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Tech-Heavy: Goldman regains Sachs appeal as Microsoft has its ‘iPhone moment’
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The Week on Wall St
For the week the S&P500 added 1.9%, the blue-chip Dow Jones rose 2.2%, and the tech-heavy Nasdaq Composite climbed 1.1%.
The S&P (SP500) is also now just about 0.5% away from another record high.
On the US corporate front Friday was very exciting for Novavax (NVAX) which went nuts, gaining 99% after signing up with French pharma Sanofi to licence its Covid vaccine starting next year.
NVAX stands to pocket circa US$1.2bn under the deal. The Frenchies will also take a 5% minority stake in return.
On the dark side of the fence, Walt Disney (DIS) delivered a surprise profit in its streaming operation for the first time, like since, ever.
The Star Wars stealers dropped a profit for its slightly entertainment streaming division (Disney+ and Hulu), and forecast full combined streaming business profitability in FQ4 (including ESPN+).
Yet, no-one likes straight out good storytelling these days, as DIS shed 10% – its worst trading day in 18 months.
What’s Ahead
Otherwise, we can probably say Wall Street March quarter earnings were strong.
Certainly, I’m just about done with US Q1 earnings.
And the results have been pretty good.
Excellent even, if you take into account the economic environs and listen to Goldman Sachs.
The world’s biggest fundie says technology is still it, and there’s heaps cheap out and about right now on that front.
The biggies in macro world are Wednesday’s US retail sales and then the consumer price index (CPI) reports.
Both readings can smack Wall Street’s worriers because of what one or the other – or both – could do to the Federal Reserve’s dalliance with trimming interest rates, especially after those odds ticked up following favourable US jobless data.
Also of interest next week will be 13F filings – regulatory disclosures by major funds of their quarterly equity ownership changes.
Alphabet’s (GOOG) Google is hosting its annual developer conference.
But the big show, as ever, will be developments in the artificial intelligence dance, as Microsoft (MSFT) backed OpenAI gets everyone all het-up with an expected AI-update on Monday (tonight) in New York.
Goldman 💕 MSFT
And as Stockhead’s been complaining about, the word on how clever Microsoft Corp is starting to become is getting out.
As of last week, the former software specialist found itself atop of the fresh list of Goldman et al favourites in the AI-dept.
Revenue growth for MSFT’s cloud division accelerated over the last quarter, at well over 30%, way ahead of expectations.
“This quarter Microsoft Cloud revenue was US$35.1 billion, up 23% year-over-year, driven by strong execution by our sales teams and partners,” an MSFT exec said in the earnings press release last month.
And there’s generally broad agreement now among the best of the best US broker clique – the software giant’s cloud segment is killing it, according to the likes of UBS and JP Morgan and as of the weekend, Wedbush Securities.
The broker’s Dan Ives on Saturday told clients Microsoft was in the middle of its very own “iPhone moment”
Microsoft’s new trick is its AI, led by Copilot.
And Dan Ives at Wedbush says he’s seeing “major momentum” in the AI success that CEO Satya Nadella reckons stands to benefit MSFT even more than it already has and change the tech industry forever.
Copilot is “orchestrating a new era of AI transformation,” the CEO told investors.
Further upside is ahead for the tech giant following its late April earnings report, according to analyst Kash Rangan.
Microsoft and Goldman go way back.
In March, after scratching its nemesis off the GS “Conviction List”, Microsoft got to watch Apple stock tumble so much following the GS snub, that its total market cap moved past APPL by US$315bn in one day.
At the time the largest gain Microsoft has had on Apple since 2003.
Last week, Goldman concluded that Microsoft’s “large total addressable market with consistent long-term growth” made the stock and its outlook simply too attractive to ignore.
Azure, its cloud-based business, offers “margin stability,” and artificial intelligence demand remains robust, he said.
“The company is well positioned to capture share of Gen-AI revenue via its broad suite of AI services and productivity-centric focus in an efficient manner that leverages the playbook from its Azure build out, ” Rangan added.
MSFT vs NVDA… (but only because everyone looks shite vs Nvidia)
Since the launch of OpenAI’s ChatGPT in 2022, demand for AI software and the giant data houses required to make it has gone supersonic and the feeling is MSFT is ahead of the curve.
Earlier this month, MSFT happily continued to expand its global AI empire, lobbing US$2.2bn at Malaysia on AI infrastructure.
Before that the tech giant said it wanted to make Thailand a regional infrastructure hub, within a broader move to provide AI training for circa 2.5mn people in Southeast Asia by next year.
Then the show was back home in Wisconsin, where MSFT rolled out the presidential carpet so that President Biden could thank them for the electoral gimme of being on stage when Microsoft’s chair Brad Smith dropped a US$3.3 billion investment in a new artificial intelligence data centre.
Goldman likes.
“We believe Microsoft is one of the most compelling investment opportunities in the technology industry and across sectors.”
On CNBC last week, Goldman Sachs boss David Solomon said he expects AI capital-raising around power and energy to fuel data centre growth as well.
“If you think about the amount of capital that’s going to be necessary to implement [AI], the amount of energy and power that’s going to be necessary to implement it, this is something that people are going to have to think very strategically about….So it’s a big opportunity,” Solomon said.
“[AI] is something that our clients are talking actively about because the changes, the transformation of compute is accelerating at such a pace. The implications on productivity and efficiency in business are going to be enormous,” Solomon said.
The buildout of data centres to fuel AI remains in its early stages, he added.
Nicewhile – since we’re all in the same room – Goldman’s been quietly accumulating some of the clout, heft, respect, vim and ardour which has made its stock such a fine measure of US capitalism, banking, dealmaking, wealth and penis size comparison for the last 25 years of being a listed company.
On Friday, GS stock gently nudged higher, roughly in-line with the S&P500, but with more investment bank panache.
Lookit that.
The somewhat barrelling stock price of the investment bank all but headbutted into an all-time high Friday, insensible to they why’s and wherefore’s and pardon me’s.
Yet and by the love of Satan, the GS share price has risen with a kind of viagral certainty for the last eight days straight.
That inexorable ascent represents GS’ longest straight run of upsurges in more than two years.
There’s two equally evident sets of symptoms to explain this and both are pretty useful to know:
- US equities are punchy and it may be too late to stop the fight. The broader Wall Street have been traded back near records — creating a virtuous cycle of investor confidence that the lean times are over and big, smart money is back on the table for M&A action, obscene public offerings and big-end-of-town deals.
- The bullet hole in Goldman’s foot is almost healed. The years long failed experiment in trying to be a bank for humans – offering customers consumer-banking products is in the rear view mirror. Instead GS dropped a bullish, blood-pumping old school quarter of making a shit ton of money trading and making more money by advising global companies on how best to take over other companies.
On Friday, the stock rose slightly to $457.64, a record intraday high since the bank’s own IPO 25 years ago.
Goldman shares have climbed for eight straight days, up some 7% in that time, their longest winning streak since November 2022.
The Neverending Story
US earnings keeps on keeping on this week, results drop for a swag of big retail names like Walmart (WMT) and Home Depot (HD).
Other watchable moments include the Chinese e-commerce twins Alibaba (BABA) Tencent (TNCT) and former tech giant Cisco (CSCO).
Monday
Petrobras (PBR), Tencent Music (TME), and Agilysys (AGYS)
Tuesday
Home Depot (HD), Alibaba (BABA), Sony (SONY), Tencent Holdings (OTCPK:TCEHY), and Flutter Entertainment (FLUT)
Wednesday
Cisco Systems (CSCO), Grab Holdings (GRAB), Spire Global (SPIR), and Hut 8 (HUT)
Thursday
Walmart (WMT), Applied Materials (AMAT), Deere (DE), JD.com (JD), Baidu (BIDU), Take-Two Interactive (TTWO), and Under Armour (UAA)
The Economic Calendar
Monday May 13 – Friday May 17
MONDAY
India Inflation (Apr)
Germany Current Account (Mar)
Canada Building Permits (Mar)
Brazil Business Confidence (May)
TUESDAY
Japan PPI (Apr)
Germany Inflation (Apr, final)
United Kingdom Labour Market Report (Mar)
United States PPI (Apr)
S&P Global Investment Manager Index (May)
WEDNESDAY
Hong Kong SAR, South Korea Market Holiday
China (Mainland) 1-Year MLF Announcement
Eurozone Employment Change (Q1)
Eurozone GDP (Q1, 2nd est.)
Eurozone Industrial Production (Mar)
United States CPI (Apr)
United States Retail Sales (Apr)
United States Business Inventories (Apr)
THURSDAY
Japan GDP (Q1, prelim)
United States Building Permits (Apr, prelim)
United States Housing Starts (Apr)
United States Industrial Production (Apr)
FRIDAY
China (Mainland) House Price Index (Apr)
China (Mainland) Industrial Production, Retail Sales, Fixed
Asset Investment, FDI (Apr)
Eurozone Inflation (Apr, final)
United States CB Leading Index (Apr)
