GraniteShares | August 1st, 2024

Today's insights are courtesy of GraniteShares, learn about their 2X leveraged Coinbase Exchange-Traded Fund (CONL) to get exposure to Bitcoin on the NYSE.

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GOOD MORNING

Here's everything you need to know today: Fed Chair Jerome Powell, the master of monetary suspense, announced that interest rates would stay right where they are 5.25% to 5.50%  for now, but hinted as strongly as he ever has that the Fed might actually cut rates in September. But J-Pow, being the incorrigible cut tease that he is, did warn us that rates can only go down if economic data keeps playing nice

With inflation nearing the Fed’s 2% target and unemployment creeping above 4%, the candles are lit and the stage is almost perfectly set for some rate relief. J-Pow, ever the data-driven romantic, insists that he and the FOMC will be "data dependent, but not data-point dependent" in their choices, so breathe deep and think how good watching those 25 basis points disappear will feel when the heat of summer wears off.

And in case you’re thirsty for more, J-Pow's next chance to tease is scheduled for the Fed’s Jackson Hole symposium at the end of August.

Let’s dive into more detail below.

INDUSTRIALS

Boeing’s New CEO Has A Bad Job

Kelly Ortberg has his work more than cut out for him at the controls of America’s most troubled manufacturing giant

BREAKING NEWS
We were tempted to call this “Local Man Gets America’s Worst Job,” but that felt too on-the-nose.

Boeing has decided to switch up its cockpit by replacing CEO Dave Calhoun with Kelly Ortberg, the former head of Collins Aerospace. Apparently, Boeing's board thinks Ortberg has the industry experience to navigate the stormy skies that have plagued the company under Calhoun’s leadership, pushing the aeronautics giant’s stock down by what wonky Wall Street analysts would term “way too much.”

But is a new CEO enough to save what was once perhaps the U.S.’s most important company?

WHAT HAPPENED
Back in 2019, Boeing’s market cap hit $183 billion, making it the top plane manufacturer in North America, with more than a few Pentagon contracts to its name. But then Boeing’s engineers tried to outdo Airbus with the more fuel-efficient 737 MAX. You know where this is going.

The MCAS software, designed to compensate for the plane's larger engines, led to two tragic crashes in 2018 and 2019, grounding the entire fleet and sparking global outrage. Boeing's response? A cascade of PR disasters, production halts, and endless regulatory scrutiny. They even ousted CEO Dennis Muilenburg to bring in Calhoun to staunch the bleeding.

Instead of things getting better, Boeing launched the 737 MAX 9. And you’d think an aircraft door would be straightforward, but no. Issues with emergency exit doors not closing properly and even doors flying off midair were reported, which is probably the last thing you want to see an airplane door do. Boeing’s engineering team scrambled to fix it, issuing updates and assurances. Meanwhile, the flying public could only roll their eyes and hope for the best.

Fast forward to today, and Boeing is still in damage control mode, trying to rebuild trust with regulators, airlines, and the public, while its stock price has dropped more than 40% over five years.

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Coinbase is set to report earnings after the market close today, and we want to spotlight a GraniteShares ETF that can boost your crypto portfolio.

With the launch of cryptocurrency funds, investors now have unprecedented access to this asset class on the NYSE. As Coinbase is the leading platform for trading Bitcoin and other cryptocurrencies, its earnings report will be closely watched. The GraniteShares ETF $CONL offers leveraged access to Coinbase.

$CONL, up over 70% this year, aims for daily investment results of 200% (2x) the daily percentage change of $COIN, before fees and expenses.

If you're looking to increase your crypto exposure, consider $CONL. It provides a way to participate in the cryptocurrency market through an ETF.

FINANCE

SoFi Reports Record Revenues and Member Growth in Q2 2024

Despite high FED interest rates and student loan pauses from Biden last year, SoFi’s diversified offerings drive continued growth and profitability

BREAKING NEWS
Money may not be the root of all evil, but it also makes the world go round. With the average consumer paying about ten bills each month—totaling roughly $2,126—it's no wonder a company like SoFi Technologies, a “one-stop shop” with savings, investing, lending, and other offerings, is thriving. Their stellar earnings report on Tuesday showcases their role as a beacon of diversified digital finance efficiency.

With the average consumer juggling around ten bills every month—totaling roughly $2,126 on average—it’s no wonder SoFi Technologies, the “Swiss Army knife” of digital finance, is thriving.

Its stellar earnings report on Tuesday cements its status as the golden child of lending platforms. While Elon Musk is busy trying to make X the "everything" app, SoFi is actually pulling it off. With its financial services and tech platforms now making up 45% of adjusted net revenue, it's clear SoFi is running circles around the competition.

While Elon Musk is busy trying to make X the "everything" app—complete with delays and bot swarms—SoFi is quietly living up to its promise. Its slogan, “All Your Ambitions, All In One App,” isn’t just marketing fluff. Financial services and tech platforms now contribute 45% of adjusted net revenue, up from 38% a year ago. This success comes even amidst record Fed interest rates and Biden's pause on student loan repayments, a core income source for the company.

Basically, SoFi's delivering on core efficiency while Musk plays whack-a-mole with bots.

WHAT HAPPENED
SoFi reported net revenue of $598.6 million for the quarter, a 20% jump from $498 million in Q2 2023. This isn’t just a flash in the pan; it’s a trend. Adding 643,000 new members in Q2 2024 (a 41% year-over-year increase), SoFi is growing like a weed. The plan is to add at least 2.3 million members in 2024.

SoFi’s total products hit nearly 12.8 million, up 36% year-over-year. This means more members are lining up for its buffet of services, from loan refinancing to high-yield savings accounts offering almost 5% (compared to the 0.01%-0.04% from traditional banks).

Thanks in large part to tech acquisitions like Galileo and Technisys, SoFi is becoming the Pied Piper of fintech, pulling in a young demographic with boosted user experience and efficiency. This is why it’s nice to have a CEO like Anthony Noto, who is comfortable with some M&A from when he used to work at Goldman Sachs.

The company flaunted a GAAP net income of $17 million in Q2 2024, making it profitable for the third straight quarter. Adjusted EBITDA soared by 80% to $138 million, and SoFi Invest assets ballooned by 58%. They even upped their FY24 GAAP net income guidance to $175-$185 million.

Of course, it’s not all sunshine and rainbows. Like traditional banks, new regulations have had an impact on SoFi’s non-interest income. Having its hands tied on collecting high fees on things like basic transactions and overdrafts, have caused a 38% nosedive year-over-year.

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AI

OpenAI Faces $5 Billion Loss Amid Rising AI Costs and Declining App Downloads

OpenAI Faces $5 Billion Loss Amid Rising AI Costs and Declining App Downloads

BREAKING NEWS
At Moby, we remember when computers first invaded homes in the pre-internet '70s, '80s, and '90s, mostly exciting hobbyists and tech geeks. Fast forward to today, and large language models (LLMs) like OpenAI’s ChatGPT, Google’s Gemini, and Claude AI are sparking a similar frenzy. Money is pouring in, bizarre projects pop up (looking at you, Rabbit and Friend), and users are confused.

Now, with reports suggesting OpenAI might lose $5 billion this year due to high AI costs and declining app downloads, whispers of a dot-com bubble 2.0 are getting louder.

WHAT HAPPENED
Jack Bogle, the man who made index funds mainstream investments, once said, “New ideas that fly in the face of conventional wisdom of the day are always greeted with doubt and scorn, even fear.”

LLMs and AI are currently faced with all three, though big businesses, seeing upticks in operational efficiency, customer service, and general market research and analytics, see no reason not to embrace the future.

So, it’s not a surprise that AI adoption in companies are rapidly increasing, with 77% either using or exploring AI in their businesses and 35% actively using AI services. A significant 83% of companies consider AI a top priority in their business plans, though many lack an existing workforce from any internal training program. For instance, last month, we wrote about Intuit laying off 1,800 of their existing employees—about 10 percent of its workforce of around 18,000 - while simultaneously planning to hire the same number of new workers trained in exactly what they wanted, framing it as a “significant restructuring effort purportedly focused on AI.” Ouch.

For retail, OpenAI is seeing almost $1.87 billion in revenue in consumer-facing ChatGPT subscriptions of OpenAI's total annualized revenue of approximately $3.4 billion, with projections to exceed $4 billion by the end of 2024. This is a significant portion of their revenue, accounting for more than half or 55%. That’s a heavy burden on any consumer, especially when the tech is new. Remember, we’re not talking about Netflix or Spotify here, which have solid customer bases with a founded product with a culture and network. For comparison, Netflix and Spotify have annual churn rates of around 20-25% and 30%, respectively.

ChatGPT boasts over 100 million weekly active users, with daily active users reaching a peak of 31.57 million in November 2023. The key word here is "peak," yet the platform's user base shows to be predominantly composed of individuals aged 25-34, suggesting a strong appeal among younger, tech-savvy demographics. Perhaps we’re seeing a slight pull-back in downloads and users simply because they hit a wall with utility, which OpenAI appears to be aware of after recent news of their upgrade of Chat GPT voice and Search.

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1. Microsoft Reports Slower Azure Cloud Growth

Microsoft shares dropped after reporting slower growth in its Azure cloud unit, causing investor concern despite the company’s overall strong performance. The results highlighted the costs of AI investments, impacting the stock’s performance.

2. Boar’s Head Expands Recall to 7 Million Pounds of Meat

Boar’s Head has expanded its recall to include 7 million pounds of deli meats due to a listeria outbreak. This recall follows a previous one of 200,000 pounds and has affected numerous products across the nation.

3. Japan Raises Interest Rates for Second Time Since 2007

The Bank of Japan raised its benchmark interest rate to 0.25%, marking only the second increase since 2007. This move aims to bolster the yen and indicates a shift towards normalizing monetary policy.

4. AMD Surges on Record Data Center Revenue

AMD reported record second-quarter revenue from its data center segment, driven by strong AI demand. This performance led to a surge in AMD’s stock as the company continues to compete with Nvidia in the AI chip market.

5. Amazon Ordered to Handle Recall of Faulty Products

Amazon has been ordered to manage the recall of faulty products sold by third-party vendors. This decision follows findings that Amazon bears responsibility for ensuring the safety of products sold on its platform.

6. Delta CEO Blames CrowdStrike for $500M Outage Loss

Delta Air Lines CEO Ed Bastian announced that the airline is seeking legal action against CrowdStrike and Microsoft over a global tech outage that cost the airline $500 million. The outage disrupted flights and caused significant financial losses.

7. Boeing Names Kelly Ortberg as New CEO

Boeing has appointed Kelly Ortberg as its new CEO, effective August 8. Ortberg, formerly of Rockwell Collins, will face the challenge of navigating the company through its ongoing operational and financial difficulties.

8. Nvidia Stock Soars on Strong AMD Results

Nvidia shares surged 12% following strong earnings results from AMD and a positive analyst call from Morgan Stanley, which named Nvidia as a top stock pick. This development underscores investor confidence in the semiconductor sector.

9. Fed Signals Potential Rate Cut in September

Federal Reserve Chair Jerome Powell indicated that an interest rate cut could be on the table for September if inflation data continues to improve. The Fed’s current decision was to keep rates steady, with future adjustments dependent on economic conditions.

10. HSBC Announces $3 Billion Share Buyback

HSBC announced a $3 billion share buyback following its second-quarter earnings report, which beat expectations. The move comes as part of outgoing CEO Noel Quinn’s strategy to return value to shareholders.

CONTINUE READING ➔

Today's insights are courtesy of GraniteShares, learn about their 2X leveraged Coinbase Exchange-Traded Fund (CONL) to get exposure to Bitcoin on the NYSE.

Learn More Now ➔