Global AI stocks fall as industry chiefs call for slowing development
Market Scorecard
Yesterday, US markets were closed for Labor Day, which means there was no pain or gain for our offshore portfolios. However, European indices fell and the Euro touched a new 20-year low after Gazprom (MCX:GAZP)'s indefinite halt of natural gas through a major pipeline. The Euro Stoxx 600 index and Germany's DAX were down, while the UK's FTSE bucked the trend and rose.
In corporate news, CVS Health (NYSE:CVS) reached a deal to buy home-health and technology services provider Signify Health for about $8 billion in cash, as it continues to expand beyond its retail pharmacy roots. Elsewhere, one of the biggest strikes in US history is brewing at logistics and delivery company UPS.
Izolo, the JSE All-share was up a tiny 0.03%.
Bright's Banter
Last week, Vestact recommended stock CrowdStrike released a good set of quarterly numbers that handily beat analysts' expectations. The Sunnyvale, California-based cybersecurity company grew its earnings per share by 227% to 36 cents, while revenues jumped 58% to $535.2 million. Additions of new corporate subscribers to their security products continue to grow.
The company also raised its revenue guidance for the year to between $2.22 billion and $2.23 billion. Annual recurring revenue growth, a key metric in Crowdstrike's results is still strong at 59%. This means the company is still gaining market share in the cloud security business.
Ransomware attacks are still a major issue for companies and governments. The most recent attacks involve the hijacking of prominent individuals inside corporates, and sending messages that cause havoc. This shouldn't be possible if your company uses a good security tools provider.
CrowdStrike uses machine learning to detect any irregularities in corporate IT systems and maintains a specialised database to find malware on laptops, cellphones, and other devices that access dedicated corporate networks. I like a company that protects classified information from criminals!
One Thing, From Paul
When I was a teenager in the 1970s, people used to worry that population growth was exploding and we'd soon run out of food. Well, now it's 2022, birth rates have fallen and some countries don't have enough young workers. As for food, agricultural productivity has never been higher.
According to this article in the Guardian, genetically modified soya beans have been developed that absorb light more efficiently, and they produce a 25% greater yield. Scientists tweaked the genes of the soya bean plant, and voila. The advance could significantly boost global food supplies.
This is a reminder to avoid being negative and gloomy. To quote the great Yogi Berra, "it's tough to make predictions, especially about the future". Personally, I always assume that everything will work out well in the end.
Byron's Beats
Inflation is still a hot talking point, as it has been for the whole year. Paul wrote about it here yesterday, noting that it has dampened market sentiment considerably. So, how does inflation get fixed? Well, there are two things that interact to determine prices: supply and demand.
Prices go down if companies can supply more goods. According to Charlie Bilello's latest Compound Newsletter, the global container freight index has hit a 16-month low and is now down 52% from the highs. This is of course very good news for the global supply chain. Gasoline (petrol) prices are also down 24% in the US and are at fresh 6-month lows.
Demand is also starting to cool. That is what happens when interest rates are increased and the economy slows down. Take a look at the graph below showing the slowdown in US home sales.
As the supply chain recovers and demand slows down, inflation will fall. When we say we expect inflation to start coming down quickly from now to the end of this year, it's not just a hopeful thumb suck. The data coming through is indicating as such.
Signing Off
Asian markets are improving this morning. After early advances that fizzled, we are back in the green towards the close of trading in Tokyo, Hong Kong and Shanghai.
Crude oil climbed after OPEC+ agreed to cut 100 000 barrels of production a day from October. Having said that, NY Merc crude is trading at below $90, so not much to worry about.
The Rand is at R17.10 to the USD.
We are looking forward to a busier day today, with Wall Street back in action. US equity futures are in the green.
