What we’re reading (11/16)
“Stock Market Rally Is Dented As Signs Of Worry Emerge” (New York Times). “Wary of high valuations and potential market potholes, investors are punishing companies that miss earnings expectations more harshly than usual, which some analysts say is an indicator that they are more attuned to signs of stress than shows of strength. On average, companies in the S&P 500 that missed earnings expectations by more than 2 percent fell roughly 4 percent immediately after, while those that beat expectations by more than 2 percent gained only just over 1 percent, according to data from Fundstrat and FactSet.”
“Wall Street Blows Past Bubble Worries To Supercharge AI Spending Frenzy” (Wall Street Journal). “Not long ago, Blue Owl Capital was an upstart investment firm that lent money to midsize U.S. companies such as Sara Lee Frozen Bakery. These days, the firm is financing massive data centers costing tens of billions of dollars for the likes of Meta and Oracle—a sign of just how quickly Wall Street has become the enabler of America’s artificial-intelligence boom. Fund managers such as Blue Owl amassed trillions of dollars of investing firepower and have been hunting for big deals where they can put that money to work. They found slim pickings for years until a perfect match appeared in AI, which has provided a bigger target than anything in history due to the vast sums tech companies need to ramp up computing power.”
“The Hole Lurking In Big Tech’s Trillion-Dollar AI Blitz” (The Telegraph). “The threat of faster-than-expected depreciation is important because companies account for the cost of IT hardware assets over several years. Recently, tech giants have taken the view that Nvidia’s graphics processors will remain effective and profitable for longer, increasing their expected lifespans from three to five years. If these estimates are right, it will result in a huge boost to profits. If they are wrong, the tech giants will be forced into significant write-downs. Over time, their chips will begin to wear out, break, or become obsolete, compounding fears that tech companies have overstretched themselves to keep the AI show on the road. Commenting on Meta’s results in July, Jim Chanos, the investor who predicted the collapse of US energy giant Enron, said: ‘If the true economic life of its GPUs [graphics processing units] is actually two to three years, most of its ‘profits’ are materially overstated.’”
“Americans Really Want Their Cheap Stuff Back” (Business Insider). “[P]eople are tired of being surprised at how expensive everything is and increasingly annoyed that their paychecks aren't going as far, too. A Washington Post-ABC News-Pisos poll from October found that 71% of American adults say they're spending more money on groceries compared to a year ago. Many consumers have hoped prices would fall — they don't realize that, in many cases, the best they can hope for is for them to stop rising so much.”
“Are We Nearing The End Of Apple’s Tim Cook Era?” (TechCrunch). “The company’s board and senior executives are reportedly preparing for the possibility that Tim Cook could step down as CEO as soon as early next year. This would come after Apple’s earnings report in late January, giving the new leadership team time to settle into their roles before Apple’s big events like the Worldwide Developers Conference in June.”
