Market scorecard
US markets closed lower last night as a mild tech sell-off ended a seven-day rally. The Thanksgiving holiday weekend in America has started, so airports were busy yesterday but trading desks were deserted and volumes were low.
The S&P 500 is up over 26% year-to-date, outperforming other major market indices.
In company news, Dell Technologies (NYSE:DELL) and HP (NYSE:HPQ) both took a hit, dropping 12.2% and 11.4%, as their results fell short of investor expectations. Elsewhere, the US Federal Trade Commission (FTC) launched an antitrust probe into Microsoft (NASDAQ:MSFT), scrutinising its bundling of products, including cloud computing, software licensing, cybersecurity, and AI. Oh please.
Izolo, the JSE All-share was down 0.35%, the S&P 500 fell 0.38%, and the Nasdaq slipped by 0.60%.
One thing, from Paul
Cybersecurity firm CrowdStrike (NASDAQ:CRWD) is a Vestact-recommended stock. They are based in Austin, Texas, and compete with SentinelOne (NYSE:S), Microsoft Defender, and Palo Alto. Their core product is called Falcon which does endpoint detection and response, which replaces legacy anti-virus systems. They also do forensic investigations and data protection consulting.
In July, the company had a nightmare when a Falcon update caused a meltdown of 8.5 million computers running Microsoft Windows operating systems around the world. The stock price tumbled then, as it seemed that they may be legally liable for damages. In reality, the impact was limited to a few subscription refunds, and the share price has since recovered, moving back towards historic highs.
On Tuesday, CrowdStrike reported numbers for the quarter concerned, and all appears to be going smoothly. Despite reporting a modest loss for the period they surpassed their target for recurring revenues, at excellent margins. Profits are growing and they have over $4 billion in cash or equivalents on their balance sheet. Management guidance for the year ahead was lowered marginally, leading to a modest share price decline this week.
Oddly enough, customers seem to be responding to the debacle in July by doubling down on their CrowdStrike systems and subscriptions. As one analyst said, "They are becoming an even stickier, more leaned-on vendor for these companies, which will be great for retention and lifetime value."
Byron's beats
I found this survey in the US very interesting (see image). People from different generations were asked what they consider the minimum annual salary to be considered financially successful. Boomers had the lowest expectations. That makes sense, they grew up in a time of relative moderation. The Dollar also went a lot further back then.
I was quite surprised that Gen X (born between 1965 and 1980) had higher expectations than Millennials (1981-1996). I don't really have an explanation for that. Millennials should be more motivated!
Gen Z (from 1997-2012) has very high standards. Maybe the Instagram algos have made them want to live the high life? Not to mention unlimited leave and mental health days. Most Gen Zs are probably not working yet and don't really understand the concept of money. What do you think is considered a successful salary in South Africa?
Michael's musings
I studied economics, so by default, I prefer free trade. A world where countries can easily export and import without burdensome government regulations and tariffs would be the best outcome. Free trade only works if all countries play by the same rules.
Unfortunately, increasing tariffs on imports is becoming the norm. In the US, Trump has been very vocal about his tariff plans for next year. A recent spat between the EU and China shows how trade wars can escalate.
In October, the EU imposed steep tariffs on Chinese EVs. As a result, China retaliated by putting import taxes on some EU goods, including French cognac. To avoid the new 40% taxes, Hennessy plans to ship bulk cognac to China, and do their bottling there. As you can imagine, that has angered French factory workers. Also, can you even call it cognac if the bottle says 'made in China'?
Bright's banter
CoreWeave is preparing for a US IPO in mid-2025, aiming for a valuation of over $35 billion. The New Jersey-based AI cloud platform plans to raise over $3 billion, which is great news for Nvidia (NASDAQ:NVDA), one of its original investors.
As demand for AI infrastructure like data centres and high-powered chips surges, CoreWeave has emerged as a key player, backed by Nvidia to compete with Microsoft Azure and Amazon (NASDAQ:AMZN) AWS. This follows a $650 million secondary share sale that valued CoreWeave at $23 billion, with investors including Jane Street, Magnetar, Fidelity, and Macquarie Capital.
The IPO would align with growing investor interest in AI and cloud technologies, which are projected to attract $79 billion in private funding this year. CoreWeave's listing is part of a broader trend, as markets warm up to high-profile IPOs following two years of volatility.
Signing off
Chinese stocks underperformed on Thursday as reports surfaced that the US might introduce fresh sanctions to limit China's access to key semiconductors. Markets in Hong Kong and the mainland slipped, with the Biden administration potentially rolling out these restrictions as early as next week.
In local company news, Pepkor (JO:PPHJ) is expanding its footprint in the adultwear market with the acquisition of Choice Clothing, a discount retailer with over 100 stores in South Africa and Namibia.
The Rand is trading at around R18.22 to the greenback. US markets are closed today for Thanksgiving, so it will be a very boring afternoon at the Vestact office. Thankfully, there will be a half-day session on Friday.
Goodbye.