Chips pop on Micron earnings

On Wednesday, U.S. equities stalled amid tepid trading, with most S&P 500 sectors declining after recent record highs. The S&P 500 fell 0.19%, while the Dow dropped 0.70%. Technology shares showed resilience, buoyed by strong results from Micron, which surged 10% post-market. Meanwhile, European equities also faced pressure, reflecting cautious sentiment ahead of key economic data, though utility and technology sectors performed relatively well amid growing interest in AI investments.

Summary for 26.09.2024

Most Asian equities rose on Thursday, buoyed by optimism over China's stimulus measures and strong earnings from U.S. chipmaker Micron Technology. South Korea's KOSPI gained 2.1%, while Japan’s Nikkei 225 and TOPIX rose 2.4% and 1.8%, respectively. China's Shanghai Composite and CSI 300 indexes increased by 0.6%, supported by heavy bargain buying, as broader markets advanced amid positive sentiment.

European markets are expected to follow U.S. trends, with tech shares set to rise after strong earnings from chipmaker Micron lifted sentiment. U.S. equity index futures pointed to a mixed open, with gains in the Nasdaq and S&P 500, while Dow Jones Futures edged lower. Market focus remains on Fed Chair Jerome Powell's upcoming address and key inflation data due later this week.

Oil prices steadied after steep losses on Wednesday due to signs of Libyan production recovery. Despite this, prices saw strong weekly gains, driven by Chinese stimulus measures and shrinking U.S. oil inventories. Middle East tensions and a Federal Reserve rate cut also supported oil demand, while U.S. production faced disruptions from adverse weather in the Gulf of Mexico.

The U.S. dollar held steady on Thursday after its sharpest rally since June, rebounding from lows against the euro and sterling. Traders awaited speeches from key Federal Reserve officials for clues on future rate cuts. Diverging views within the Fed were noted, while U.S. jobless claims data and global currency movements also impacted market sentiment.

Micron Technology shares surged 14% in after-hours trading after the company forecast higher-than-expected Q1 revenue of $8.7 billion, driven by strong demand for its AI-focused memory chips, especially HBM chips used in NVIDIA processors. The AI boom helped cushion impacts from a memory chip glut in other markets, with Micron forecasting record revenue and improved gross margins.

OpenAI plans to restructure into a for-profit entity to attract investors, with CEO Sam Altman set to receive equity. The company is raising $6.5 billion, with Microsoft, Apple, NVIDIA, and UAE firm MGX expected to participate. Several top executives, including CTO Mira Murati and CRO Bob Mcgrew, have resigned. Altman will remain CEO, with Mark Chen appointed as SVP of Research.

At its annual Connect conference, Meta unveiled a prototype of its augmented-reality glasses, Orion, showcasing the company's vision for merging the virtual and real worlds. CEO Mark Zuckerberg highlighted future plans for sleeker, consumer-ready versions by 2027. Meta also announced AI chatbot enhancements, a new Quest headset, and massive investments in AI and metaverse technologies, despite significant losses in its Reality Labs division.

Pfizer is withdrawing its sickle cell disease treatment, Oxbryta, from all markets due to safety concerns, including risks of vaso-occlusive crises and deaths. The decision follows clinical data showing the drug's risks outweigh its benefits. Pfizer is also discontinuing related studies and advising patients to seek alternative treatments. The move comes ahead of a European regulatory review of the drug.

Shares of Ford Motor and General Motors fell around 5% yesterday after Morgan Stanley downgraded both automakers due to a challenging market with falling prices and increased competition, particularly from China. Ford's rating dropped to "equal weight," while GM was rated "underweight." Meanwhile, car dealerships like Penske Automotive and Asbury were upgraded, benefiting from stable consumer demand and less exposure to competition.

New Street Research analysts forecast a 10% shortfall in iPhone 16 shipments for FY25, projecting 215 million units, due to lukewarm consumer reception attributed to "disappointing innovation" and delays in Apple’s generative AI platform. They maintain a Neutral rating on Apple with a target price of $225, noting that while AI has long-term potential, it won't significantly drive hardware sales in the near term.

KeyBanc upgraded DoorDash to "overweight," raising its price target to $177, citing the company's strong growth in food and grocery delivery, with a projected 17% increase in gross order volume for 2025. For Uber, the price target increased to $90, reflecting anticipated profit growth and improved operating efficiencies, particularly in its mobility segment, with expected EBITDA of $11.3 billion by 2026.

Piper Sandler raised its price target for Tesla to $310, driven by improved delivery estimates for 2024, now forecasted at 1.75 million units. The firm anticipates nearly 459,000 deliveries in Q3, potentially marking a record quarter in China. While U.S. demand may rise with Cybertruck deliveries, European sales remain weak. The analysts maintain an Overweight rating, highlighting risks like production delays.

Barclays analysts upgraded Hewlett Packard Enterprise Co (HPE) to "Overweight," anticipating continued growth in AI server revenues and improvement in its storage business. HPE reported a 167% surge in AI server orders last quarter and expects over 30% sequential revenue growth in the next quarter. Despite facing competition, HPE raised its full-year adjusted earnings forecast, reflecting increased spending on AI infrastructure.

Citi analysts raised their price target for Roku shares from $60 to $77, reflecting increased confidence in the company's initiatives to boost platform revenue growth, while maintaining a Neutral rating. This new target is based on Roku's strong free cash flow performance and expectations for future growth. Citi believes Roku can achieve around $205 million in incremental revenue through improved subscription sign-ups and ad fill rates.

Barclays analysts noted that despite record high equities, market positioning is "not stretched," suggesting potential for further gains as systematic investors might chase the rally if volatility remains low. They highlighted that hedge fund exposure has not fully rebounded since the summer selloff. The analysts also see opportunities in under-owned cyclical sectors and emerging markets, particularly amid easing measures from China.

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