April 24, 2024

Nvidia and an AI ‘tipping point’ are driving a market rally

For now, Nvidia is living up to the lofty title Goldman Sachs gave it this week — “the most important stock on earth” — after its huge earnings report.

Markets are looking up on Thursday, along with investor and government hopes for the artificial intelligence boom, as strong demand for the chipmaker’s products suggests there is more room for the trend.

Nvidia is up 13 percent in premarket trading after results that exceeded analysts’ high expectations (and prompted a torrent by exuberant memes). Jensen Huang, the company’s CEO, said Nvidia saw an “inflection point” in demand for AI systems.

Among the highlights:

  • Nvidia’s annual revenue rose by as much as 265 percent year-on-year to $22.1 billion. It also forecast that revenue this quarter would be about $24 billion, which would easily exceed forecasts of $22 billion.

  • Huang told analysts that the results represent the first year of “a 10-year cycle of spreading this technology into every single sector.” Demand is so high that Huang had to reassure analysts that they were “fairly” allocating chip orders to customers.

  • One warning sign: Sales fell in China, a once-crucial market hit by U.S. export restrictions on certain advanced chips.

Market watchers credit Nvidia with fueling a global rally. Stocks in Asia and Europe rose on the news, including ASML, the Dutch chip equipment maker. Meanwhile, the Nikkei 225, a benchmark index in Japan, closed at a record high that surpassed its level 34 years ago, as global investors continue to sell Chinese stocks in favor of Japanese stocks.

Skyrocketing AI expectations go beyond stocks. Some economists have begun to talk about once-in-a-generation productivity gains from technology that automates tasks like composing emails and proposals.

Washington is also focusing even more on AI. Commerce Secretary Gina Raimondo said Wednesday that the CHIPS and Science Act, passed in 2022 to boost domestic chip production with $39 billion in manufacturing incentives, would not be big enough “if we want to lead the world.” .

In calling for a “CHIPS Two,” Raimondo singled out OpenAI, a major Nvidia customer, as a tech company with a “mind-boggling” need for high-end chips to run its products like ChatGPT. (Raimondo made her comments at an Intel event where that company announced a more than $15 billion deal to make custom chips, including AI processors, for Microsoft.)

But there is increasing skepticism about the AI ​​boom. Some hedge funds have begun cutting their positions in Nvidia and other Magnificent Seven technology stocks ahead of Wednesday’s earnings call.

In other AI news:

  • Google said this would happen temporarily interrupt an image generation function for Gemini after it was found that the AI ​​tool depicted some historical figures, such as the founding fathers, as people of color.

  • OpenAI CEO Sam Altman pushed back on a report from The Wall Street Journal that his company is looking to raise up to $7 trillion.

  • Chinese companies remain heavily dependent on American technology to realize their AI ambitions.

  • A quiet pillar of AI research is Steve Schwarzman, co-founder and CEO of Blackstone

The Fed is in no rush to lower borrowing costs. Minutes from the central bank’s January interest rate meeting showed that while officials saw “significant progress” in moderating inflation, they remained cautious about cutting rates too quickly. The futures market on Thursday forecast three to four rate cuts this year, a sharp decline from a month ago, when traders saw six to seven such moves.

Boeing is replacing the head of its 737 Max program. Ed Clark, who oversaw the factory that makes the 737 Max 9, was the most prominent executive ousted during a leadership change at the aerospace giant. The changes represent the biggest step Boeing has taken yet in the wake of an episode in which a door plug on an Alaska Airlines 737 Max 9 fell off mid-flight.

An Alabama court ruling puts fertility treatments in limbo. The University of Alabama at Birmingham health care system said it would pause in vitro fertilization treatments after the state Supreme Court ruled that frozen embryos should be considered children. There are concerns that other conservative states will follow Alabama’s lead, adding to the confusion over the legality of such procedures there and driving up costs.

Nestlé warns that inflation will hurt growth. The maker of Nescafe coffee, chocolate bars and pet food sees “unprecedented inflation” undermining customers’ purchasing power as profits fall short of expectations in 2023. Earlier this month, Krispy Kreme and Heineken also warned that inflation would drive up input costs and reduce sales.

The deal this week that has the digital media industry talking is BuzzFeed’s $108.6 million sale of Complex, the culture media publication, to Ntwrk, a livestream shopping company backed by the likes of music impresario Jimmy Iovine.

The transaction is a further dismantling of the controversial BuzzFeed. But perhaps the most interesting angle is Universal Music Group’s investment in Ntwrk as part of the deal – and how that underlines the way the music industry is looking to leverage new revenue streams and expand the reach of their artists.

The deal is about creating a new hub for ‘superfan culture’, Ntwrk said in a press release. The e-commerce company – whose founders include Iovine’s son Jamie Iovine – has worked with musical acts such as Blackpink and Post Malone on commercial partnerships. Complex has long been known for its coverage of areas such as hip-hop, sneaker culture and streetwear.

“I think over time there have been a lot of publishers that strive to get into shopping, or there are a lot of commerce platforms that strive to tell media stories to drive more commerce,” said Aaron Levant, another co-founder of Ntwrk. is the new CEO of Complex, told The Hollywood Reporter.

That’s what Universal wants to take advantage of. said John Janick, the chairman and CEO of the company’s Interscope Geffen A&M label, who is joining the board of the newly combined Ntwrk and Complex. “This partnership gives our artists access to a dynamic network to deepen connections with superfans through unique collaborations and cultural moments,” he said in the release.

Universal Music CEO Lucian Grainge has also called for strengthening the relationship between artists and fans, including partnerships with other platforms. The company’s merchandise division, Bravado, has teamed up with artists like Billie Eilish and Justin Bieber to collaborate with brands.

Universal has been looking for an updated model for its sector. That included dealing with the proliferation of artificial intelligence and renewing streaming rights — two reasons the company cited for pulling its music from TikTok.


– The code name advisors gave to Capital One’s $35.3 billion acquisition of Discover Financial, DealBook hears. It is a reference to Taylor Swift’s blockbuster tourwhich raises the question of whether executives gave to each other Friendship bracelets.


One of the Biden administration’s biggest budget priorities has been providing more funding to the IRS to collect more taxes.

Armed with tens of billions in new funds appropriated by the Inflation Reduction Act of 2022, the agency is beginning to show off its new efforts, including tackling diversion of private jets and billionaires using sophisticated tax avoidance strategies.

The IRS is cracking down on corporate aircraft misuse by pursuing those who claimed millions in deductions on planes sometimes used for personal travel. That will start with dozens of new audits targeting companies, partnerships and the passengers themselves (who, according to the agency, must report these trips as income).

The IRS says this is made possible by the Inflation Reduction Act, which has helped fund new analysis tools. And there’s a lot of money at stake, said Daniel Werfel, the agency’s commissioner: “On any given taxpayer’s tax return, the amount of the air travel deduction could be tens of millions of dollars,” he said.

It is part of a broader campaign to step up enforcement. The International Consortium of Investigative Journalists has examined the agency’s efforts to keep a closer eye on the extremely wealthy, including by:

  • Using artificial intelligence tools to map complex partnerships that help taxpayers mask their income, something that was not possible before: “We would ask for reports on partnerships, but there were only three or four people in the data- unit of the IRS with high prosperity,” a former Treasury Department official told the ICIJ

  • More advanced analyzes of cryptocurrencies

  • Announcement of the recruitment of 3,700 new agents

But those efforts face headwinds, including moves by Republicans in Congress to recover extensive IRS funding, and to actually prove these things in court. “Enforcement has been so low for so long that there are very few people at the IRS or the Department of Justice who have the relevant experience to actually go to trial in criminal tax cases,” Rod Rosenstein, deputy attorney general, told IPS. President Donald Trump. the ICIJ

Offers

  • Reddit is said to have signed a $60 million per year deal with Google, which would allow the tech giant to use the social media platform’s content to train its AI models. (Reuters)

  • Chord Energy has agreed to acquire Canada’s Enerplus for about $3.7 billion, the latest in a wave of deals in the North American oil and gas sector. (Bloomberg)

  • “A billionaire bought a piece of Manchester United. Now he has to fix it.” (NYT)

Policy

The best of the rest

  • How Instagram Became an Increasingly Important News Site Even as It Places Less Emphasis on “Political Content.” (NYT)

  • The FTC said Twitter employees saved Elon Musk from a hefty fine for violating data protection rules by ignoring some of his demands. (Business Insider)

  • “The Ozempic effect gives Sweetgreen a boost” (Bloomberg)

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