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Today

Weekly newsletter 182

Welcome to all new subscribers! If you are a new subscriber, the Getting Started article will help you answer all the common questions for new subscribers. Subscribers to Outperforming the Market get full access to the Model Portfolio , all my intrinsic value, 1-year and 3-year price targets in the Price Target Report , and real-time trade alerts when I place buy and sell orders (I am fully invested in the Model Portfolio). The full track record for the Model Portfolio from 2022 till today can be found here . In addition, subscribers get a weekly deep dive on Fridays, a weekly newsletter on Mondays, and other earnings analysis, market review and portfolio review articles during the week. All links can be found consolidated here . Articles posted in the last week Sea Limited: No Longer In The Penalty Box Adyen: Looking To 2027 Weekly newsletter 181 Market Updates Federal Reserve Two Federal Reserve officials, including Vice Chair Philip Jefferson, suggested policymakers should take more time before deciding whether additional interest-rate increases are needed to slow inflation. Vice Chair for Supervision Michelle Bowman said the Fed needed more time to better understand the economy’s underlying trends and does not currently see an urgent need for further action. Jefferson and Bowman’s statements echoed comments from New York Fed President John Williams, who said there was no urgency in considering another rate increase following the Fed’s decision to lift rates in September. Fed Neel Kashkari said he was skeptical that the rest of the economy is contracting, citing corporate profits that have been up very strong across many sectors. Kashkari pointed to a low unemployment rate and very low layoffs and unemployment claims but acknowledged that housing is under pressure. Kashkari said inflation remains too high and hopes the Fed can tame price growth with modest adjustments, noting that energy costs impact virtually everything that we buy. The Federal Reserve voted to finalize its landmark stress test changes, which Fed Vice Chair for Supervision Michelle Bowman said preserve the test’s resilience by ensuring it is transparent, granular and risk sensitive. The final rules require the central bank to seek input on stress test scenarios and material model changes, and update the framework for hypothetical scenarios, the stress test calendar, and the global market shock component. The changes are likely to reduce year-over-year volatility in capital requirements, according to the agency, and have been applauded by banking groups, but some, including Fed Governor Michael Barr and Fed alumnus Christopher Appel, have expressed skepticism or opposition to the changes. Jobs data US companies stepped up hiring in September, another sign that the economy may be picking up. Private-sector payrolls rose by 90,000, the most in three months, according to ADP Research data out Wednesday. The median estimate in a Bloomberg survey of economists called for a 75,000 increase. More than half of the gain was in education and health services. Leisure and hospitality, construction and manufacturing also showed healthy job growth. The stable job market, alongside resilient consumer spending, has allowed the Federal Reserve to focus on fighting persistent inflation. The central bank raised interest rates two weeks ago for the first time since 2023 and numerous policymakers have since described the labor market as solid and in balance. US consumer spending US consumer spending rose in August at the fastest pace in over a year, helping to power the economy through persistent inflation. Inflation-adjusted personal spending climbed 0.6% in August from a month earlier, according to Bureau of Economic Analysis data. The Federal Reserve’s preferred measure of underlying inflation rose a less-than-expected 0.2%, with traders paring bets on an October rate hike after the better-than-expected core inflation figures. US long-bond yields Long-dated Treasury yields rose to fresh multi-decade highs as resilient US spending bolstered expectations that the US economy can handle higher interest rates. Yields on 30-year Treasuries rose to 5.63%, the highest since 2002, after US consumer spending rose in August at the fastest pace in over a year. The US announced plans to accept up to $6 billion in long-term debt as part of Secretary Scott Bessent’s expanded buyback program. US consumer sentiment US consumer sentiment fell in September to a four-month low amid worries about rising prices and the economy. Consumers expect prices to rise over the next year and saw costs rising at an annual rate over the next five to 10 years, the highest since May. A gauge of the outlook for the economy in the year ahead slumped in September to the lowest since 2022, with consumers’ expectations for their personal finances also deteriorating. US consumer confidence US consumer confidence fell in September to the lowest level since 2014 as views about the economy and the labor market deteriorated. An indicator of present conditions dropped nearly 8 points to the lowest since 2021, and a measure of expectations for the next six months declined to a more than one-year low. The report illustrates persistent anxiety about the cost of living, including high gasoline prices, that is seeping into diminished buying plans. Apple Apple is set to sell about 6 million units of the iPhone Duo this year, according to Counterpoint Research. The iPhone Duo is priced at $1,999 and set for an October release and carries industry-wide hopes for stoking greater interest and sales of foldables. Apple’s iPhone 18 Pro family has gotten off to a fast start in China, with a 12% rise compared to the iPhone 17 Pro’s initial sales, helping Apple grab 33% of China’s smartphone market. Apple Chief Executive Officer John Ternus is moving to overhaul the company to accelerate product development and create a leaner organization with a greater focus on engineering. Ternus has discussed plans to rely less on traditional spring and fall product release schedules and to eliminate some middle-management positions to reduce the layers separating engineers from senior executives. The company is also undergoing cost-cutting efforts, including layoffs and reductions in certain teams, as Ternus seeks new sources of revenue and ways to generate more money from existing products. Anthropic Anthropic is set to meet prospective investors on Oct. 14 in preparation for its initial public offering, according to people familiar with the matter. The timing would put the company on track for an expected November debut, with formal marketing for its IPO potentially starting as soon as the week of Nov. 9. Investors believe a fair valuation for Anthropic is in the $1.8 trillion to $2 trillion ballpark, and the company expects to match or beat the size of SpaceX’s IPO. OpenAI OpenAI’s CEO Sam Altman said the company wants to navigate a period of heightened artificial intelligence safety concerns without the pressure of being a newly public company. Altman said the company is “adjusting” to a “new level” of AI capability and the added safety requirements that coincide with it. OpenAI is holding discussions about a new funding round to raise at least $30 billion from investors at a valuation of around $1.4 trillion. OpenAI aims to raise at least $30 billion from investors in a new round of funding, according to people familiar with the matter, after pushing back its plans for an initial public offering. The company is seeking a valuation of around $1.4 trillion, not including the money raised, and the fundraising discussions are early and could change. The latest fundraise is meant to serve as a bridge round to provide OpenAI with additional capital in place of an IPO, as the company focuses on addressing concerns about AI safety. Micron Micron Technology gave an upbeat forecast for the current quarter, fueled by the AI building frenzy, though the chipmaker warned that rising compensation would weigh on profit margins. Revenue will be about $61.5 billion in the fiscal first quarter, and excluding some items, profit will be about $38.15 a share. The company’s gross margins will tighten slightly in the current period due in part to increased worker pay, with the adjusted gross margin expected to narrow to 86.3% in the current quarter. SpaceX SpaceX’s Starship rocket reached orbit for the first time on Monday morning, achieving a milestone for the program. The rocket was carrying 26 of the company’s upgraded Starlink satellites, which the vehicle successfully placed in orbit to join the existing internet-from-space network. The mission was cut short after an earlier engine failure, with the vehicle splashing down in the Pacific Ocean near Hawaii around 3 hours into the mission. The Model Portfolio updates Read more

PEPPepsiCoNeutralPepsiCo

1w ago

Weekly newsletter 181

Welcome to all new subscribers! If you are a new subscriber, the Getting Started article will help you answer all the common questions for new subscribers. Subscribers to Outperforming the Market get full access to the Model Portfolio , all my intrinsic value, 1-year and 3-year price targets in the Price Target Report , and real-time trade alerts when I place buy and sell orders (I am fully invested in the Model Portfolio). The full track record for the Model Portfolio from 2022 till today can be found here . In addition, subscribers get a weekly deep dive on Fridays, a weekly newsletter on Mondays, and other earnings analysis, market review and portfolio review articles during the week. All links can be found consolidated here . Articles posted in the last week Alibaba: Increasing Confidence on ROIC of Capex Spend Quanta Services: Powering the AI trade Weekly newsletter 180 Subscribe now Market Updates US Iran war US and Iranian negotiators are exploring a phased deal that would see Tehran reopen the Strait of Hormuz and Washington lift its blockade of Iranian ports. Qatari officials are mediating the negotiations, which are taking place on the sidelines of the United Nations General Assembly. A White House official said President Donald Trump remains open to talking with Iran but stressed the US didn’t need to negotiate because it was in a strong position. Bond yields Yields on the US’s longest-dated bonds climbed to the highest level in more than two decades, driven by inflation fears and concern about government debt burdens. A fresh jump in oil prices lifted five- to 30-year Treasury yields to new multiyear highs, with the 30-year rising to levels just shy of 5.5%, the highest since 2004. The rise in yields undercuts the Treasury’s efforts to bring down long-term borrowing costs, with the department’s bond buyback program failing to ease pressure on the market. US China truce US Treasury Secretary Scott Bessent announced the US and China have agreed to extend their trade truce by two months. Xi said he was “confident” the trip would produce “fruitful results,” in a written statement released by the Chinese Foreign Ministry shortly after he landed. Trump will host the Chinese leader Thursday morning with a state arrival ceremony, according to an itinerary released by the White House, which called the event “a significant milestone” in ties. Google Google announced pricing and hardware specifications for the first Googlebooks, marking a push into a high-end laptop market where built-in artificial intelligence features have become the norm. The Googlebooks, priced at $899 and up, are designed to work seamlessly with Android phones and include AI features, with the company targeting Android users and coders. The laptops have features such as running phone apps on the laptop, AI-powered file search, and contextual awareness, and come with a complimentary year of the Google AI Pro subscription and other perks. OpenAI OpenAI is urging the US to lead an effort with other countries to set standards for cutting-edge artificial intelligence, in response to mounting concerns about the potential harms of the technology. The company said international technical standards are needed to develop AI safely, particularly to help define what kinds of incidents involving AI models should be reported and determine how countries can work together on AI advancement. OpenAI suggested that countries work together to come up with complementary national and international standards for building the most capable AI models, and that “fully autonomous” recursive self-improvement shouldn’t be pursued “unless and until it can be done safely”. Oracle Oracle is moving to protect itself from potential delays at Project Jupiter, a massive New Mexico data center. The company has issued a force majeure notice to the project’s developer, a unit of Blue Owl Capital, to defer certain payments if the facility fails to come online as planned. While a power-related force majeure event could delay Oracle’s rent obligations, the company would still be responsible for other costs and ultimately pay the full rent over the lease term once payments begin. Qualcomm Qualcomm has renewed its global licensing pact with Apple, effective in April 2027. The length of the new agreement was not included in the statement announcing the renewal. Apple is Qualcomm’s largest customer, accounting for more than a fifth of revenue, according to data compiled by Bloomberg. SoftBank SoftBank Group improved the terms of its record-sized junk-bond offering after attracting strong investor demand, despite initially offering its highest-ever yields to fund aggressive artificial intelligence investments. The company is seeking to raise more than $11 billion through the deal, including $10 billion in US-dollar and €1 billion in euros, as part of broader financing efforts to support commitments totaling nearly $65 billion to OpenAI and other AI-related investments. Anthropic Anthropic is releasing a new artificial intelligence model called Claude Opus 5.5 that performs similarly to Fable 5.1 but costs significantly less to use. The new model generates output faster than Opus 5 and has been found to write more clearly, according to Anthropic. Anthropic plans to expand its 5.5 family of models with new versions of Claude Sonnet and Haiku in the coming weeks. Anthropic is expected to generate more than $100 billion in annualized revenue this year as it prepares for a trading debut as soon as November. The company’s run rate has surged throughout the year as business customers have embraced using its Claude artificial intelligence software to streamline coding and other workplace tasks. Anthropic is moving forward with plans for an IPO while confronting heightened public anxiety. Anthropic has told investors it plans to have about 5 gigawatts of computing power available by the end of the year, accelerating expansion plans as the artificial intelligence company works toward an initial public offering, the New York Times said. It expects to roughly double that capacity again by the end of the next year, according to the report. That would be a jump from the roughly 1.5 gigawatts Anthropic had available as of last year, the New York Times reported, citing people familiar with the matter who weren’t authorized to speak about the deals. Apple Apple is developing a screenless health and fitness tracker similar to Whoop Inc.’s wrist-worn device as part of an effort to rethink its smartwatch lineup and add new wearable technologies. The company has been exploring the category for several months and is now developing prototypes, with the effort having support from top executives, including Apple Executive Chairman Tim Cook and services chief Eddy Cue. The project remains in a preliminary phase, and if Apple proceeds with a release, the device likely won’t debut before 2028, featuring a thin fabric band with a sensor-equipped computing module and distinguishing it from the Apple Watch. PepsiCo PepsiCo is raising prices on some chips, soda, and dips after pledging to make its snacks more affordable. The price increases will extend to brands including Doritos, Ruffles, and SunChips, and are expected to go into effect at the end of this year or early 2027. The company is raising prices on some dips, including Tostitos salsa and Fritos canned dips, and has warned some retailers of upcoming price hikes on some sodas. Walt Disney Walt Disney is raising prices across several streaming subscription plans, bringing its premium Disney+ offering more in line with comparable services such as Netflix. The ad-free Disney+ plan will increase by $2.50 to $21.49 per month, while the ad-free Disney+ and Hulu bundle will rise to $21.99. In contrast, the ad-supported Disney+ and Hulu bundle will remain unchanged at $12.99 per month, with subscribers expected to begin receiving notifications of the price adjustments as early as Wednesday. McDonald’s McDonald’s plans to allocate approximately $8.5 billion through 2036 to support franchisees in modernizing restaurants, adopting new technology, and enhancing operations as part of its multiyear “Next” initiative. The program aims to turn the chain into more than a stop for a quick, cheap meal by redesigning restaurants and improving its food offerings and service. The Model Portfolio updates Read more

NeutralNVDANVIDIANVIDIAQQQNasdaqNasdaq

2w ago

Weekly newsletter 180

Welcome to all new subscribers! If you are a new subscriber, the Getting Started article will help you answer all the common questions for new subscribers. Subscribers to Outperforming the Market get full access to the Model Portfolio , all my intrinsic value, 1-year and 3-year price targets in the Price Target Report , and real-time trade alerts when I place buy and sell orders (I am fully invested in the Model Portfolio). The full track record for the Model Portfolio from 2022 till today can be found here . In addition, subscribers get a weekly deep dive on Fridays, a weekly newsletter on Mondays, and other earnings analysis, market review and portfolio review articles during the week. All links can be found consolidated here . Articles posted in the last week Tencent: Winning in Productivity AI and Consumer AI Applied Materials: Confidence In Doubling Weekly newsletter 179 Market Updates Federal Reserve The Federal Reserve raised interest rates by a quarter percentage point and plans an additional hike later this year to contain inflation. Chairman Kevin Warsh said the action shows the Fed is serious about delivering on the price stability objective and removing a dose of accommodation. The rate increase defied President Donald Trump, who said on social media that US interest rates should be at 1% or lower and called for lower interest rates. The bond market is signaling growing confidence that Federal Reserve Chairman Kevin Warsh will act to tame inflation, which has exceeded policymakers’ target for half a decade. Traders are now pricing in additional Fed increases by the middle of next year, with the first increase possibly coming as soon as next month, after the Fed lifted borrowing costs and forecast further monetary tightening. The repricing reflects a view that the Fed is willing to deliver meaningful tightening to slow the economy and lower inflation, which could prove a headwind for US stocks. Saudi Arabia’s key oil pipeline Saudi Arabia is seeking to return about half the capacity of its cross-country oil pipeline within days after the link was halted following drone attacks. State-run Saudi Aramco is working to bypass a damaged section on the route to resume part of the pipeline’s capacity, with plans to return the conduit to its full capability in about six weeks. The shutdown of the pipeline has caused delays for customers in Europe, leading to a jump in regional crude prices, with some refiners buying replacement cargoes from other sources. China’s credit growth China’s central bank governor signaled a long period of massive credit growth has come to an end, in a message of reassurance for markets after an abrupt deceleration in lending. The slowdown in overall financing helps keep the debt levels in the economy stable, according to People’s Bank of China Governor Pan Gongsheng, who described it as a natural development during the economy’s transition. Pan said the real economy’s demand for credit growth is changing, and it is difficult and unnecessary for overall credit to maintain its past growth rate, citing the rise of high-tech sectors that rely less on debt. Xi-Trump summit The US is expected to delay the announcement of new tariffs over allegations of trading partners’ excess manufacturing capacity at least until after next week’s planned summit between Presidents Xi Jinping and Donald Trump. The reason for the delay is unclear and it’s also uncertain whether the final tariff rate will change from the previously expected level. US and Chinese officials are expected to discuss a number of issues during the summit, including the war in Iran, trade and AI. The US and China are discussing slashing tariffs on certain goods, including American energy and agricultural shipments. The meetings between the two sides are likely to result in an agreement to lower duties on Chinese inputs for manufacturers. An agreement would signal that the sides are engaging enough to maintain the tariff truce reached in October 2025. Calls for slower AI model development Leaders of the world’s biggest AI platforms say it’s time to slow the development pace of their most advanced models, citing escalating risks of the technology. Anthropic Chief Executive Officer Dario Amodei will implement new safety steps, including third-party evaluators, and is calling on the industry to support a broader downshift. The move to slow AI development comes as anxiety about severe AI risks has begun to enter the mainstream, driven by warnings from within the industry that AI poses a growing threat to national security and the global economy. Anthropic Anthropic told shareholders it will report an adjusted operating profit this quarter, marking a second consecutive period of profitability. The company’s gross margins exceed 80% before factoring in revenue-sharing payments and training costs for AI models. Anthropic is preparing for an initial public offering and aims to match or exceed SpaceX’s record offering, with the company choosing the Nasdaq as its listing venue. Anthropic’s Claude chatbot drives more than a quarter of the company’s research and development work for artificial intelligence. The company found that Claude “leads” 26% of Anthropic’s R&D and collaborates with staffers for about 90% of their work. Anthropic plans to embed third-party evaluators within the company and grant them access to internal processes, systems and data to help track the progress of AI development. SK Hynix SK Hynix said that it’s exploring options to boost its global competitiveness after a report that it may team up with Intel to make semiconductors in the US. The South Korean memory chipmaker issued the statement after Reuters reported the company may potentially lease part of ‌Intel’s long-planned chipmaking facility in Ohio or form a venture with Intel and major cloud computing firms. The memory chipmaker says it hadn’t made a decision about a deal with Intel. OpenAI OpenAI has held early talks with investors about raising another private funding round at a $1.2 trillion valuation before its planned IPO, Financial Times reports, citing unidentified people familiar with the matter. The talks with investors are at an early stage and the figure could change over the coming months, the people told FT. Whether to go ahead with the private round, and its timing, would depend on when OpenAI opts to go public, one of the people told FT. Chris Lehane, OpenAI’s global policy chief, said the company does not see the need for an antitrust waiver to coordinate on safety matters, stating “it’s better to try to work together to prioritize safety”. US antitrust regulators are signaling skepticism toward giving AI companies an exemption to coordinate on safety, with Federal Trade Commission Chair Andrew Ferguson saying he would be “deeply suspicious” of such requests. OpenAI shared undisclosed incidents of its AI models misbehaving and unveiled a new framework for tracking and disclosing such occurrences. The company detailed instances of its AI models misbehaving, including concealing and fabricating information, attempting to bypass network restrictions, and sharing private files. OpenAI outlined a system for employees to self-report incidents of “misalignment” and said it will make its findings about misalignment public to inform researchers, developers, policymakers, and the general public. Blackstone A group of 10 banks is providing a $22 billion chip loan to support Blackstone and Alphabet’s new cloud venture Crux AI. The debt will be used to purchase tensor processing units, or TPUs, and will be backed by the value of those chips and Crux AI’s customer contracts. The debt could be replaced later with longer-term financing from institutional investors in the investment-grade bond market, and some banks are also providing a $1 billion revolving credit facility. Salesforce Salesforce gave a long-term outlook for sales that exceeded analysts’ estimates, signaling to investors that the software company can boost revenue growth in the face of competition from artificial intelligence tools. The company expects $63 billion in sales in the fiscal year ending in January 2030. The outlook includes revenue from Salesforce’s acquisition of Informatica, which was completed last November. Analysts, on average, estimated $61.4 billion, according to data compiled by Bloomberg. Emulate A UK artificial intelligence startup founded by former Google DeepMind researchers is in talks to raise $700 million in a seed round, in the latest example of investors backing alumni of notable AI labs. Emulate was founded by Jack Parker-Holder, Matthew McGill and Philip Ball, who all worked on DeepMind’s world-model team. The company, which develops systems to simulate and predict how the physical world behaves, is seeking a valuation of $3 billion pre-money, according to people familiar with the matter. Huawei Huawei Technologies is set to unveil new AI technology this week, advancing its ambition to replace Nvidia in China and compete on the global stage. Huawei’s rotating chairman Wang Tao will present its upcoming Ascend 960 AI chips at the company’s annual summit in Shanghai on Thursday, with some critical details including whether the new component will be powerful enough for training frontier AI models. Huawei’s goal is to ensure its Ascend chips can operate every single AI model, in China and beyond, according to Chairman Guo Ping of the company’s supervisory board. The Model Portfolio updates Read more

DRAMRoundhill Memory ETFNeutralRoundhill Memory ETF

2w ago

Applied Materials: Confidence In Doubling

Applied Materials is positioned well in the current AI wave where record demand for leading edge logic and memory chips are resulting in unprecedented demand for the company’s products as more logic and memory fabs are built. The company is ensuring that it takes full participation in the growth wave as it invests in its technological leadership and capacity. Perhaps most importantly, Applied Materials has the higher visibility from customers today, with some customer conversations extending to 2030. The decision to double systems output capacity by 2028 is likely strongly supported by the visibility that management has based on customer conversations today. There is already more capacity being planned beyond 2028 and this suggests continued momentum in the business well beyond the medium term. FY3Q26 review and FY4Q26 outlook Applied Materials reported FY3Q26 revenues of $9.12 billion, up 25% from the prior year and 1.4% ahead of consensus expectations of $8.99 billion. Gross margin came in at 50.4%, which was 30 basis points ahead of consensus expectations of 50.1%, while operating expenses was largely in-line and operating margin expanding 330 basis points from the prior year to 34% All that resulted in EPS coming in at $3.50, above the midpoint of guidance with EPS growth of 41% from the prior year. Management demonstrated ability to execute as it drove increasing operating leverage as revenues grew faster than operating expenses. FY4Q26 revenue guidance came in at $10.25 billion at the midpoint, about 7% ahead of consensus expectations of $9.55 billion. Gross margin guidance for FY4Q26 came in at 50.4%, ahead of consensus expectations, while operating expenses of $1.58 billion came in largely in-line, resulting in EPS of $4.02 at the midpoint., 8% ahead of consensus expectations. Segment breakdown Semiconductor Systems revenue was up 27% from the prior year to $7 billion, within which DRAM revenues, which includes HBM packaging, was up 52% from the prior year. Management continues to expect a “very significant increase” in DRAM revenues in the second half of calendar year 2026 as customers start to expand their cleanroom capacity. The Semiconductor Systems gross margin increased 190 basis points from the prior year to 55.4% and operating profit increased 45% from the prior year to $2.7 billion. Applied Global Services or AGS revenue was up 22% from the prior year to $1.8 billion, contributed by strong subscription services growth and high transactional parts demand. Gross margin for the segment increased 180 basis points from the prior year to 35.6% and operating margin expanded 280 basis points from the prior year to 30.1% as AGS is using AI and warehouse automation to improve operational efficiency. Management did not update its full year Semiconductor Systems revenue guidance of up more than 30% but they shared that the year strengthened since the last call and that the company will outgrow WFE this year. Management expects AGS to grow more than 20% from the prior year in calendar year 2026. Beyond that, management reiterated its long-term growth outlook of mid-teens percentage year-over-year growth. During the call, management also shared that it is hiring more than 1,000 customer support engineers to ensure ramp readiness, which is weighing on segment gross margins today. As such, I expect such headwinds to ease in FY1Q27 as management is investing for future growth today. Doubling capacity by 2028 Read more

CRWDCrowdStrikeBullishCrowdStrikeMSFTMicrosoftBullishMicrosoft005930Samsung ElectronicsNeutralSamsung ElectronicsAMZNAmazonNeutralAmazon

3w ago

Weekly newsletter 179

Investors are underestimating CrowdStrike's Mythos-driven growth inflection.