Tag: Nasdaq

Nasdaq, S&P 500 Slide as Meta and Microsoft Trigger AI Spending Concerns

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Meta and Microsoft’s AI spending plans trigger a broad tech stock decline.
– U.S. 10-year Treasury yield climbs to 4.33%, pressuring equities.
– Core PCE inflation and jobless claims data keep Fed policy under scrutiny.

Wall Street’s main indexes dropped sharply on Thursday, driven by renewed concerns over Big Tech’s escalating artificial intelligence (AI) expenses. While both Meta and Microsoft posted better-than-expected quarterly earnings, their plans to increase already significant spending on AI infrastructure raised red flags among investors. This push toward higher AI investment triggered a sell-off in the technology sector as fears surfaced that such costs could eat into future profitability.

The Nasdaq Composite, heavily influenced by tech giants, fell approximately 2%, while the S&P 500 dropped about 1.6%, reflecting the widespread impact of these concerns. Meta and Microsoft’s focus on AI investments caused their shares to slide, signaling that, despite their strong earnings, heightened spending in this area could offset potential gains. This trend extended to other major technology companies, such as Amazon and Apple, which are also slated to report earnings soon. Investors will closely monitor their results as the “Magnificent Seven” tech giants—the group of leading high-value companies that have largely driven market gains—determine much of the market sentiment around AI and technology spending.

Bond markets added another layer of volatility to the day’s trading activity. U.S. Treasury yields rose, with the 10-year yield hitting 4.33%, its highest level in months. A stronger dollar also accompanied this climb in yields, placing additional pressure on stocks, particularly in sectors sensitive to rate fluctuations. Meanwhile, across the Atlantic, the UK faced a bond market sell-off, fueled by inflation fears related to recent fiscal stimulus, adding further tension to global markets.

Compounding the market’s cautious mood was new economic data reflecting inflationary pressures and resilient employment. The Personal Consumption Expenditures (PCE) index, the Federal Reserve’s favored inflation gauge, showed core inflation rising 2.7% in September, maintaining August’s rate and slightly exceeding economists’ expectations. The data hints that inflationary forces might still be persistent, adding pressure on the Federal Reserve as it prepares for its next policy meeting. Investors are now left questioning whether the Fed might adjust its rate policy to control inflation, particularly as a series of rate cuts had been anticipated.

Additionally, weekly jobless claims fell to 216,000, a five-month low that was below market expectations of 230,000. This lower-than-expected figure further indicates a strong job market, a factor that could complicate the Fed’s decision on interest rates. Combined with last month’s spike in private payrolls, this data builds a case for economic resilience, though the Fed must balance this with inflation management. With the critical monthly jobs report due Friday, investors anticipate further insights into employment trends and inflation risks as they navigate these mixed signals.

This blend of rising bond yields, mixed tech earnings, and economic data reflecting both inflation and robust employment presents a complex landscape for investors. The challenges of AI’s impact on Big Tech’s financials, alongside uncertain Fed policy in the face of economic data, have amplified market volatility. The coming weeks, including additional earnings from major tech players, Middle Eastern tensions, the Nov. 5 U.S. election, and the Fed’s upcoming policy meeting, suggest that market fluctuations will likely continue.

WeRide Raises $440.5 Million in US IPO and Private Placement, Eyes Nasdaq Listing

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Chinese autonomous vehicle company WeRide raised $440.5 million through a U.S. IPO and private placement.
– WeRide is valued at over $4 billion and begins trading on the Nasdaq, signaling improved investor sentiment in Chinese tech IPOs.
– The autonomous driving sector faces challenges, particularly in robotaxi safety and regulatory barriers.

WeRide, a prominent Chinese self-driving technology company, has successfully raised a combined $440.5 million through its initial public offering (IPO) in the United States and a private placement. The Guangzhou-based firm sold 7.74 million American Depositary Shares (ADS) at $15.50 each, reaching the lower end of its targeted range and securing roughly $120 million from the IPO. In addition, WeRide raised $320.5 million through a concurrent private placement, valuing the company at over $4 billion. Trading on the Nasdaq is expected to start later today, marking a significant milestone for WeRide and a notable increase in Chinese company IPO activity on American exchanges.

The interest in U.S.-listed Chinese IPOs has seen a resurgence after years of regulatory uncertainty that culminated in the delisting of ride-hailing giant Didi Global following scrutiny by Chinese regulators. Recent easing of regulatory barriers by Beijing, paired with a resolution on audit access between the U.S. and China in 2022, has allowed for renewed activity. The reopening of the U.S. IPO market has also been welcomed by tech startups that faced a downturn over the past two years due to cash burn concerns and volatile valuations. With investor sentiment improving, WeRide’s successful listing follows the IPO of EV manufacturer Zeekr earlier in the year and could pave the way for additional Chinese tech companies to pursue U.S. listings. Autonomous vehicle firm Pony AI, backed by Toyota, is one such company with its Nasdaq filing earlier this month.

WeRide’s operations include testing and commercial trials of autonomous taxis, buses, vans, and street sweepers across 30 cities in seven countries. As robotaxi technology continues to evolve, analysts note that establishing widespread autonomous taxi services may still require years of technological refinement to meet safety and reliability standards. Accidents involving autonomous vehicles remain a primary concern, as challenges such as adverse weather, complex intersections, and unexpected pedestrian behavior still pose obstacles to self-driving technology. Despite these hurdles, China has taken a more proactive stance on authorizing self-driving trials compared to the U.S., allowing firms like WeRide greater flexibility for experimentation and commercialization within their domestic market.

WeRide’s expansion into the U.S. market, however, may be influenced by a proposed regulation from the Biden administration that seeks to limit Chinese software and hardware in American-connected and autonomous vehicles due to national security concerns. Such regulatory measures may shape the future landscape of cross-border collaboration in autonomous technology. However, companies remain optimistic that continued advancements in the sector will transform urban transportation. Notably, Tesla has recently revealed its own robotaxi and robovan concept as the competition within the EV and autonomous vehicle industries intensifies.

The underwriters for WeRide’s IPO include major players Morgan Stanley, J.P. Morgan, and China International Capital Corp. With proceeds potentially reaching $458.5 million if underwriters exercise options for additional shares, WeRide’s public listing aims to bolster its financial base for continued development and expansion, setting it on a path toward establishing a robust presence in the global autonomous driving market.

Nasdaq Tumbles as Netflix Shock Eclipses Mideast Crisis

Posted on by slightbourne@noblecapitalmarkets.com

US stocks were mired in a broad sell-off on Friday, with the S&P 500 and Nasdaq Composite extending their losing streaks to six sessions despite easing concerns over a potential military escalation between Israel and Iran. The slide puts both indexes on pace for their worst weekly losses in months as investors continue repricing expectations around Federal Reserve rate policy.

The tech-heavy Nasdaq bore the brunt of the selling, dropping 1.3% as disappointing earnings from streaming giant Netflix exacerbated the rout in high-growth companies. The S&P 500 fell 0.4%, dragged lower by weakness in its information technology sector.

In contrast, the Dow Jones Industrial Average rose 0.7%, lifted by a massive post-earnings rally in American Express. But the divergent performance did little to soothe overall market jitters.

Netflix plummeted over 8% even after topping first-quarter profit and revenue estimates. The company’s decision to stop reporting paid subscriber metrics beginning in 2025 raised concerns on Wall Street about its ability to maintain its stratospheric growth trajectory.

The streaming industry bellwether’s slide reverberated across other pandemic winners. Chip stocks like Nvidia and data center firm Super Micro Computer tumbled 4% and 18% respectively, adding to this week’s brutal declines.

The technology-led selloff comes against a backdrop of unresolved global macro risks weighing on sentiment. Overnight, US equity futures careened lower and oil prices spiked after Israel launched airstrikes into Iran in retaliation for last week’s drone attacks.

However, markets appeared to take the muted response in stride as Friday’s session progressed. With neither side appearing eager to escalate the conflict further, crude benchmarks pared their earlier gains, while futures recovered most of their earlier losses.

Still, the flareup injected a fresh dose of geopolitical angst into markets already on edge over stubbornly high inflation and the implications for central bank policy tightening down the road. While no broader military conflagration has materialized yet, the smoldering tensions threaten to exacerbate existing supply chain constraints.

Ultimately, Wall Street’s immediate focus remains squarely on tackling decades-high consumer prices through aggressive monetary policy. And on that front, data continues to reinforce the challenges facing the Fed in bringing inflation back towards its 2% target.

This week’s string of hotter-than-expected readings, ranging from producer prices to housing costs, dimmed hopes for an imminent rate cut cycle central banks had been forecasting just months ago. Economists now don’t see the first Fed rate reduction until September at the earliest.

That policy repricing has piled pressure onto richly-valued growth and technology names which had rallied furiously to start the year. Year-to-date, the Nasdaq has now surrendered nearly all of its 2023 gains.

With the S&P 500 over 5% off its highs, earnings season takes on heightened importance for investors seeking reassurance that corporate profits can withstand further Fed tightening. So far, results have failed to provide much of a safety net with the majority of major companies reporting missing lowered expectations.

The deepening tech wreck underscores the dimming outlook for an already battered leadership group. Absent a decisive downtrend in inflation, markets could have more room to reset before finding their ultimate nadir.

Tech Stocks Stumble Despite Strong Earnings from Alphabet and Meta

Posted on by slightbourne@noblecapitalmarkets.com

Tech stocks have taken it on the chin over the past two days, with the Nasdaq tumbling nearly 3.5%, despite stellar earnings reports from two giants in the space. Alphabet and Meta both exceeded expectations with their latest quarterly results, yet saw their shares plunge amid broader concerns about economic conditions weighing on future growth.

Alphabet posted robust advertising revenues, with Google Search and YouTube continuing to hum along as profit drivers. However, its Google Cloud division came up shy of estimates, expanding at a slower pace as clients apparently pulled back on spending. This reignited worries about Alphabet’s ability to gain ground on the cloud leaders Amazon and Microsoft.

Meanwhile, Meta also topped analyst forecasts, led by better ad revenues at Facebook and Instagram. But in the earnings call, Meta CFO Susan Li warned that the conflict in the Middle East could impact advertising demand in the fourth quarter. This injected uncertainty into Meta’s outlook, leading the stock lower.

The sell-off in these tech titans reflects overall investor angst regarding the challenging macroeconomic environment. While both companies beat expectations for the just-completed quarter, lingering headwinds such as high inflation, rising interest rates, and global conflicts have markets on edge.

Details

This skittishness has erased the gains tech stocks had made earlier in the year after a dismal 2022. Meta and Alphabet remain in positive territory year-to-date, but have given back chunks of their rallies from earlier this year. Other tech firms like Amazon and Apple are also dealing with the fallout ahead of their upcoming earnings reports.

The market is taking a “sell first, ask questions later” approach with these stocks right now. Even as fundamentals remain relatively sound, any whiff of weakness or caution from management is being seized upon as a reason to sell. The slightest negative data point is exaggerated amid the unsettled backdrop.

Both Alphabet and Meta have been aggressively cutting costs after overindulging during the pandemic boom years. But investors are now laser-focused on the revenue outlook, rather than celebrating the expense discipline. If top-line growth decelerates materially, the bottom-line gains from cost reductions will be moot.

For now, the Nasdaq remains in a confirmed uptrend, so this could prove to be just a brief pullback before tech stocks regain their footing. Many firms in the sector remain highly profitable with solid balance sheets. But the risk is that slowing economic activity and consumer jitters will weigh on future earnings potential.

Tech investors may need to buckle up for more volatility ahead. The days of easy gains propelled by boundless growth and ultra-low interest rates appear to be over. Now tech companies face much more skeptical scrutiny of their business fundamentals. In an environment where growth is harder to come by, even stellar quarterly results may not be enough to pacify traders worried about what lies ahead.

DoorDash Ditches NYSE for Nasdaq in Major Stock Exchange Switch

Posted on by slightbourne@noblecapitalmarkets.com

Food delivery app DoorDash announced it will transfer its stock exchange listing from the New York Stock Exchange to the Nasdaq. The company will begin trading on the Nasdaq Global Select Market under the ticker ‘DASH’ starting September 27, 2023.

This represents a high-profile switch that exemplifies the fierce competition between the NYSE and Nasdaq to attract Silicon Valley tech listings. It also reflects shifting sentiments around brand associations and target investor bases.

DoorDash first went public on the NYSE in December 2020 at a valuation of nearly $60 billion. At the time, the NYSE provided the prestige and validation desired by the promising young startup.

However, DoorDash has since grown into an industry titan boasting a market cap of over $30 billion. As a maturing technology company, Nasdaq’s brand image and investor mix provide better positioning.

Tony Xu, co-founder and CEO of DoorDash, emphasized the benefits of the Nasdaq in the company’s announcement. “We believe DoorDash will benefit from Nasdaq’s track record of being at the forefront of technology and progress,” he said.

Nasdaq has built a reputation as the go-to exchange for Silicon Valley tech firms and growth stocks. Big name residents include Apple, Microsoft, Amazon, Tesla, Alphabet, and Facebook parent company Meta.

The exchange is also home to leading next-gen companies like Zoom, DocuSign, Crowdstrike, Datadog, and Snowflake. This creates an environment tailor-made for high-growth tech outfits.

Meanwhile, the NYSE leans toward stalwart blue chip companies including Coca Cola, Walmart, Visa, Walt Disney, McDonald’s, and JPMorgan Chase. The historic exchange tends to attract mature businesses and financial institutions.

Another factor likely influencing DoorDash is the investor makeup across the competing exchanges. Nasdaq generally appeals more to growth-oriented funds and active traders. The NYSE caters slightly more to institutional investors like pension funds, endowments, and passive index funds.

DoorDash’s switch follows ride sharing pioneer Lyft’s jump from Nasdaq to the NYSE exactly one year ago. Like DoorDash, Lyft desired a brand halo as it evolved past its early startup days.

“It’s a signal of us being mature, of us continuing to build a lasting company,” said Lyft co-founder John Zimmer at the time of the company’s NYSE listing.

Jared Carmel, managing partner at Manhattan Venture Partners, believes these exchange transfers reflect the “changing identities of the companies.”

As startups develop into multi-billion dollar giants, they evaluate whether their founding exchange still aligns with their needs and desired perceptions. Brand association and shareholder registration are becoming as important as operational capabilities for listings.

High-flying growth stocks like DoorDash also consider indexes, as the Nasdaq 100 often provides greater visibility and buying power from passive funds tracking the benchmark. Prominent inclusion in those indexes requires trading on Nasdaq.

Whether mature blue chips or emerging Silicon Valley darlings, the rivalry between Nasdaq and NYSE will continue heating up as each exchange vies to attract and retain brand name public companies. With lucrative listing fees on the line, exchanges will evolve branding, services, and capabilities to better cater to their target customers.

The DoorDash switcheroo exemplifies the changing perspectives and motivations influencing exchange selection. As companies lifecycles and personas transform, they reevaluate decisions made during those frenetic early IPO days.