Global AI stocks fall as industry chiefs call for slowing development
Market Scorecard
On Friday, US markets closed lower as corporate profit warnings clouded the outlook for the global economy for the rest of the year. US stocks fell, with the tech-heavy Nasdaq down 5.5% for the week and the broader S&P 500 retreating by 4.8%. As Captain Bligh of the Bounty once said, "the beatings will continue until morale improves".
In company news, logistics giant FedEx (NYSE:FDX) closed down 21% after it said that current quarter revenues fell below their own expectations. They are closing offices and parking aircraft to offset declining volumes of packages moving around the world. Elsewhere, General Electric (NYSE:GE) said supply chain problems were weighing on its profits.
In the final day of trading last week, the JSE All-share lost 1.46%, the S&P 500 fell 0.72%, and the Nasdaq was down 0.90%.
One Thing, From Paul
Russia's war in Ukraine has taken an interesting turn. Ukrainian forces engaged in an aggressive counteroffensive, pushing back Russian troops to regain 8 500 square kilometres of territory and liberate 150 000 people.
International pressure on Russia is rising. Even their pals, the Chinese, seem fed up. The Indians have made some disapproving comments. A mass burial site containing hundreds of bodies has been uncovered in Izyum, one of the newly recaptured towns. The Russian army is short of missiles and men, and lacks parts for their complex weapon systems.
Putin thinks that Ukraine will lose its western support when Europe is freezing this winter, but indications are that an energy crisis will be averted. Natural gas storage tanks are almost full. With Russian pipelines shut, half of the shortfall will be met by LNG imports from the US, and the rest will be made up by curtailing residential and industrial use.
In terms of peace talks, Ukraine now has the upper hand, and probably wants to take back the Donbas and Crimea. They have no incentive to quit while they are ahead. There will be further twists and turns in this conflict, and Putin may be even more dangerous in defeat. The mood is souring in Moscow.
Note though that this issue is not central to our outlook for markets for the balance of the year. Commodity markets have already priced in this conflict. We expect a rebound in stock markets due to a moderation in US inflation.
Byron's Beats
If people can grow food efficiently in their backyards, it would positively impact many households. This is especially true in a country like South Africa where unemployment is so high. LFP Agri, a South African provider of transformational agricultural systems, thinks they have a solution.
They have created a device called the Hydro Coop. It is a modular system that has the capacity to raise 1 100 broiler chickens and 3 600 vegetables a year. The 9-square-meter device comes with a 40-watt solar panel and a 150-litre water tank.
LFP Agri is launching the product in Alexandra township. It is estimated that up to 750 000 people live there, many of whom are unemployed. You can read more about the initiative here on BizCommunity.
Michael's Musings
It may surprise some readers that Monster Energy (NASDAQ:MNST) is the top-performing stock on the S&P 500 over the last 30 years. Even more surprising is that two South Africans built up the company. Rodney Sacks and Hilton Schlosberg both attended the University of the Witwatersrand.
There are many other South Africans who have done well on the international stage. Elon Musk is the richest person on the planet, and will probably be the richest person on Mars too. Koos Bekker's purchase of Tencent (HK:0700) into Naspers (JO:NPNJn) in 2001 is considered the best investment of the last century.
These stories remind us that South Africans can compete globally.
Bright's Banter
On Thursday, Corebridge Financial (NYSE:CRBG) went public on the New York Stock Exchange. Launching a large, traditional IPO in the US is quite rare these days. The offering was priced at the low end of expectations and it still fell on its stock-market debut, disappointing advisers who had hoped the deal might inject life into a floundering IPO market.
Corebridge is the life insurance and asset management unit of AIG (NYSE:AIG). The company managed to get a $13.2 billion price tag, which isn't so bad since it closed just 2% below its IPO price. New listings have been challenging because it comes against the backdrop of the global market turmoil that has already shaved billions off corporate valuations.
Another significant IPO in the pipeline, Greek yoghurt maker Chobani, was seeking a valuation of $10 billion but they postponed their listing plans this month, citing unfavourable market conditions. Others rumoured to be close include Reddit, Instacart, and Mobileye.
Signing Off
Asian markets declined in a cautious start to the week. Shares dropped in Hong Kong, mainland China, and South Korea. Trading was muted due to a holiday in Japan. UK markets are shut today because of a day of mourning for Queen Elizabeth II. There will be no trading in cash treasuries during the European session.
US equity futures are lower. Most market participants are on hold until a slew of interest rate decisions are announced, including one from the Fed mid-week. The Rand looks fragile today, trading at R17.70 to the US Dollar.
Have a good week. Be brave.
