Wall Street drops as AI worries pummel chipmakers
Market scorecard
US markets were closed yesterday for Independence Day so there was minimal activity in financial markets. Traders are now focusing on today's jobs report, which will provide an update on the state of the US labour market. Economists predict that 200 000 jobs were created in June, with the unemployment rate remaining steady at 4%. A weaker report would be market-positive, as it will encourage the Fed to drop rates sooner.
In company news, Samsung (KS:005930) shares rose 2.3% after reporting a 15-fold increase in operating profit for the June quarter, driven by a strong recovery in memory chip demand. Meanwhile, the EU has confirmed plans to impose additional tariffs on EVs made in China starting today and lasting for at least four months. Oddly enough, European carmakers mostly oppose the tariffs, fearing they could trigger a two-way trade war with China.
Izolo, the JSE All-share closed up 0.48%.
One thing, from Paul
Here's some life advice, because it's a Friday. I'm passing on something from Ryan Holiday, again. Wikipedia describes him as an American philosopher, marketer, author, businessman, and podcaster. He's only 37 years old.
"Making improvements in your personal life or your self-development will make you better professionally. The converse is less often true - getting better and better at what you do is not necessarily going to make you a better spouse, parent, citizen."
I recently stopped doing an extra work shift at night, and have been spending that time with my wife. That means not doing any more market-related reading after dinner. I still check my email before retiring to sleep, to take note of pressing matters for attention in the morning.
I accomplished the change by completing some tasks earlier in the day that I used to leave until night time, and by cutting down on some email subscriptions. I feel happier, and my work output is unchanged.
Byron's beats
Google (NASDAQ:GOOGL) unleashed its AI technology to analyse 8 000 advertising campaigns on YouTube in the last 6 months. They were looking for insights on sentiment, themes, visuals, language, music, culture, and more. The analysis yielded 750 insights and signals per category, on what makes for a successful campaign.
This work proved very useful for brands looking to improve their representation. The need for deeper storytelling, community connection, and strong partnerships with creators and celebrities, were the central findings. You can read more about this on the Google blog here.
A number of Vestact-recommended stocks make a lot of money from online advertising, most notably Meta, Google and Amazon (NASDAQ:AMZN). I am very excited about AI's ability to make online advertising more effective and efficient. AI tools can quantify the response to certain advertising themes and methods, which is very valuable information.
Michael's musings
On the 5th of July 2023, Meta released a new app called Threads, a direct competitor to X (previously known as Twitter). Thanks to user curiosity, and controversy surrounding X, Threads quickly reached 100 million monthly active users. Once the initial hype died down, I didn't hear much about the app, and assumed that it was fading away.
The opposite has happened. Mark Zuckerberg announced earlier this week that Threads has reached 175 million monthly active users. Meta uses Instagram and Facebook (NASDAQ:META) to drive users towards Threads, highlighting the value of being part of the Meta ecosystem. Meta has not released its number of daily active users, however, which makes you think that regular engagement isn't as good as hoped.
Threads doesn't offer adverts yet, but is planning to do so soon. With 175 million people on the platform, it's another viable outlet for advertisers to push content. Assuming that marketers don't just move their spending budgets from Instagram or Facebook, Threads will be a nice additional revenue stream for Meta.
Bright's banter
A California-based rechargeable battery startup, Sila, has raised $375 million from investors. The money will be used to complete a factory in Moses Lake, Washington, by early next year, which will deliver battery parts to customers like Mercedes-Benz (ETR:MBGn) and Panasonic (TYO:6752) by the end of 2025.
Sila raised $590 million three years ago, and focuses on using silicon instead of graphite in battery anodes, offering greater energy storage and reducing reliance on Chinese-made graphite.
The startup, founded in 2011 by former Tesla (NASDAQ:TSLA) engineer Gene Berdichevsky with his friends Gleb Yushin and Alex Jacobs, aims to tackle issues related to EV range, charging speed, and charging infrastructure.
Despite a slowdown in EV sales, global demand for EV batteries rose 40% in 2023, with significant investments in US EV and battery facilities. Other companies like QuantumScape and Solid Power, are also innovating with solid-state batteries, which promise faster charging, longer life, and lower fire risk.
China currently leads in battery production, but Sila's CEO believes US innovation can keep pace, positioning Sila as a leader in the industry.
Signing off
Asian markets are mostly lower this morning. Benchmarks in Hong Kong, India, Japan, and mainland China fell. Chinese stocks are headed for their seventh consecutive week of losses, the longest losing streak since early 2012. Markets in South Korea and Taiwan rose.
In local company news, Naspers (JO:NPNJn) said that their most recent buyback programme, from August 2023 until now, has resulted in spending of R44 billion. That's certainly the largest share buyback program in JSE history, and represents 3% of their market cap. This program is funded by selling its Prosus (JO:PRXJn) stake in Amsterdam, and is intended to close the gap between their NAV and their share price. Over time Naspers has repurchased 21% of its outstanding shares, and they will probably keep this up.
US equity futures are pointing towards a positive open later today. The Rand is currently at around R18.25 to the US Dollar.
Have a strong Friday and enjoy the weekend. It's going to be chilly but sunny in Joburg, just perfect.
