh or, or a MD, it’s really an all uh kind of purpose chip.
It’s, it’s a high performance computing chip rather than something that would power uh say generate the A I uh that’s still very good.
This is something that all, I mean, servers still need these kind of CPU chips.
So this is a, a big announcement uh for Intel and for, for the industry uh on the, the A I side of things where all the hype is uh they announced their Godi chip pricing uh which they say is going to come in less than what you would see from uh NVIDIA uh or, or a MD, presumably they did say exactly who just competitors vaguely.
Uh But still the fact that uh you would be able to purchase a competitive chip uh at a price that’s lower than what you would have to pay for the likes of NVIDIA or A MD is important because the, those those chips go for tens of thousands of dollars.
Uh So those are some of, you know, the big deals that are, that are coming out of Intel on the day data centers.
They also announced their new Lunar League chip.
Uh These are for uh consumer and commercial P CS, uh laptops and desktops.
Uh And they say that this is basically a chip that will uh be able to compete with the likes of arms uh chip line.
Uh The Qualcomm Snapdragon X Elite Line, uh those chips are basically designed to go ahead and rival what Apple has managed to do.
It’s max, which is uh build power and performance so long battery life, uh and strong performance into a chip, something that was really lagging on the window side.
So uh Qualcomm went ahead and did that with their arm base chip.
And now Intel says they’re doing the same thing.
And oh, by the way, A MD also announced its own new A I accelerator road map as well as chips for laptops and desktops and A IP CS.
So Dan, talk to me about the customer that Indel is targeting and how that differs from NVIDIA.
As I know they talked a lot about enterprise customers here is that an area that they see a stronger use case for in terms of gaining market share from NVIDIA.
Yeah, I think really the, you know, the the hyper scalers are, you know, the Microsoft, the Googles that they’re all in on NVIDIA at this point.
You know, they, they, they offer uh competing uh chips as well just because you know, their, their customers want to have some kind of option when it comes to the, the types of chips that they, they may want to take advantage of when they’re, they’re building out their, their A I platforms.
Uh but this will allow for other companies outside of hypersal to get into generative A I at, at a potentially lower price.
And I think that’s something that’s, that’s worth uh you know, acknowledging uh it’s not just the hyper scale.
It’s not just the Microsoft, the Googles, the Amazons, the Metas, uh the Teslas, what have you, it’s, it’s healthcare, it’s uh, you know, individual uh research institutes.
Uh it’s, it’s automotive industries.
Uh And so that’s where we, we could see Intel really shine.
Uh They also, uh you know, they’re, they’re uh A I accelerator chip is gonna pair nicely with the Zion six chip.
Uh just because they’ll, they’ll have the, you know, the, the compatibility, uh because they’re from the same manufacturer.
And so I think that’s something that, that Intel also has as far as market share goes, you know, I mean, look, NVIDIA is still the odds on leader in the space.
They’re, they’re, they know what they, they, they’re doing, they’ve been doing it for a long time.
Uh They have the software and the hardware, they have that moat that they’ve built up.
Uh, that’s gonna take a while to, to get uh, companies to break through.
I don’t think it’s necessarily means that we’re going to see significant market share, uh improvements from Intel, but they’ll, they’ll still, you know, gain some.
Uh, but this isn’t a, you know, knocking video off off its throne kind of thing by, by a long shot.
All right, Dan, we gotta leave it there.
Thank you so much for joining us on all things.
Chips, a lot of news on your beat this week and always so we appreciate it.
Thanks so much.
Now meme stock seem to be losing steam after shaking up Wall Street on Monday.
The latest round of gamestop Fervor kicking up again on an account believed to be tied to investor Keith Gill.
He’s the guy who united the whole meme stock rally back in 2021 revealed that it spent nearly $175 million building a position in the video game retailer using online trading platform E trade.
Since that post, there’s now ongoing discussions and Morgan Stanley’s E trade to ban Gill’s account.
That’s according to the Wall Street Journal.
Now, this raises the question of whether or not more companies need to be on the lookout for our social media is impacting trading here to weigh in.
We’ve got Bill Capuzzi.
He is CEO of Apex fin Tech Solutions that is a digital wealth management company.
Bill.
Thank you so much for being here with us.
I mean, as I mentioned, E trade is considering blocking Keith Gill from the platform and the growing concern about stock manipulation.
Would you consider the same?
Yeah, look, you know, when I looked at the the, you know, the facts that I can see based upon what uh Keith has done.
Really, there’s no reason to be banning him from their platform.
I think it’s actually a black eye for, for Morgan Stanley to take this uh position, right?
It’s no different than someone like Warren Buffett putting out uh sort of 13 f filings for Berkshire Hathaway in that obviously a smaller sense uh in the case of, of Keith Gill, but he’s basically put out his positions that he owns.
Um he’s published them on social media and uh it’s obviously created some stir in the market but from an outsider looking in without seeing all the facts, I don’t see anything wrong with what he’s done.
And, and so as we’re taking a look at the update that came through yesterday, that was posted online, I mean, this comes back to what had taken place in some of the proceedings on Capitol Hill when there was a lot of fact finding in the wake in the aftermath of the height of the meme stock frenzy in January of 2021 where then elected officials were trying to figure out.
Ok, how is it different for someone to go on social media and just post what they might talk about at a backyard barbecue and their holdings and their positionings and what they’re invested in and you know, what their strike dates might look like all of those things versus what Wall Street has been known to do and firms have been known to publish for years and, and the difference there.
Is it any different than what was already found out at that time right now?
Look, first of all, the environment is incredibly different than it was in 2021 right?
What happened back then?
Right?
Um let’s just take gamestop.
It was called a hard to borrow, right?
So there’s a big short squeeze.
And part of the reason for that was that there weren’t a lot of shares to borrow to cover the shorts.
All right.
And it caused challenges.
Number one, number two was we were settling trades in what was called A T plus two environment.
So you settled trades two days later.
Uh Last week, we moved to T plus one, which definitely changed the environment in terms of trading.
What it means is that I buy or sell something today and tomorrow it settles, right and it creates a better environment for us, right?
Creates a lot less risk for the for the uh for the entire street specific to his trades.
To your point.
Brad, it’s no different than, you know, an institution filing their 13 f filings, right?
In terms of what he’s doing, there is a fine line.
It’s, you know, if they’re posting on social media, hey, this is what I’m doing, right?
Having the position after, right?
And causing manipulation in the stock that obviously is illegal, right?
But from what I see in terms of Keith Gill, um I don’t see any issue and frankly, we would invite him on to the Apex platform, you know, based upon the facts and circumstances that I see, right?
He’s expressing his views in terms of what he thinks.
Um you know, in terms of GME, um A MC, some of the different meme stocks.
I don’t see any issue with what he’s doing.
Well, Morgan Stanley would say the issue is that they would likely say that the issue is the call options prior to posting.
To what extent do you think that that is a valid argument?
I, I mean, he, he bought call options.
Right.
So again, he’s expressing his view.
What I love is the fact that we’ve lowered the barriers and allow for retail investors to use things like equities like options to again express their views.
He had bought these options and he actually took a post and said, hey, I have these options on, right?
There’s nothing wrong with that.
So again, you know, make the analogy to Warren Buffett or to any other institution as the post 13 F filings, they’re telling you what their positions are right?
There’s nothing wrong with that.
Well, Bill, you said at the beginning of our interview, you called this a potential black guy for Morgan Stanley, if they do in fact, block him from the platform, how likely do you think e trade would be to lose other customers if they make that move?
Very likely?
Right?
So let’s go back to 21 and then fast forward to today, which is amazing for our industry is retail investors have power, right?
That we’ve lowered the barriers.
Folks like apex creating a platform that allows for people with small amounts of money.
This is not a rich person’s game anymore and effectively allow these people to access the market.
Um And so my sense is that if they kick him off the platform for sure, there’s gonna be backlash from for Morgan Stanley e trade in terms of others saying, hey, this isn’t fair.
He didn’t do anything wrong as far as what we see again.
I don’t have all the facts, but based on what I see, I don’t see anything wrong with what Keith Gill is doing.
Bill Capua, who is the apex Fintech solutions CEO joining us here.
Bill.
Great to see you.
Thanks for hopping on.
Good to see you.
Thank you.
Thanks.
Well, we’re just getting started here on the morning, brief bath and body works investors.
They’re not loving the first quarter report, not smelling great share sinking this morning.
We’ve got the details next and the battle of the chip giants heating up.
We’ll speak with an analyst who now has the highest in video price target on the entire street that’s coming up later on this hour.
Plus we’ll get data that could give us more insight into the state of the economy.
The latest job openings jolts.
Yes, we’ve got more on that during our 10 a.m. hour catalysts.
All this and much more.
You’re watching Yahoo Finance.
We have some breaking news this morning.
Elon Musk is reportedly ordering NVIDIA to prioritize and ship thousands of A I chips meant for Tesla to X and Xa I, that is according to emails obtained by CM BC.
But we know from Tesla’s first quarter earnings called Brad back in April, Elon Musk saying that the EV company would increase the number of active H one hundreds that’s in videos flagship A I chip from 35,000 to 85,000 in number the end of the year.
But emails that C NBC obtained from within NVIDIA from among staffers shared within the company suggesting that Elon Musk could have exaggerated that number, that 85,000 number in terms of the number of chips to ship to Tesla in his statements to shareholders.
And now of course, the big news that he could potentially be diverting those chips to X and Xa.
I mean, this is amazing and considering the fact that we to hear Jensen Hong would be very rosy, at least in his interview with Yahoo Finance about the work that Elon Musk is doing at Tesla talking a little bit a smidge about Xa I as well there.
And for Xai, I think as they’re continuing to try and get a grasp of how many chips that they’ll need in order for artificial.
I mean, think about the data centers.
It’s 60,000.
Uh I think it was we had a, a guest on yesterday, Beth Kendig who had pointed to a $10 trillion valuation one day that uh NVIDIA could get to and it’s on the back of growth in the data center as well where Jensen Wong is talking about a data center that could have 1 million chips in it.
And so 60,000 chips as of right now um is what they’re already talking about.
So all of these things considered Xa I is going to require an artificial intelligence as a whole is going to require a ton of chips in these data centers in order for them to be able to have the compute power to process and have the influential kind of connectivity of all these troves of data.
It’s really only gonna be multiplied when you think about the number of interactions that are gonna have to take place with A I that only add on a significant multiplier or even, you know, uh I mean, my goodness like it’s, it’s just it’s mind blowing almost at the end of the day like, yeah, no, it, it it’s it’s such a huge story and I think that’s why I mean, we initially did see Tesla’s share price drop 1% on the news, which I think just goes to show that to your broader point.
Brad, this is such a big deal for markets in terms of what we’re seeing from company demand for chips.
Anything related to in video within each individual company is going to move potential stock exponential is the word I was looking exponential.
There you go.
Great word of the day.
Well, we’re going to move to another company here because bath and body work shares are sinking this morning after its second quarter sales forecast coming in below expectations.
Now, expecting a decline of 2% to flat moving forward.
Now, the did slightly boost the bottom end of its earnings guidance for the full year.
But we all know we’re always looking for that top line number for these companies and they did not deliver on that top line number.
That is why we’re seeing bath and body works down over 7% in the free market trade here.
They again have better than expected results across the board.
But their key one outlook was spooky for investors and we’re seeing shares down off of that, their net sales were also down.
We’re seeing nearly 8000 call options on this ahead of the market.
Open Brad.
Yeah.
Um it kind of stinks honestly and and here’s why you look at the broader environment from the amount of people that are spending into little luxuries right now that scented candle, little luxury that added, you know, hair wash or any of the kind of body gels that you might be using a little luxury that people are tapping into.
You’re hearing success in parts of other businesses and bath and body works is signaling and it’s outlook that it’s gonna be weaker than expected.
That’s not good for shareholders who are trying to, ok.
If a consumer spending into this, that means that they’re trading away from your brand right now, especially if other companies are saying something that is counter to the guidance that you’re putting out as of this time.
So all of that in mind uh putting a little bit of a number on this.
They said it was a strong start to the year, please though, to narrow their full year guidance range while raising the mid point for the top and bottom line.
So it’s gonna be interesting to see how they meet that and where ultimately some of the consumer sentiment shifts towards words when you’re spending into uh the little luxuries of everything from body scrubs to facial oils and I don’t know, whatever makes people self care.
Saturday come to life.
Well, it’s a great point and I know you talk about this a lot on your show wealth as well, right?
It’s this idea that consumers are starting to struggle particularly on the low end and a bath and body works is a more economic brand.
So it’s not really that surprising when you see this stock struggling a little bit today.
Brad.
Absolutely.
All right.
Well, from soaps to uh screwdrivers, shares of Stanley Black and Decker moving lower this morning after Barclays downgraded the stock to equal weight from overweight.
The analysts behind the downgrade saying the current trading levels are too high to be justified.
Meanwhile, us imposed tariffs on Chinese imported products could also hurt sales.
We’re taking a look at the shares, they are down by about 1.7% here this morning.
And, and, and was an interesting call that came out from Barclays here this morning um and downgrading the stock from equal or to equal weight from overweight.
And then additionally, here, um one, the huge things, the sluggish sales likely to be a key headwind to the rapid eps growth that was predicted here, this implies a 1% drop from Stanley’s current market value and level.
And it’s another example of what we’re seeing in terms of consumer behavior, having a negative impact on some of these names.
You can see year to date, the stock is down over 11%.
And that makes a lot of sense when you consider that the housing market is sort of in a standstill right now as interest rates continue to be higher for longer.
People are staying in their homes longer.
It’s the same thing that’s impacting some of the companies like Lowe’s Home Depot.
These other home renovation related names are having a negative impact because of people staying in their homes for longer.
There’s just not a ton to be done in the tool buying space for all of your home renovation.
Yeah.
Yeah.
What is the tool replenishment rate?
Iii I don’t know, I don’t want a business where you only need to buy it once in your lifetime.
I mean.
Yeah.
No, I’ve had the same screwdriver for the last four years.
Here.
So, um, I impressed that you own a screwdriver.
I don’t own it.
The power one you gotta have, you gotta have a power one.
You just have to.
Yeah, it’s gotta be portable too.
Mine plugs in.
Unfortunately, I’m working on that.
Boeing.
Yeah, let’s talk about that this morning, Boeing.
I was tracking this one you were through this morning.
Boeing has had a difficult start to 2024 shares down nearly 30% so far this year company Ceo Dave Calhoun speaking at an event in Berlin saying Bur uh Boeing is a quote different company post the Alaska Air incident, but that it’s looking to put the crisis behind them.
Now Calhoun, he’s also gonna be putting Boeing behind him.
He set to step down from his position by the end of the year.
Of course, they didn’t go into who might be the leading candidate just yet.
Uh A lot of questions about who is going to be the right person to steer this aircraft behemoth.
Um He also talked about how many different businesses that they do operate.
Uh Of course, a lot of people know them as, and he was kind of putting it as, you know, we have the connectivity.
Um and that connectivity is essentially how they’re getting people from point A to point B.
That’s obviously what people know.
Um But then there is, you know, even on the military side of the businesses that they do have in, in terms of defense and so forth.
But I, I think it’s really just a matter of where within the operational changes and how they’re lifting up the rug in certain parts of the factory floor and their own manufacturing operations where they are lifting up that rug and continuing to see traces of what was previously um determined to be negligence and now has really kind of become even more of a focal point on what the corporate culture was.
And so getting rid of the bad apples that were kind of rotting some of the operational uh the operations at the end of the day.
I think that’s what’s going to be key here and how they’re able to deliver aircraft going forward as well and what airlines should be expecting in taking delivery and investors keenly watching the succession plan of course, is going to be critical.
Now, he did have just an interesting mention.
He said regarding us isolation is moving forward.
He said he doesn’t like any of the signs that he is seen on the US becoming an isolationist nation, particularly with regards to the impact it could have on free and the economy moving forward.
So interesting to get executive takes on what we’re seeing more broadly with trade as well as that kind of tends to heat up as we get closer to elections, speaking of things coming up, we are just minutes away from the opening bell on Wall Street.
We’re going to be watching the day’s biggest market movers ahead of the key jobs data coming out right here at 10 a.m. That’s coming up later.
So stick with us for more.
Hey, we’re tracking the opening bell.
Here we are the morning brief brought to you by Invesco.
And let’s do a quick check of the markets here.
I thought we were gonna have a look at the NYSC but let’s take a look at the Dow Jones industrial average here to begin things as of right now, we are lower by about 3/10 of a percent out of the gates.
The NASDAQ composite flat just barely to the downside here still net positive for the past two days and then the S and P 500 you’re seeing that moving lower by about 2/10 of a percent.
Fire up some of the sector activity as we’re just taking a brief look at the 11 S and P 500 sectors.
This is the past two days.
Let’s give you an intraday look.
So you get an active view of what’s taking place out of the gate this morning.
Really the only gainer right now staples.
Yeah, it’s interesting to see that we’re continuing to see this kind of risk off sentiment.
I was noticing that the S and P equal weight index and now we’re flipping just across the board into negative territory.
We’re seeing that maybe there’s a little bit of broadening happening.
That’s why the S and P is at the flat, the S and P equal.
Wait, where as we’re seeing the broader S and P index chipping into negative territory, which is likely to continue as we head further into the opening bell here.
But we are going to get more insight into that with Yahoo Finance’s Jared Blicker.
He is watching what is moving in the markets for us at our big board, Jared.
What do you have for us?
Thank you, Matty.
I wanted to take it and let’s load the wifi Interactive here.
We just got off a very positive may and Dietrich crunched the numbers.
So this is kind of a bigger picture view.
We just had the best, we best May of the S and P 515 years.
And then if you look at the 10 best Mays and you look at the results, the rest of the year happens to be up double 10.5% versus 4.9% and June is up 1% versus an average negative.
So June usually has a little negative seasonality there.
But with the strong gains, the conclusion, as I like to say is that strength begets strength.
Now, I want to take a look at the dollar and also the 10 year T note yield because both have been under a little bit of pressure.
Recently.
Here is a two month look and you can see the US dollar index just after bouncing up a bit after a string of losses, but I’ll show you that this happens to be an important support area and here’s a head and shoulders top, if we break below should gain some momentum.
And that would be a tail wind for stocks that lower dollar that tends to help risk assets.
Here’s a 10 year T note yield and that is falling as well.
But here’s one thing that I’ve been checking out, uh, if you take a look at what’s happening with commodities and I don’t need to rehash wt I crude and is on that beat.
But excuse me, commodities in general have really just fallen off recently and that has to do with the deteriorating economic picture.
We’ve gotten some weak manufacturing numbers and so that’s at play there.
So then if the soft landing isn’t in play and the no landing is, then you got to think about possible hard landing.
So I think that would be the next pivot, but that’s probably a bit farther down the line.
And here we have the sectors opening up, mix for the day energy, the biggest loser here with crude oil.
Now down below about 78 $77 there.
Uh real estate, the only sector in the green and let’s briefly check out what’s happening with the NASDAQ.
And here we have a mixed board, but NVIDIA, this looks like it’s going to be another record high.
Here’s a four day look and yes, indeed exceeding the highs from yesterday.
So another record high for NVIDIA, surprise, surprise, surprise as always Jared.
Thank you so much for joining us and bringing down all things markets for us.
Now, major indices are on the move to the downside, seeing a lot of red across your screen across the dow the S and P and the NASDAQ, the S and P kind of furthering its moves to the downside down about 3/10 of a percent.
As we move past the opening bell, we’re gonna get a pulse on the labor market at 10 a.m. with the latest report on job openings and quits manufacturing data earlier this week showing a contraction over the course of the last month.
Our next guest here thinking that there may be some cracks in the economy.
So for more on this, we’re joined by John Lynn.
She is Co America Wealth Management’s Chief Investment Officer.
Thank you so much for being here with us, John.
I mean, let’s talk about the extent of these cracks two weeks ago.
I feel like we were celebrating better than expected PM I data.
Now here we are in this kind of Oh no.
Are we heading towards a recession?
The GDP.
Now, figures dropping situation.
Are we overreacting or had we previously been underacting?
Well, good morning.
And I do think we’re overacting currently.
You know, we’re seeing some weakness obviously in manufacturing that’s persisted.
We have been creeping higher.
But yesterday’s report was disappointing.
I think the services number tomorrow will be very important because when that cracked last month, that really kind of got everybody’s attention.
But I really think it’s important for investors to focus on the fact that we saw durable goods orders up.
We’ve seen claims really strong.
I, I’m surprised to see uh what I would characterize is too much concern about Friday’s report.
You know, if businesses are spending on labor and if they’re spending on capital, which is again evident in the weekly claims data, uh which is more current and certainly the uh durable goods orders.
You know, I think we’re gonna see basically in line with unchanged if you will from last month, looking at maybe 100 and 80,000 jobs created uh on Friday.
So, so how many more reports of and you can kind of take your pick of the economic data piece that’s really gonna move the fed’s mind one way or another.
How many more reports are they going to need to see in order to feel like a trend is locked in towards their goal?
Well, I think they’re gonna have to see a while and you know, the the the messaging is very clear for uh an institution that prides itself as Mr Greenspan used to say obfuscation.
Uh you know, looking at, looking at the uh inflation data, you know, year over year core is still 2.8.
Now we can round all we want, but it’s hard to get to 2% when year, over year core is 2.8%.
So I think they’re gonna hold off.
I still think we’re gonna see, call it mild strength in the jobs data.
So consequently, I believe the fed is on hold until at least September.
Well, talk to me about what could fuel those rate cuts coming up.
I mean, we are seeing about a 5050 chance of a rate cut in September priced into the market right now.
Something like the meme trade that we’re seeing right now feels like it might come up to members of the FED as a potential concern.
That means there’s too much liquidity.
Is that something you think will be at the top of their agenda in making that decision or will it be more of the data?
No, I would separate the mean trade uh from, from the jobs data to get the fed to cut rates will have nothing to do with the mean trade.
In my opinion, I suspect a couple of months of extremely weak employment debt as we all know the Fed has a dual mandate, but they’ve been focused solely on inflation for the past couple of years.
So if you see a crack in employment, a significant plunge, uh I think that would be enough.
I know some people are talking about a July by looking at Fed Fund futures.
Uh I think that would be if you saw really weak May and really weak June data, that could uh necessitate a July cut.
But on the meme information, I, I think it’s more important on the meme stuff, the meme stocks to really look at what treasury is doing and the whole liquidity environment, you know, uh people don’t talk enough about the fact that M two, right, the money supply is still up by a third from where we were pre pandemic levels.
Uh So that, that’s an additional $5 trillion sloshing around the economy.
We’ve seen uh even though the FED has enabled or allowed 1.5 trillion to roll off its balance sheet over the last 18 months through reverse repo programs through uh draw down in the Treasury General account.
Treasury provided the equivalent of 1.5 trillion essentially offsetting the fed’s quantitative tightening program.
So that extra liquidity feeds its way into consumers, businesses and risk assets.
You know what we have here, we have to talk about NVIDIA.
I mean, we’ve seen tech and chips dominate the market this year.
I I mean, it, it seems like, you know, that is the the way into our conversation even at, you know, people’s backyard events over the course of this summer, we we just gotta talk about this NVIDIA where you see the sector going from here.
We got a new fresh all time high at the opening cross here for the company too.
You know, it’s fascinating, Brad.
I’m glad you brought it up because uh you know, your earlier segment talked about uh Elon Musk requesting an additional 60,000 chips or whatever uh what 60,000 trips chips, if you’re looking at some of these data centers in the future, that may require a million chips as you highlighted.
So I really think, you know, looking at tech, looking at uh you know, the the the semiconductor space in particular, I like to look at relative performance within a sector and to the degree people may be concerned about technology on valuation.
I still see the semiconductors outperforming software.
And I think that really bodes well, not only for NVIDIA but we see this morning that uh Intel is coming out with a new laptop chip.
A MD is coming out with new A I chips.
So uh it’s it’s broader than NVIDIA even though NVIDIA is the household name.
I keep asking this, I am just curious which day matters more Jensen one or Jay Powell because we continue to see that Invidia drives this market for even a day.
Like yesterday, we saw a bit of a sell off in the last 10 minutes of the day.
A bunch of buying the dip because why not get in when in video?
Is that a little bit of a discount?
What do you make of that?
Well, as exciting as NVIDIA is I have to give the J to Jay Powell, because, you know, at this point in the cycle, you know, there’s a lot of concern about where we are with seasonal weakness.
But with the markets heading into a typically seasonally weak period in an uptrend history shown that we, we tend to perform favorably.
And th those are our expectations, but it’s really about earnings and interest rates.
Despite all that liquidity out there, you know, Powell still holds the, the, the levers that I think will will keep this market going.
And I I suspect he’s gonna be on hold until September, John Lynch.
Come Wealth Management Chief Investment Officer John.
Great to see you and thanks for joining us this morning.
Thank you coming up the battle of the chip giants.
We’ll speak to the analyst who now has the highest price target on the street for NVIDIA.
That’s next.
Welcome back to morning brief brought to you by invest, go now the battle of the semi conductor space heating up with intel and video and A MD all announcing new next generation A I chips.
But we’re going to zoom in on Invidia.
It’s already been a huge year for the stock, obviously shares though up over 130% so far just in 2024 surpassing that $1000 milestone for the first time a few weeks ago and just this hitting another record high, but it hasn’t just been this year, right?
Nvidia’s dominance, sending shares skyrocketing over 500% in the last two years.
Take a look at that extreme climb there and not coming as investors double down on A I hype, all of Nvidia’s momentum leading to a lot of bullishness across Wall Street, Bank of America becoming the latest hiking their price target on NVIDIA this week from 1000 $320 to $1500.
This is now the highest call on Wall Street for the chip giant.
The analyst behind the call.
Vivek Arya is Bank of America’s senior semiconductor analyst and he joins us now.
Vivek, thank you so much for being here with us to talk about your bullish call on NVIDIA.
I’m curious why 1500 why not doubling your price target on this name, considering the amount of bullishness and the fundamentals that back it up?
Sure, good morning.
Thank you for having me.
So I think there are two aspects to it.
The first is where we are in the cycle of converting data centers to accelerated computing, right?
The concept of the data center is not new.
It’s been around since the 19 forties.
But then we have these multi decade infrastructure upgrade cycles from the mainframe to the microcomputer to computing.
And now we are at the start of what I think would be a decade long conversion over to accelerated computing.
What is accelerated computing.
It’s a way of taking a lot of very intensive data processing tasks that have to do with images with voice, with video, with the processing of these large language models and converting the data center with new kinds of semiconductors to make sure that processing can be done very efficiently.
We are just at the start of this cycle, we think that the spending could be anywhere between 250 to $500 billion a year and then video is leading the charge.
And I know there is often this comparison to let’s compare it to intel of the past or let’s compare it to Cisco of the past or other parts of the technology of cycles.
But what is different is that NVIDIA is bringing a combination of silicon, of systems of networking, of software, of developers and that is unprecedented.
So to come to your question, you know, technology stocks, the price target really move because of the size of the market, because of their execution.
And even at this $1500 the stock would essentially be trading at one time their earnings growth rate.
If you look at the S and P 500 it’s trading at two times their earnings growth rate.
So I would claim that even at this kind of price level, it’s actually trading below where the broader market is in terms of the price to earnings to growth ratio, high target on the street for you.
Vivek for NVIDIA.
What is the significance that you see in deals like the one that is being reported this morning Xa I potentially going to be taking the chips that Tesla was supposed to be getting from NVIDIA here.
Yeah, I think there is a race going on between technology companies of various types.
We have seen that across the cloud of players, you know, who have raised their capital spending forecast to over 40 to 45% growth last year.
We were thinking that growth would be 20%.
It’s already 40 to 45%.
There is a race between these different technology companies to be the first to support the next large language model to make sure that they are the destination of choice for a lot of start ups who are trying to really kick start their own generative A I applications.
And then this market is broadening from these cloud service provider to a lot of enterprise verticals.
And in this most recent quarter and video did call out that automotive and automotive customers, which I assume includes Tesla are part of that really large, you know, vertical.
So we see the spreading from cloud customers towards automotive, towards health care.
A lot of drug discovery is being done with this infrastructure, financial services are benefiting from it.
And then the last but not least part that we will start to see more is the rise of this infrastructure among sovereigns, right?
So we have seen India, Europe, Japan, every country and region, the Middle East.
They are trying to make sure that they are able to use their culture, their language to really go and train these large language models.
And we think we are just at the start of what that and that could be a really large infrastructure operate cycle as well.
V you mentioned customers.
And it makes me think about Intel’s latest chip announcement and the executives really speaking about this idea that their chips are not necessarily for the hyper scaler there for more of the enterprise customers, they are going to be a little bit more affordable to what extent do you see that as a winning strategy for Intel moving forward, particularly given the amount of headwinds facing that stock over the course of the past year here?
Sure, absolutely.
I think we have to give Intel the credit that they have very strong enterprise incumbency.
They are the brand name, one of the most trusted names in enterprise infrastructure, but broadly speaking, you know, Intel is facing this challenge where they have been behind in A I, they have the incumbency, but they don’t quite have the deployed base the range of software developers.
For example, NVIDIA has 5 million developers on their cu A platform.
So a lot of the enterprises as they start to look towards their A I infrastructure, the first name they turn to is NVIDIA for the reason that there’s a lot of developers who are already familiar with Nvidia’s infrastructure.
And number two as these enterprises start to scale out.
They look towards cloud instances and that too is where they find a lot of nvidia based instances.
So broadly speaking, if I look at the overall A I chip market today, we think it’s about $100 billion or so.
Uh this year and video has about 80% of that custom chips from Broadcom Marvel and others are another 10 or 15%.
And then you have this long tail, which is a MD, which has Intel, which has a number of start ups.
And even as I look forward over the next 3 to 5 years, as this market doubles or triples from here, we think that ratio will stay relatively in that range, that NIA will continue to have 80%.
You know, we think custom chips will have another 10 or 15% and then you will continue to have this long tail of companies that have a presence, the benefit from the rising tide in this market, but they are never quite able to achieve the escape velocity that the leader in the market has.
And by the way, that is not too uncommon.
If you look at other parts of technology, search social, you know, ecommerce operating system, you see the leader that has the early start, that has the scale the incumbency, the relationship with developers claiming 80 plus percent of the market.
And we see exactly the same thing in the A I market.
As well.
So what would change that dynamic moving forward?
Vivek and I, I would, would love to get your answer on that in the context of some of the cloud providers that are trying to compete with NVIDIA.
I was just in Amazon’s chips lab, Aws S chips lab last week taking a look at some chips that they have coming out here.
And I’m curious what you think would make some of the cloud players like an Amazon a formidable opponent to NVIDIA.
No, ab absolutely.
I think uh we have to look at uh the cloud service providers as uh in some way competing with NVIDIA but even more so being very strong customers uh for the company, you know, developing chips and developing cloud infrastructure are, are two different uh skill sets, right?
So if I’m developing a custom chip in a cloud, only that cloud can use it, it’s not going to scale, you know, any chip that Amazon develops.
It’s not going to be used by Google.
It’s not going to be used by Microsoft, it’s not going to be used by Oracle or Meta.
So in some ways, it is serving a very specific need that, you know, Amazon might have.
Similarly, the chips that Google develops the TP they serve very specific needs.
What NVIDIA has developed is a so called, you know, merchant reconfigurable programmable infrastructure that can be deployed across a very wide range of workloads.
Both for when these cloud companies are handling internal workloads, you know, such as search, you know, such as e-commerce, such as youtube or, you know, uh you know, tiktok, like video recommender engines or when it is serving a lot of enterprise customers through their public cloud, which is why I mentioned that if you, you know, take a step back and look at the broader accelerated computing market, I do think that 10 to 15% will be these custom chips, but they will have several different custom chips, you know, across each of these specific cloud infrastructure.
But because they don’t quite have a way to go from one cloud to another cloud, their range of workloads, you know, their applicability, their their scale tends to be limited to just that cloud infrastructure.
Vivek Arya, who is the Bank of America Senior Semiconductor analyst, Vivek.
Thank you so much for taking the time here today.
Thank you.
Thanks everyone.
We’ve got all your markets action ahead.
Stay tuned.
You’re watching the morning brief, you’re watching the morning brief brought to you by Invesco.
Let’s get to our vibe check on this Tuesday morning.
It’s looking good for Apple, the tech giant closing in positive territory for the year yesterday.
If you remember the stock had previously been down as much as 14% this year at trough in 2024.
But Apple’s quarterly report in early May eased some concerns for investors about its growth trends and sales in China now there, you’re taking a look at the year dates as of right now and unfortunately it looks like we’ve shifted back into, uh, actually that’s a plus sign.
My goodness.
I had to squint to see it.
But anyway, we are barely above that flat line up.
Half a percent.
Yeah.
Yeah.
I mean, I mean, it’s like, not great for the company.
Like Apple, is that close to the flat line.
You really want to be seeing bigger gains than that, right?
Brad.
But it is interesting to your broader point when you look at the Apple stock compared to the NASDAQ, the NASDAQ up almost 11 percent this year.
As of the close when Apple was in positive territory, it was up just 8/10 of a percent.
Now this is a upper trend for Apple rising over 13% throughout the month of May reversing a lot of the downside risk that we have seen impacting this name, putting it below its $3 trillion market cap.
And to your point as well, Brad, the question about demand from China, really a sticking point for investors.
And as we continue to get little pieces of data out of China, out of various manufacturers that show a little bit more of that demand that is helping buoy this stock that really needs some help.
The next big event that investors could potentially be looking at WWDC, that’s going to be incredibly important for really getting a sense of how this company is delivering even more in terms of its ecosystem for developers to iterate.
On top of a lot of question mark around what generative A I could even look like within some of the consumer technology products here own.
Dan Halley has continued to do excellent reporting on that.
And so we’ll see exactly what the tenor, what the vibe of WW DC even getting super meta with it, not to confuse it with meta platforms.
But ultimately here that is going to be perhaps the next major event that we’re seeing on this timeline for Apple shares over the course of 2024.
Yeah, hopefully we’ll get something bigger than the new ipad announcement that we got the last Apple event for a little bit more looking for some new.
But we are going to work on finding Brads I had coming up.
We also are going to have some breaking labor market data right here at the top of our 10 a.m. hour.
We’re going to break down what job of these are signaling about the economy.
But we got a chairman and IBM board member, former CEO of Shell as well.
Peter Bother he can join me here in studio.
We’re going to talk about the, the infrastructure and the impact of A I on the move to electrification of all that and more on catalyst here.
Source Agencies
