Shares rise on renewed AI optimism

General market commentary

Equity markets finished Wednesday's session in positive territory, reversing earlier modest losses, with the S&P 500 gaining 0.4% and the Dow Jones Industrial Average rising 0.7%. The real estate and information technology sectors demonstrated strong performance, leading the S&P 500, while the communication services sector lagged due to Alphabet's earnings results. Although Alphabet's earnings per share exceeded expectations, lower-than-expected revenue led to a significant drop in its share price, weighing down the communication services sector.

Economic data released during the session indicated a mixed picture. The ADP employment survey revealed stronger-than-anticipated private sector job growth in January, while the ISM services PMI came in below expectations, suggesting a slowing pace of expansion in the services sector. Bond yields responded to the ISM services reading by moving lower, reflecting investor sentiment. Market participants are now focused on the upcoming nonfarm payrolls report for January, seeking further clues about the Federal Reserve's future policy decisions, with many anticipating an initial interest rate cut in June.

Latest market and economic update

Most Asian equity markets experienced gains on Thursday, mirroring Wall Street's surge, particularly in the tech sector, though escalating US-China trade tensions have tempered overall optimism. Chinese markets saw increases, with the Shanghai Composite rising by 0.8%, while in Japan, the Nikkei 225 advanced by 0.3%.

U.S. equity futures saw a slight increase on Thursday, building on gains from the previous session, as Nvidia's 5.2% jump led an AI equity recovery following the DeepSeek concerns. Investors are now focusing on quarterly reports from Amazon and upcoming jobless claims, while semiconductor firms like Qualcomm and Arm experienced after-hours declines due to weak results.

European equities rebounded on Wednesday, closing in positive territory as strong earnings reports buoyed investor sentiment across sectors. Banco Santander led the charge with a 7% surge, while GSK and Novo Nordisk also enjoyed substantial gains thanks to impressive financial performances and raised outlooks.

The 10-year US Treasury note yield stayed put at a seven-week low of 4.42% as soft US data and easing trade war worries boosted hopes for Federal Reserve rate cuts. Despite strong private-sector job growth, a disappointing ISM Services PMI and a flat US Treasury auction announcement kept rate cut expectations on the table.

The dollar index dropped to about 107.5 amidst easing trade war fears between the US and China, with the euro/USD exchange rate trading at 1.0393. Markets still expect two Federal Reserve rate cuts this year, while the dollar weakened against the yen due to hawkish comments from Japanese officials.

Oil prices edged up in Asian trading on Thursday after sharp declines, as traders assessed rising US crude stockpiles and escalating US-China trade tensions. While the US's renewed policy on Iran could tighten supply, concerns over demand and increased inventories are currently weighing on the market.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

NVIDIA shares jumped on Wednesday thanks to increased capital expenditure plans from major clients like Alphabet, Microsoft, and Meta, despite recent concerns raised by DeepSeek. Supermicro, an NVIDIA partner, also announced the full production availability of its AI data centre solutions powered by the NVIDIA Blackwell platform, as all eyes turn to NVIDIA's upcoming earnings report on 26th February.

Fiserv shares climbed 7% after reporting better-than-expected Q4 earnings and revenue, with EPS at $2.51 and revenue reaching $5.25 billion. The company's positive outlook for 2025, projecting adjusted EPS between $10.10 and $10.30, reflects confidence in its growth strategies and operational efficiency.

Arm Holdings reported robust third-quarter results, exceeding revenue expectations, but narrowed its full-year revenue forecast, leading to a share slump in extended trading. Investors had anticipated a greater increase in the full-year outlook, despite the company's significant presence in smartphones and its advancements in the AI sector.

Qualcomm announced robust Q1 results, driven by growth in key segments, but its share price dipped due to a forecast of flat revenue in patent licensing after a Huawei agreement ended. Despite securing new deals, concerns linger about the licensing outlook and weak demand in the Chinese smartphone market.

Novo Nordisk reported a strong fourth quarter, with Wegovy sales more than doubling and contributing to a 37% jump in operating profit to 36.7 billion Danish crowns. Looking ahead, the company anticipates slower sales growth of 16% to 24% in 2025, a forecast that reflects increasing competition from rivals like Eli Lilly and potential pricing pressures in the obesity drug market. Analysts have described the results as "good enough," easing some concerns about future performance.

Uber's shares fell after the company's Q4 adjusted profit missed estimates and its Q1 forecast for gross bookings fell short due to a strong dollar and rising costs. Despite beating revenue estimates with $11.96 billion, total costs increased, leading to operating income of $770 million, which was below the anticipated $1.22 billion.

Disney outperformed quarterly earnings estimates, driven by the strong performance of "Moana 2" and higher profits in its streaming business. While domestic theme park profits declined due to hurricanes, this was offset by gains in international parks, and the company forecasts continued earnings growth in fiscal year 2025.

TotalEnergies reported better-than-expected Q4 earnings of $4.4 billion, driven by strong gas market trading, and announced a 7% increase in its 2024 dividend to €3.22 per share, with plans for $2 billion in quarterly share buybacks in 2025. Despite a drop in annual profit due to lower crude prices and weak fuel demand, the company anticipates higher gas prices and increased production in early 2025.

Strategy, previously known as MicroStrategy, reported its fourth consecutive quarterly loss, including a substantial impairment charge on its significant Bitcoin holdings. Despite this, the company is rebranding to highlight its dedication to cryptocurrency, planning to acquire more Bitcoin through fixed-income issuance and anticipating a change in accounting rules to reflect fair value.

Amazon is preparing to launch its highly anticipated generative AI-powered Alexa on 26th February, representing the biggest update to the service in a decade, in an effort to convert users to a paid subscription. The revamped Alexa will offer enhanced capabilities, such as responding to multiple prompts, but Amazon faces challenges like potential AI "hallucinations".

Loop Capital initiated coverage on the cruise line industry, giving Viking a "Buy" rating with a price target of $55, while assigning "Hold" ratings to Carnival, Norwegian Cruise Line, and Royal Caribbean. The firm believes that legacy cruise line stocks already reflect demand recovery and balance sheet improvements, but sees Viking as a more attractive investment due to its lower debt and stronger growth potential.

Rosenblatt Securities downgraded Spotify from "Buy" to "Neutral," citing a limited upside after a significant stock rally, despite the company's strong execution and raised its price target to $658. The firm anticipates decelerating revenue growth in 2025 and a normalisation of operating margin expansion, reducing the potential for further multiple expansion and earnings upside.

Truist has increased its target share price for Booking Holdings and Expedia, citing strong travel trends in Europe and Asia-Pacific, while noting a sluggish U.S. domestic travel market. Booking is well-positioned due to its European exposure, while Expedia may see a U.S. rebound, though its strategic direction remains uncertain.

Despite mixed Q4 results causing Google's shares to tumble, with revenue growth slightly above expectations but EBITDA marginally below, Piper Sandler views this pullback as a buying opportunity. Strong performance in Search and YouTube was offset by weaker results in Google Cloud, but analysts remain confident, maintaining an Overweight rating with a price target of $208.

AMD's shares have fallen following a Citi downgrade to "Neutral" from "Buy" due to concerns about slowing AI growth, weaker margin leverage, and potential inventory build-up. Despite reporting better-than-expected Q4 revenue, AMD's AI revenue is projected to be flat or down in the first half of 2025, leading to lowered price targets from analysts.

Wells Fargo analyst Andrew Bauch maintained a Hold rating on PayPal, citing mixed financial performance and a cautious 2025 outlook, setting a price target of $80. Despite solid Q4 results, Bauch noted uncertainties like elevated buyside expectations and the need for clarity on branded growth.

Stifel has downgraded LVMH from Buy to Hold, increasing the price target from €680 to €710, because the share price has already risen by 20% since November and earnings forecasts haven't increased. Louis Vuitton is performing well, but other brands like Dior, Celine, and Fendi are in transition, and there are challenges in the cognac and jewellery sectors.

Barclays has downgraded Ferrari from Overweight to Equal Weight, keeping the price target at €485, because of concerns about the sustainability of Ferrari's earnings and doubts about the quality of those earnings. Investors are worried about the resale value of models like the SF90 in the UK and how well Ferrari can keep its pricing strong with new models coming out in 2025, including their first electric car.

Raymond James initiated coverage on Robinhood with a "Market Perform" rating, acknowledging its disruptive influence but expressing concern over its high valuation and the sustainability of transaction volumes. The firm anticipates strong Q4 results driven by crypto trading, but cautions that potential interest rate cuts could negatively impact net interest income, establishing a fair value of $47 per share.

Wells Fargo downgraded Snap to Equal Weight, lowering the price target to $11 from $15, citing increased expenses from reinvestments and a slow app redesign rollout. Despite positive ad revenue trends and a potential boost from a TikTok ban, the firm anticipates slower advertising growth in the coming years.

Skyworks Solutions Inc. has been downgraded by Mizuho and Stifel analysts who anticipate significant revenue and profitability headwinds due to the anticipated loss of RF module content in Apple's upcoming iPhone 17. Analysts foresee potential revenue declines and highlighted broader industry challenges as well as the loss of single-source status for a crucial iPhone 17 component.

TD Cowen has reiterated a "Buy" rating for Tempus AI after its Ambry Genetics acquisition, expecting the deal to boost profitability despite potential integration risks and slower revenue growth from Ambry. The firm increased its price target from $50 to $75 reflecting confidence in Tempus's expanded database and new product opportunities.

JPMorgan has named Fresnillo as its top gold mining pick in the EMEA region, raising the target price to £10 per share due to its attractive valuation and high free cash flow yield. The bank is optimistic about the gold mining sector overall, citing a compelling entry point due to low valuations and anticipates gold reaching $2,950 per ounce by the end of 2025.

BlackRock is set to launch a Bitcoin exchange-traded product in Europe, potentially based in Switzerland, following the success of its U.S. Bitcoin ETF. This move aims to meet the rising demand for cryptocurrency exposure and marks BlackRock's first crypto-linked ETP outside of America.

Upcoming data and events

The Bank of England is today expected to announce its decision on interest rates, with markets anticipating a rate cut, while the US will release data on jobless claims, nonfarm productivity, and unit labour costs. On the earnings front, we have results scheduled for the likes of Amazon, Eli Lilly, L’Oreal, ConocoPhillips, Bristol-Myers, Vinci and Fortinet.

For more information visit https://cc.com.mt/. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice.