Wall Street Breakfast: Cutting Edge


Cutting edge

Only three weeks into the new year, tech is showing its staying power, with the market continuing to favor the sector. Chip optimism and AI headlines are helping support the sentiment despite some concerns that Fed rate cuts may take place a little later this year. In fact, the Nasdaq 100 (NDX) just closed at a new all-time high at 16,982, while the best year-to-date performance for any S&P 500 sector is Information Technology (SP500-45TR) with an increase of 2.6%. Will the tech boom continue through 2024? Wall Street Breakfast subscribers think so. Also read Seeking Alpha Readers Predict Tech, Health Care Will Have Best Returns For 2024: Are They Right?

Tech dominance: Many of the usual suspects have seen outsized gains in the new year, including the list of AI favorites. Nvidia (NVDA) +19%, Meta (META) +9% and Microsoft (MSFT) +8% have seen impressive YTD returns, while big tech players like Alphabet (GOOGL) +5%, Amazon (AMZN) +2% and Apple (AAPL) +2% have also tacked on gains. Interestingly, Tesla (TSLA) has seen its shares slide 15% this year, and it wasn’t long ago that Elon Musk threatened to develop AI products outside of the company unless he doubled the amount of his voting control.

Everyone needs a little artificial intelligence these days, and the ones that are ahead in the race stand to benefit. Buying may also be taking place before tech earnings next week, while some of the trillions of dollars parked in money-market funds and other cash-like investments could be coming off the sidelines with yields looking less attractive. A soft landing also appears to be in the cards and that may mean less macro uncertainty, letting tech companies talk more positively about the upside and their bullish product developments.

The AIverse: “This is like, bigger than just a technological revolution,” Sam Altman declared from Davos, adding that there’s no “magic red button” to stop AI. Mark Zuckerberg has also decided to merge two of Meta’s (META) leading AI research groups (FAIR and GenAI) as it “becomes clear that the next generation of services [will] require building full general intelligence.” His new focus will involve 350,000 Nvidia (NVDA) H100 GPUs by the end of the year, or almost 600K H100s equivalents of compute if including other GPUs, which will be another revenue windfall for Nvidia and other computer chip players that are helping power the AI revolution. (4 comments)

Attention borrowers!

The Biden administration will forgive another nearly $5B in student debt for 74K people, though the plan did not disclose when eligible borrowers can expect to see that relief. “Nearly 44K of them are teachers, nurses, firefighters and other individuals who earned forgiveness after 10 years of public service, and close to 30K of them are people who have been in repayment for at least 20 years but never got the relief they earned through income-driven repayment plans,” President Biden said in a statement. His administration has so far forgiven more than $136B in student debt. Recall that last year, the Supreme Court struck down Biden’s student loan forgiveness plan to cancel up to $20K of student loans per borrower. (9 comments)

Peltz and the proxy

Famed activist investor and billionaire Nelson Peltz, who is engaged in a proxy battle with Disney (DIS), feels that oversight of the entertainment giant’s board is awful. “This company is just not being run properly,” announced Peltz, who runs Trian Fund Management. The comments came as Peltz officially launched a campaign to get himself and former Disney CFO Jay Rasulo elected to the board, saying they were “going to be Batman and Robin.” Earlier this month, activist hedge fund Blackwells Capital said it would nominate three directors to Disney’s board in support of Iger, while another activist, Ancora, supports Peltz. Here are the names of Disney’s board nominees. (30 comments)

No shutdown

Congress has officially cleared a temporary spending bill to fund the federal government into early March, buying more time for U.S. lawmakers to hammer out funding bills for the fiscal year that started in October. The latest continuing resolution, which is expected to be signed by President Biden, is the third extension made in recent months. Hardline Republicans pushed back on the measure, with the House Freedom Caucus calling on “all conservatives” to oppose the proposed bill. “It’s Groundhog Day in the House chamber all the time, every day, yet again spending money we don’t have,” said Rep. Chip Roy (R-TX). (3 comments)


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