Roots | June 15th, 2024

Today's insights are courtesy of Roots, the only real estate fund that creates wealth for both its investors and its renters.

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GOOD MORNING

Here's everything you need to know today: OpenAI has appointed ex-NSA chief Paul M. Nakasone to its Safety and Security Committee, sparking backlash from privacy advocates, including Edward Snowden. This move comes as OpenAI enhances its leadership team and announces a strategic partnership with Apple.

Consumer sentiment has hit its lowest level in seven months, with the University of Michigan's survey revealing a sharp decline amid financial unease and sticky inflation. All eyes are now on the Federal Reserve's next move as it navigates the delicate balance between curbing inflation and fostering economic growth.

Adobe's AI innovation with its Firefly model has driven a 16.5% surge in its stock, reflecting strong sales and market confidence. This boost underscores Adobe's strategic focus on AI integration, setting it apart from its competitors.

Let’s dive into more detail below.

AI

OpenAI Appoints Ex-NSA Chief Nakasone to Safety and Security Committee, Sparking Backlash

OpenAI’s latest leadership additions include ex-NSA chief Nakasone, prompting debates on data privacy, AI ethics, and commentary from Edward Snowden

BREAKING NEWS
OpenAI has appointed Paul M. Nakasone, retired U.S. Army general and former director of the NSA, to its board. Nakasone, also the longest-serving leader of U.S. Cyber Command, joins during a significant period of expansion for OpenAI. This move comes as OpenAI enhances its leadership team with new top executives and announces a strategic partnership with Apple.

WHAT HAPPENED
OpenAI's latest announcement introduces Paul M. Nakasone to its board, highlighting his extensive experience in cybersecurity and intelligence. Nakasone's expertise will be pivotal as he joins the Safety and Security Committee, tasked with evaluating OpenAI's processes and safeguards over the next 90 days. The addition of Nakasone underscores OpenAI's commitment to strengthening its cybersecurity measures, a crucial aspect as the company continues to innovate in the AI space. Additionally, OpenAI has onboarded Sarah Friar as CFO and Kevin Weil as Chief Product Officer, bringing substantial industry experience. This strategic bolstering of leadership aligns with OpenAI's rapid growth trajectory and its recent collaboration with Apple to integrate ChatGPT with Siri, marking a significant step in generative AI development.

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ECONOMICS

Consumer Sentiment Hits Lowest in 7 Months, All Eyes on Fed’s Next Move

University of Michigan’s recent survey reveals a sharp decline in consumer sentiment index to 65.6 amid financial unease and sticky inflation

BREAKING NEWS
With high inflation, stagnant wages, and the unemployment rate ticking up to 4% in May, it shouldn't be a shock to see consumer sentiment at its lowest level in seven months.

The University of Michigan's latest survey revealed a sentiment index of 65.6, down from 69.1 in May and below the expected 72.

WHAT HAPPENED
The decline in consumer sentiment was primarily driven by a significant drop in the current conditions index, which fell to 62.5 from 69.6 in May. This decline reflects a growing unease among consumers about immediate financial situations, likely exacerbated by higher interest rates and still-elevated consumer prices. Consumers remain wary despite recent positive inflation data, such as May's CPI showing a modest 3.3% increase year-over-year—the lowest since July 2022.

This disconnect between consumers' perceptions and economic data suggests deeper underlying issues, such as wage stagnation and rising living costs. Federal Reserve Chair Jerome Powell addressed these concerns, reaffirming the Fed's commitment to reducing inflation to its 2% target while acknowledging the short-term pain this adjustment process entails.

"Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses," Powell said in a speech at Jackson Hole in April 2022.

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SOFTWARE

Market Rewards Adobe’s AI Innovation with 16.5% Share Boost Amid Strong Sales Outlook

Adobe’s AI model Firefly boosts stock by 16.5%, leading to record sales and surpassing profit expectations

BREAKING NEWS
The market is once again rewarding those who have embraced the power of AI. Adobe Inc. shares exploded 16.5% + Friday, marking the most significant gain over four years after projecting robust future sales driven by adopting its new AI-based tools.

This market confidence reflects growing customer support for Adobe's AI features, contrasting with the recent investor anxiety faced by its peers.

WHAT HAPPENED
One reason for the bullishness was Adobe Inc.'s new annual recurring revenue, expected to reach $460 million this quarter, surpassing the average estimate of $435.2 million. Their latest digital media segment, which includes creative and document-processing software, reported an 11% sales increase to $3.91 billion for the quarter ending May 31.

The company's fiscal-year profit forecast was raised to $18.20 per share, exceeding analysts' estimates.

This notable uptick proves Adobe successfully integrates its AI model, Firefly, into essential products like Photoshop and Illustrator, which has generated over 9 billion images. The company's strategic focus on AI innovation and monetization positions it favorably against smaller rivals and market concerns about generative AI's impact on traditional software demand.

This optimism could sustain the stock's upward momentum in the short term. At the same time, long-term prospects will depend on Adobe's ability to continuously innovate and expand its user base, especially against competitors like Canva.

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1. GameStop Shares Edge Down Ahead of Critical Shareholder Meeting

GameStop shares saw little movement on Friday, with the absence of social media activity from Roaring Kitty ahead of the upcoming Monday shareholder meeting.

2. California Wipes Water Debt for 4 Million Residents

Governor Gavin Newsom announced that California has paid nearly $880 million to clear water and wastewater utility bills for 4 million residents.

3. Roaring Kitty may have cut GameStop options position, strategists say

A surge of trading in some short-dated GameStop options contracts suggested to some market participants that Keith Gill, known as Roaring Kitty, may have sold part of his recently-disclosed options position.

4. ‘Dutch Roll’ Incident on Boeing Max Prompts Federal Investigation

The FAA and NTSB are investigating a 'Dutch roll' incident that occurred on a Southwest Airlines flight from Phoenix to Oakland.

5. Edward Snowden Releases New Message: "You Have Been Warned"

Edward Snowden has issued a warning to the public about OpenAI, following the announcement of a former NSA director joining its board.

6. Dow Jones Tumbles 300 Points, But Adobe Jumps On Earnings, AI Optimism; Nvidia Hits New High

The Dow Jones fell by 300 points while Adobe's earnings and AI optimism pushed its shares higher. Nvidia reached a new high amid the mixed performance of other indices.

7. Tempus Soars 15% on the First Day of Trading, Demonstrating Investor Appetite for AI in Health Tech

Tempus, a health tech company focusing on genomic testing and data analysis, saw its shares rise by 15% on its Nasdaq debut, reflecting strong investor interest.

8. Consumer Sentiment Tumbles In June, Reaches 7-Month Low

Preliminary data shows US consumer confidence dropped in June, reaching its lowest point in 7 months. Inflation expectations remained unchanged.

9. Google Loses Bid to End US Antitrust Case Over Digital Advertising

Alphabet's Google must face trial on U.S. antitrust enforcers' claim that it illegally dominates the online advertising technology market, a federal judge ruled on Friday.

10. Meta Pauses AI Models Launch in Europe Due to Irish Request

Meta Platforms will not launch its Meta AI models in Europe for now after the Irish privacy regulator told it to delay its plan to harness data from Facebook and Instagram users.

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Today's insights are courtesy of Roots, the only real estate fund that creates wealth for both its investors and its renters.

Learn More ➔