Your portfolios in brief
Meta unveiled its quarterly results on Wednesday highlighting significant growth, while raising concerns about its increased investments in artificial intelligence (AI) and metaverse.
1. increased profits and sales: Meta doubled its net profit to $12.4 billion, with sales up 27% to $36.5 billion. These figures exceeded analysts' expectations.
2. massive investments in AI: The company plans to invest between $35 and $40 billion in AI this year, a higher amount than previously forecast. These massive investments are aimed at catching up with competitors like Google and Microsoft in the generative AI race.
3 Market reaction: High investment announcements led to a drop of over 16% in Meta's share price in after-hours trading, reflecting market concerns about the sustainability of high spending with no immediate return. Meta's share price almost tripled last year and, at Wednesday's close, had risen 40% in 2024. It reached a record high of $527.34 in early April.
4 Future developments and AI: Meta also introduced Meta AI, an enhanced version of its AI assistant, and launched Meta Horizon OS, an operating system for mixed reality devices. These developments are aimed at strengthening Meta's position as a potential leader in AI and immersive technologies.
5 Management response: Mark Zuckerberg expressed renewed optimism and ambition for AI, saying that early feedback is very positive and encouraging the company to continue investing to stay at the forefront of technology.
6 Industry reactions: Some analysts remain optimistic that Meta's core business will grow, thanks in particular to the increase in advertising space available for sale at higher average prices, which could enable profitable margins to be maintained despite heavy investment.
- Challenges and opportunities
Operating losses at Reality Labs: Despite significant losses at its Reality Labs division, Meta continues to invest in the development of AR and VR technologies, anticipating significant long-term returns.
Payback potential: After falling in 2022, Meta's share price has risen considerably, a sign of renewed investor confidence in the company's strategy.
- Future prospects
Focus on AI: Meta is developing advanced AI products, including models like Llama 3, with the aim of becoming a leader in this emerging field.
Adaptability and growth: Meta's initiative to make its Horizon operating system open source for mixed reality headsets illustrates its flexible, inclusive approach to extending its influence in the AR/VR market.
- Conclusion
Despite this volatility, Meta continues to invest heavily in artificial intelligence and the metaverse, with capital expenditure forecast at between $35 and $40 billion for the year. These ambitious investments aim to position Meta as a leader in these high-tech fields, promising substantial long-term growth potential.
Meta has seen exceptional growth in its share price, with an increase of 131% over the last 12 months and over 40% since the start of the year. This performance clearly outstrips that of its main competitor, Google, whose shares have risen by 50% over the same period and by 13% since the beginning of the year. These figures underline not only investors' renewed confidence in Meta's strategy, but also its growth potential relative to other technology giants. Meta has demonstrated its resilience and potential for innovation, particularly with its investments in artificial intelligence and metaverse, key sectors for the future of technology.
This remarkable performance, combined with the recovery of the digital advertising market and strategic initiatives such as the introduction of a dividend and an increase in the share buyback authorization, reinforces Meta's position as a choice investment in our portfolio.
Despite the recent fall in the share price, our vision remains focused on Meta's long-term potential, underpinned by its ongoing commitment to innovation and the development of new platforms that could revolutionize both the way we interact with technology and the structure of social networks and digital communication.
Market Brief
Monday
Dow: The index rose by 0.67% to close at 38,239.98 points.
NASDAQ: The index gained 1.11% to close at 15,451.31 points.
S&P 500: The broad index gained 0.87% to close at 5,010.60 points.
After a period of losses, stock markets experienced a significant rebound, supported by the easing of geopolitical tensions and favorable anticipation ahead of the release of financial results by the technology giants. Technology stocks such as Nvidia saw a significant rise of 4.35% after a difficult week. This positive momentum can be explained by high expectations of results from companies such as Tesla, Microsoft and Alphabet. In addition, the stabilized geopolitical situation and economic forecasts, including GDP growth and the PCE inflation index, are being closely scrutinized by investors.
- Stockss in brief
Nvidia (+4.35%): Nvidia shares rose to $795.18, regaining some of their value after falling significantly the previous week, losing over 10% last Friday.
Tesla (-3.40%): Tesla's share price has fallen, possibly in anticipation of upcoming results and market reactions to the company's recent developments.
Informatica (-10.54%): Shares fell to $31.48 after negotiations with Salesforce broke down, indicating concerns about the company's value and future.
Coinbase (+7%): This rise follows the halving of bitcoin, an event that reduces the production of new units, potentially increasing the value of existing bitcoins.
Riot Platforms (+23.11%): The stock climbed to $11.24, benefiting significantly from the impact of bitcoin's "halving" on the cryptocurrency market.
Tuesday
Dow: The index rose by 0.69% to close at 38,503.69 points.
NASDAQ: The index gained 1.59% to close at 15,696.64 points.
S&P 500: The broad index gained 1.20% to close at 5,070.55 points.
The session was positive thanks to a series of good corporate results and an economic slowdown suggested by the S&P Global PMI, which fell to 50.9 from 52.0 expected. This could encourage the Fed to cut interest rates. On the bond market, yields on 10-year Treasuries also fell, from 4.97% to 4.93%, reflecting expectations of a looser monetary policy to come.
- Stockss in brief
Spotify (+11.41%): Exceeded first-quarter estimates with impressive earnings and published positive forecasts.
General Motors (+4.37%): Raised its annual forecasts after gaining market share in the United States.
Kimberly-Clark (+5.51%): saw its shares rise after raising its forecasts for the year.
JetBlue (-18.77%): Dropped following the downward revision of its revenue forecasts.
PepsiCo (-2.97%): Suffered a decline due to lower volumes in the United States.
- Tesla-Quarterly results
Tesla had a difficult first quarter, with net income down 55% to $1.30 billion. Sales were also down, to $21.30 billion, down 9% year-on-year. Faced with these challenges, Tesla announced the acceleration of production of the Model 2, an electric vehicle designed to be more affordable, with a price tag of around US$25,000. This news elicited a positive reaction from the market, with the share price rising by 11% after the close. At the same time, the company invested heavily in its infrastructure, notably in artificial intelligence and Superchargers, paving the way for a targeted annual production capacity of three million vehicles. Despite these promising initiatives, Tesla remains cautious for 2024, anticipating more modest growth and facing increased competition, particularly in China.
Wednesday
Dow: The DJIA edged down 0.11%, closing slightly lower.
NASDAQ: The NASDAQ edged up 0.10%.
S&P 500: Close to equilibrium, the S&P 500 index finished with a modest rise of 0.02%.
The session was characterized by investors' notable caution, in anticipation of several key events. On the one hand, results from major companies such as Meta, Microsoft and Alphabet were expected, adding to the uncertainty. On the other hand, important economic indicators, notably first-quarter US growth and the PCE consumer price index, were about to be released. This expectation contributed to a further rise in bond yields, with the yield on 10-year Treasuries reaching 4.64%, influencing market reluctance to take risky positions.
- Stockss in brief
Tesla (+12.06%): Despite disappointing quarterly results, the share price climbed on the announcement of a more affordable model planned for 2025.
Hasbro (+11.85%): Won after announcing a significant reduction in inventory and an increase in video game revenues.
Texas Instruments (+5.64%): The stock rose after the company announced expectations of a rebound in semiconductor demand.
Biogen (+4.56%): Improved on optimism regarding the roll-out of new treatments.
AT&T (+1.88%): Outperformed expectations with good earnings and subscription results.
Boeing (-2.87%): The share price fell despite worse-than-expected results, with a notable reduction in cash holdings.
Thursday
Dow: The index fell by 0.98% to close at 38,085.80 points.
NASDAQ: The index gave up 0.64% to end at 15,611.76 points.
S&P 500: The broad index lost 0.46% to close at 5,048.42 points.
The Wall Street session was marked by notable instability following the release of disappointing economic data. The Commerce Department revealed that US GDP growth had reached just 1.6% annualized in the first quarter, well below economists' expectations of 2.5% growth. The report also showed an acceleration in inflation, with an annualized rate of 3.7%, higher than the 3.4% previously announced.
These indicators suggest an increased risk of stagflation, a combination of low economic growth and high inflation, which further complicates the task of policymakers and could hamper the Federal Reserve's monetary policy plans. Market reaction was immediately negative, leading to sharp declines in key sectors, notably technology.
- Stockss in brief
Meta (-10.56%): The significant fall follows disappointing second-quarter forecasts and the announcement of increased investment in AI, which worried investors about future spending.
IBM (-8.25%): Sharp decline after missing first-quarter revenue estimates, despite strong demand for cloud and AI.
Caterpillar (-7.02%): Significant decline after reporting a slowdown in demand, particularly in the construction sector.
Rubrik (+15.62%): Remarkable rise in its stock market debut, supported by an investment from Microsoft and a $752 million fund-raising round.
- Alphabet - Quarterly results
Alphabet's first-quarter results delivered an impressive performance that reassured investors and exceeded market expectations. Here are the key points:
Revenue growth: Alphabet recorded revenue growth of 15%, the fastest rate since early 2022. This increase is mainly due to the strong performance of YouTube advertising sales, which rose by 20%.
Google Cloud results: Google's cloud segment increased revenues by 28% to $9.57 billion, exceeding estimates. In addition, operating profit in this segment more than quadrupled to $900 million, a sign that Google is beginning to generate substantial profits after years of heavy investment.
Market cap: Following these results and the announcement of share buybacks, Alphabet's market value exceeded $2 trillion.
Dividend and share buyback: Alphabet announced its first quarterly dividend of 20 cents per share and an additional $70 billion share buyback plan.
Investments in AI: Despite spending heavily on artificial intelligence, Alphabet has managed to turn these investments into sales, unlike some of its competitors. This shows effective cost management while exploiting the growth opportunities offered by AI.
- Microsoft-Quarterly results
Microsoft's recent results show significant progress, especially in the areas of cloud and artificial intelligence (AI). Here are the highlights based on the information provided:
Significant increase in capital expenditure: Microsoft increased its capital expenditure by 79% year-on-year, to $14 billion. This massive investment is primarily aimed at developing the infrastructure needed to support the growing demand for cloud-based artificial intelligence services.
Demand outstripping supply: Despite this increase in spending, demand for AI-based services still outstrips supply, particularly for the data center infrastructure needed to deploy AI models.
Azure revenue growth: Microsoft's Azure cloud saw a 31% increase in revenue, with 7 percentage points directly attributable to AI. This underlines the rapid growth of AI as a key contributor to the company's revenues.
Commitment to the future: Microsoft plans to further increase its capital expenditure in the current quarter, mainly to further strengthen its cloud infrastructure. This is in preparation to meet the growing demand for its cloud and AI products.
Financial outlook: For fiscal year 2024, Microsoft anticipates a two-point improvement in margins thanks to effective cost management and increased monetization of its AI investments.
Market response: Following the announcement of these results, Microsoft shares rose significantly, by almost 5% in after-hours trading, reflecting investor confidence in the company's strategy and management.
Friday
Dow: The index remained virtually stable, just below the break-even point.
NASDAQ: The index gained 1.3% at the opening.
S&P 500: The broad index rose by 0.6% in early trading on Friday.
The Wall Street session was marked by a notable recovery, driven by significant gains in the technology sector, thanks in particular to Alphabet (+10%) and Microsoft (+2%), which rebounded on solid quarterly results. Investors also analyzed the latest US inflation data.
The major indices are on track for a winning week. The S&P 500 is up 1.6% so far this week, on track to break a three-week losing streak. The NASDAQ gained over 2%, heading for its first positive week in five. The Dow gained a more modest 0.3% this week.
