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- Mood | March 1st, 2024
Mood | March 1st, 2024
TOGETHER WITH
[ good morning ]
Here’s everything you need to know today
With the market still digesting a hopeful inflation print from yesterday, we're encouraged that some of our short-term AI scenarios are playing out. Dell is soaring as more and more businesses build out the foundations they need to run large language models outside of the cloud.
After Duolingo's barn burner of an earnings report yesterday, we're genuinely starting to see the start of real-world uses for AI tools. We're barely into the early innings of this new development and there's already a growing number of winning strategies proliferating across the economy.
Of course—the efficiency revolution can hit its ceiling any time now. But with the success we're seeing, we need to start gaming out what could be coming in 2024. If AI can't fully live up to the sky-high promises made by bull investors, we might see a market overreact and pull back hard once reality sets in. But, if AI is truly the revelation its promoters make it out to be—then this could become a truly deflationary force as big names generate bigger and bigger profits from dwindling spend. That can crush this recovery in equal measure.
For now, we're in one of the most important phases of the market as we kick off the final month of Q1. We've basically proven that consumer spending isn't dead yet--which puts a slow grind to a recession a little more out of reach. With inflation looking a little more under control, it once again looks like the Fed might thread the needle here and achieve some measure of a soft landing. But--with no major catalysts on the horizon for the next few weeks, we're watching the market achieve equilibrium again as winners suck up huge gains while weaker firms get crushed by uncertainty. Staying diverse and reserved with our investments can help avoid outsized losses while the market determines if this is a top or not.
So, let's explore the major headlines powering the price action today and try to determine what the major trends are:
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ enterprise computing ]
Dell Becomes AI Leader As Demand Spikes
AI is powered by Dell
BREAKING NEWS
Dell is the new focus of AI mania thanks to a surge in server demand leading to a massive earnings and guidance beat. Let's explore the grown up narrative for AI deployment.
WHAT HAPPENED
Dell crushed expectations by generating a wild $2.20 EPS from $22.32 billion in revenue. It doesn't even matter that this is technically an 11% drop off from last year's Q4 revenue because server demand at Dell has become nearly exponential.
VERTICAL GROWTH
Dell builds high-performance AI-optimized servers for enterprise clients. A lot of businesses want to run large language models without the risk of leaving those operations in the cloud. Dell's servers are a secure option for brands that can afford them--and demand is much higher than the market expected. AI server orders surged 40% compared to Q3 2023 and Dell's AI backlog grew over 90%. While Dell made less money than last year, the market is ecstatic to see a predictable and expanding source of new revenue here.
WHY IT MATTERS
Dell is going to be a critical provider of infrastructure as more and more teams build AI systems outside of Amazon, Google, and Microsoft. Brands are also clamoring to scoop up Dell's AI-enabled desktop and laptop systems as deployed AI becomes a more and more important narrative. While this is great for Dell's short-term growth, the long-term narrative here is a little more hazy until we get a better sense of the real need for deployed AI in the wild. This easily could be companies overbuying tools they don't need for a market that isn't properly understood. Regardless, The Street would rather not miss out on expanding demand, so Dell's stock surged 26% in early trading. It's a great start to the year if you can add nearly $20 billion to your market cap inside of a few hours.
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Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | 0.89% | 3.96% | 50.42% |
| Consumer Disc. | 0.68% | 6.61% | 30.41% |
| Consumer Stap. | -0.16% | 1.38% | 4.11% |
| Energy | 0.49% | 1.34% | 1.12% |
| Financials | -0.05% | 3.01% | 13.99% |
| Health Care | -0.82% | 2.25% | 14.58% |
| Industrials | 0.31% | 6.02% | 20.09% |
| Materials | 0.76% | 4.95% | 6.73% |
| Real Estate | 0.80% | 1.24% | 4.71% |
| Technology | 1.11% | 3.49% | 53.15% |
| Utilities | 0.03% | 0.02% | -2.73% |
*Market data based on standard trading hours and calculated close to close
[ banking ]
New York Community Bank Implodes as Pressures Mount
Looks like regional bank instability is back on the menu folks
BREAKING NEWS
Almost a full year after Silicon Valley Bank ignited a regional banking crisis, investors are fleeing New York Community Bank after a wave of bad news hit the stock.
WHAT HAPPENED
With commercial offices not even close to returning to pre-pandemic levels of occupancy--investors have been concerned about NYCB's overexposure in the commercial real estate market. A few weeks ago, NYCB fell hard after the bank was forced to take a much larger reserve for loan losses than investors expected. Now, NYCB has announced an additional $2.4 billion in losses. The amended Q4 results came with a leadership change and statements about concerns they had about risk management at the bank.
MATERIAL WEAKNESSES
The big highlight here is that NYCB has determined there were a bunch of flaws in their internal loan review process. The bank is working to fix a number of issues surrounding 'ineffective oversight, risk assessment, and monitoring activities.' To investors worried about the bank losing a ton of money on bad commercial real estate loans, that sounds like the start of a really bad slide.
WHY IT MATTERS
With new leadership in place, New York Community Bank has assured The Street that they can stay solvent and perform well this year. Still, investors can't shake their regional banking worries, especially since New York Community Bank actually acquired Signature Bank--one of the institutions that failed during last year's regional banking crisis. Regional banks nationwide are on shakier ground this morning while NYCB shares plunged an additional 22%.
[ streaming ]
FuboTV Trims Losses as Disney Fight Looms
The sports streaming underdog might have a fighting chance
BREAKING NEWS
After initiating a dramatic lawsuit against Disney, Warner Bros, and Fox last month, FuboTV stood tall on the street as their earnings call showed dramatically lower losses. The sports streamer might just have enough strength to pull off an upset here, but the market isn’t convinced.
WHAT HAPPENED
As American subscribers surged, FuboTV managed to net a $0.17 loss from $410 million in revenue for Q4. Those losses are much narrower than expected while revenue came in much higher. Sports interest in America is expanding beyond the bounds of the NFL, driving strong subscriber growth for the European football-centric service.
EXPANDED RUNWAY
FuboTV also issued guidance demonstrating that North American subscribers will continue to pile onto the service in 2024. While this will still result in less revenue than analysts were hoping for, FuboTV is set to be a lot more efficient this year. That's critical as the streaming service needs to demonstrate they can keep costs under control despite onerous licensing fees from sports broadcast rights holders. If FuboTV can maintain cash reserves, they might be able to mount a strong enough offense to yield a good result from their lawsuit against Disney and the rest of the sports streaming world.
WHY IT MATTERS
FuboTV is in a tough spot dealing with high fees while traditional media players are using sports as their last lifeline to win the streaming wars. Efficient results and high engagement are going to keep FuboTV afloat while this massive lawsuit plays out. For now, FuboTV stock popped 14% in premarket action before settling into a small loss in early trading. After a bad decline kicked off by Disney'‘s joint venture announcement, FuboTV will be trading with a lot more volatility.
Extra Moby Snacks
To cap an extremely fun week on the crypto market, Bitcoin finally flattened a little after briefly topping $63,000/token yesterday. With more catalysts on the horizon, crypto bulls are still fully in control of the price action.
After teetering on the edge of complete collapse, Plug Power announced they had survived their ‘going concern’ issues. Despite the reprieve, losses expanded for the former king of green hydrogen and the stock fell 10%.
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