The promise of a clear AI strategy on the back of an exclusive tie-in with Open AI\u2019s ChatGPT has ensured the latest Protean-surge in Apple shares continued in New York overnight.<\/p>\n
Wednesday was another big day for Apple in New York as investors delighted in the shiny new AI features and operating systems which Apple fans will hope trigger a wave of snazzy new iPhone and Siri-isms.<\/p>\n
Helping the AI-tech frenzy, the US Federal Reserve then held rates steady at its meeting despite trimming its forecast for the number of rate cuts this year down to one, from\u00a0 two in March and three last December.<\/p>\n
US inflation fell to 3.3% in May, down from 3.4% in April. Month-on-month, the CPI was steady in April, whereas the forecast was for a rise of 0.1%.<\/p>\n
Monthly and yearly core CPI readings (which exclude the volatile prices associated with energy and food) were also lower than expected \u2013 slightly better than the reports for April and March.<\/p>\n
The Fed on hold means the cost of cash stays at a 23-year high of 5.25% \u2013 5.5%.<\/p>\n
US inflation fell to 3.3% in May, down from 3.4% in April. Month-on-month, the CPI was steady in April, whereas the forecast was for a rise of 0.1%.<\/p>\n
Monthly and yearly core CPI readings (which exclude the volatile prices associated with energy and food) were also lower than expected \u2013 slightly better than the reports for April and March.<\/p>\n
\u00a0<\/p>\n
SpaceX engineers who got their asses fired from Our Entrepreneur Elon\u2019s space rocket plaything have filed a big lawsuit against Mr Musk alleging some pretty musky allegations.<\/p>\n
Sexual harassment is one and something called Retaliation is another \u2013 both with the California state court.<\/p>\n
The move overnight is an escalation on what is a multi-pronged pitch legal battle with everyone\u2019s least fave billionaire.<\/p>\n
\u201cMusk knowingly and purposefully created an unwelcome hostile work environment based upon his conduct of interjecting into the workplace vile sexual photographs, memes and commentary that demeaned women and\/or the LGBTQ+ community,\u201d the eight ex-SpaceX staff said in a court filing.<\/p>\n
Elon seemed pretty stressed about it all:<\/p>\n
Starship is the most power flying object ever created.<\/p>\n
Currently over twice the thrust of Saturn V and, with future upgrades, three times the thrust (10,000 tons of force). https:\/\/t.co\/2Vi6zDl5CW<\/a><\/p>\n \u2014 Elon Musk (@elonmusk) June 12, 2024<\/a><\/p>\n\n Over on X, the days of checking if your old girlfriend liked your latest vacuous Tweet\/X post are over.<\/p>\n X, formerly Twitter, will hide who liked a post, according to an in-app alert and updates from Our X boss Elon.<\/p>\n Important change: your likes are now private https:\/\/t.co\/acUL8HqjUJ<\/a><\/p>\n \u2014 Elon Musk (@elonmusk) June 12, 2024<\/a><\/p>\n\n The move, X says, is to better protect users\u2019 privacy on the app.<\/p>\n When you post, X will show you metrics such as the like count in your notifications, but you won\u2019t be able to see who tapped the little heart.<\/p>\n Seems a bit mean, and follows\u00a0a tsunami of changes Elon\u2019s made since he bought the platform for a ridonkulous $US47bn in 2022.<\/p>\n Most notably, he intro\u2019d a paid tier that gives subscribers access to more direct messages and Elon\u2019s exalted blue-check thingy.<\/p>\n If you want the blue-check thingy, you usually have to pay, unless you\u2019re even more spesh.<\/p>\n Last week, parents should also note, X officially allowed for porn to plaster the app, following years of lingering around the issue with a\u201d laissez-faire\u201d approach to such adult content.<\/p>\n \u00a0<\/p>\n Far more excitingly, after about 570 days and nights to ponder the impact of OpenAI\u2019s generative AI launch via ChatGPT, the big Apple finally did something we haven\u2019t seen much of \u2013 make a move to suck some money out of Nvidia and into a competing AI option.<\/p>\n In fact, overnight, Apple\u2019s market value briefly topped Microsoft\u2019s for a while during trading, handing back the crown as the world\u2019s most valuable company for a fresh fitting.<\/p>\n On Monday at the Worldwide Developers Conference Apple laid out a multi-pronged AI strategy, which rang all the bells.<\/p>\n The new Apple Intelligence which uses ChatGPT will be available on iPhone 15 Pro and Pro Max smart phones, which by some estimates is just 5% of the current iPhone installed base.<\/p>\n That\u2019s a reflection of the silicon requirements for the on-board AI features. The other key question is whether the new capabilities will spur current customers to buy expensive new phones out of fear of missing out.<\/p>\n For now, though, the hesitation around Monday\u2019s AI announcement has been replaced by giddy certainty that the move to quickly integrate out-sourced, top-notch AI across its tech and devices is the right one \u2013 and why not, when Apple\u2019s products are already in the hands of some 2 billion people worldwide.<\/p>\n Apple\u2019s combined gain on Tuesday and Wednesday is now up over 10%.<\/p>\n This saw its market value vault to $3.34trn \u2013 the highest ever recorded for a listed company \u2013 before the shares faded in the final hour of the Wall Street session, closing 3% stronger and ending the display with a market value of $3.27trn, just behind MSFT.<\/p>\n Microsoft rose nearly 2% on Wednesday, lifting its value to $3.28 trillion.<\/p>\n Shares in Nvidia were up 3.5%, with the market value topping $3.08 trillion.<\/p>\n Apple\u2019s surge dragged the S&P 500 above the 5,400-point level for the first time ever.<\/p>\n The S&P500 and the Nasdaq clocked new, new highs after Apple shares first took off at pace on Tuesday \u2013 another new record high, jumping over rising 7% to some $207 a share.<\/p>\n On Tuesday, Nvidia ended about 0.7% lower as Apple ate into its fanbase.<\/p>\n \u00a0<\/p>\n Nvidia won\u2019t miss it.<\/p>\n Following NVDA\u2019s yearlong 200% surge, the AI darling\u2019s market value has popped into the $3 trillion stratosphere.<\/p>\n According to FactSet, Nvidia\u2019s current weighting in the S&P 500 has grown to 6.6%.<\/p>\n Microsoft is tops with a 7% weighting, while is looking good for a comeback at around 6.5%.<\/p>\n Meantime, NVDA could one day dominate the benchmark S&P500 by a magnitude that has never been seen before, more than doubling the influence of past leaders like Apple and Nokia, along with current leader Microsoft \u2013 that\u2019s according to Evercore chip analyst Mark Lipacis.<\/p>\n \u201cHistory suggests NVDA could become 10-15% of S&P 500,\u201d Lipacis reckoned in a note last week. \u201cWe have observed that at each successive computing era, the ecosystem players represent a larger weighting of the S&P500.\u201d<\/p>\n UBS pretty much agrees.<\/p>\n In a note that highlights some characteristics of the US market\u2019s current seven-month rally, UBS reckons that sans NVDA, the benchmark index would be around 350bps lower.<\/p>\n Here\u2019s the prime wagyu in bullets<\/p>\n There\u2019ve been two distinct phases: multiple expansion in late 2023, while earnings growth has contributed most of the 2024 upside. \u00a0<\/p>\n Even more interestingly, UBS thinks the current multi-record highs for the S&P500 are deceptive \u2013 and the index is not as expensive as it looks.<\/p>\n The S&P 500 has advanced 50% since October 2022. Over this time, the Price to Earnings ratio (P\/E ) of the index has increased from 15.2x to 20.6x.<\/p>\n This compares to an average of 16.8x over the past 30 years.<\/p>\n Not surprisingly, many (bearish) investors point to elevated valuations as a reason for caution, however, UBS believe these concerns are misplaced.<\/p>\n Here\u2019s the thinking:<\/p>\n In 1994, Tech-related companies made up 8% of the index. While P\/Es are the industry standard valuation metric, Price \/ Free Cash Flow and Price \/ Return of Capital (dividends and buybacks) better reflect true value.<\/p>\n Today, UBS calculates the US benchmark P\/E is 1.3 standard deviations above normal, vs. 0.1 above for P \/ FCF and P \/ ROC.<\/p>\n This gap is the result of:<\/p>\n a larger weight in high Free Cash Flow TECH+ companies, and UBS (and Citi previously) believe this should result in persistently higher P\/Es.<\/p>\n \u00a0<\/p>\n Via UBS<\/em><\/p>\n Another important distinction made by UBS is that although Treasury Yields are above their Long-Term average, investors too often use Treasury yields as a proxy for long-term discount rates, excluding the impact of credit spreads or equity risk premia (which are very tight).<\/p>\n Furthermore, UBS analysis suggests that the business cycle is the primary driver of medium-term changes in valuations, with P\/Es collapsing around recessions, expanding in recoveries, and drifting higher mid-cycle.<\/p>\n The recent jump in multiples is best explained by falling tail risks \u2013 with recession fears just about evaporated, UBS see P\/Es drifting higher from their current levels.<\/p>\n The rally has legs.<\/p>\n <\/span><\/p>\n The post TECH HEAVY: Apple\u2019s AI takes a bite out of Nvidia; Fed stays, Nasdaq soars and UBS expects more of the same<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Apple eats into NVDA\u2019s pie<\/h2>\n
NVDA still the monster to watch: Evercore<\/h2>\n
\nSurprisingly, since October 23, Small Caps and Large Caps have rallied almost identically. Unsurprisingly, Magnificent 7 stocks have significantly outperformed the rest of the S&P500.
\nValue outperformed in the early stages of the rally, but EPS growth has been much stronger for the Growth index since. EPS momentum and price momentum have been the strongest factors.
\nNvidia accounts for 30% of the S&P500 return in 2024. S&P500 returns drop from 11.3% to 7.8% ex-Nvidia.<\/p>\nWall Street\u2019s got more innit: UBS<\/h2>\n
\nToday, they constitute 42%, skewing valuations higher. Focusing on the median multiple removes this distortion. Today the median is 17.1x, 3.5x points below the cap-weighted S&P 500.<\/p>\n
\nimprovement in Free Cash Flows (less capital intensity) more broadly.<\/p>\n