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Nvidia, AMD, and Arm provide updates to their AI processor plans. (0:16) A trading glitch on the New York Stock Exchange shows Berkshire Hathaway stock falling by 99%. (1:45) JPMorgan comments on the restaurant sector. (2:52)
This is an abridged version of the podcast.
Our biggest story yet. The AI chip war is heating up. Over the weekend, Nvidia (NVDA) announced plans to improve its AI accelerators with the introduction of a Blackwell Ultra chip next year and a next-generation platform called Rubin in 2026.
The company also debuted its latest tools and software models. Nvidia is seeking to expand adoption of its technologies beyond its core group of cloud computing giants.
Today, Goldman Sachs reiterated its buy view on NVDA, while Bank of America raised its pre-split price target to $1,500 from $1,320.
But also today, advanced microdevices (Nasdaq: AMD) unveiled its latest AI processors and provided a roadmap for the development of AI chips over the next two years. CEO Lisa Su presented the AMD Instinct MI325X accelerator, which will be available in the fourth quarter of 2024, at Computex 2024 in Taipei.
“AMD MI300X poses a material competitive threat to Nvidia’s dominance in data centers,” says ValueAnalyst, an Alpha contributor.
Additionally, AMD previewed its fifth-generation AMD EPYC (with Y) server processors, which are scheduled to launch in the second half of 2024. It introduced the AMD Ryzen AI 300 series, the third generation of mobile devices powered by AMD AI processors.
UK-based Arm (ARM) expects 100 billion Arm devices to be AI-ready globally by the end of 2025. The chip design company’s CEO, Rene Haas, made the remarks at Computex, according to Reuters.
In today’s trading, things continue to get worse. The New York Stock Exchange investigated a reported technical issue that halted volatility at about a dozen companies, including Chipotle Mexican Grill (CMG).
The technical glitch showed Berkshire Hathaway (BRK.A) stock falling by 99%, in addition to significant movements in other stocks. It appears that the price of Barrick Gold (GOLD) has dropped by 99% due to the issue.
This comes just days after the S&P and Dow faced technical issues for more than an hour.
The major averages were unaffected today, and are trading mixed after quickly losing their early morning gains. The Energy (XLE) sector is the biggest decliner, down 2% as oil prices fall.
On the economic front, the ISM Manufacturing Index for May unexpectedly fell to 48.7, missing expectations for a rise to 49.8. Only the recruitment component showed any strength.
Interest rates fell, with the 10-year Treasury yield falling below 4.45%. Cathy Jones, a strategist at Schwab, attributed the 10-year decline to the ISM index as well as a decline in Brent and West Texas Intermediate crude oil, along with agricultural commodities.
“No more beans in the teens,” she added, with soybean prices down 1%.
Among the active stocks, JP Morgan influenced the restaurant sector with several recommendations.
Analysts upgraded Krispy Kreme (DNUT) to an overweight rating, saying increased accessibility will allow the company to more fully participate in the $650 billion global indulgence market. They added that the enterprise value of $2.7 billion appears very low.
They also recommended that investors add to their positions in McDonald’s (MCD), with franchisees known for financial strength and focus, and who can navigate a comparable, challenging sales cycle. Sweetgreen’s (SG) recent volatility is seen as offering investors compelling entry opportunities as its unique growth story continues.
But they downgraded the CAVA group to neutral from overweight due to the rating, although they remain impressed by the setup.
Meta Platforms (META) remains a top pick at Mizuho Securities. Analyst James Lee said a deep dive into the company’s operating metrics showed that product drives are more than enough to offset any slowdown from China-based advertisers.
Li added that even if revenues from Chinese advertisers decline 100% year-on-year, product upgrades and special events should be more than enough to offset roughly 100 basis points for fiscal 2024. He has a price target of $575 per share.
Shares of GlaxoSmithKline (GSK) fell after a Delaware judge allowed more than 70,000 lawsuits to proceed, alleging that the discontinued heartburn drug Zantac caused cancer.
Prosecutors allege that ranitidine, the active ingredient in Zantac, could eventually contain the cancer-causing substance NDMA. The US Food and Drug Administration ordered Zantac removed from the market in 2020.
In other notable news, Stericycle (SRCL) rose after Waste Management (WM) said it has agreed to acquire the regulated medical waste and compliance services provider for $62 per share in cash, representing a total enterprise value of approximately $7.2 billion When including ~$1.4 billion net debt.
The price represents a 24% premium to Stericycle’s 60-day volume-weighted average price as of May 23, the last trading day before a report that the company was considering a potential sale.
Additionally, Becton Dickinson (BDX) has agreed to acquire Edwards Lifesciences’ (EW) critical care portfolio for $4.2 billion in cash to expand its portfolio of smart, connected care solutions.
Critical Care specializes in advanced patient monitoring technologies, with its solutions currently used in more than 10,000 hospitals around the world.
And in the Wall Street research corner. Selling in May and walking away was the wrong thing to do again.
The S&P 500 (SP500) rose 4.8% last month, its best May performance since 2009. The Nasdaq 100 (NDX) gained nearly 6.2%, and the Nasdaq Composite (COMP.IND) gained 6.9%.
“History doesn’t really support that slogan,” says Goldman Sachs’ stock and equity trading desk. “Don’t sell…just go away (on vacation) and let the good times roll by.”
Scott Rubner, a tactical specialist at Goldman, noted that the S&P 500 is up 10.7% so far this year, and since 1950, “there have been 21 episodes in which the S&P 500 was up more than 10% by the end of May.” Among Of these instances, there were only two instances where the S&P 500 declined the rest of the year in 1987 (-13%) and 1986 (-0.1%)…the S&P 500 rose almost 90%.
He added, “The average performance for the last seven months of the year (from June 1 to December 31) since 1950 was 5.4%.” “Over these 21 episodes, the 7-month average performance increased to 8.1%.”
