Luke Kawa6/27/24

US stocks creep higher; small caps get their day in the sun

The S&P 500 crawled 0.1% higher on Thursday with small caps enjoying a rare day of standout performance.

The Russell 2000 of small-cap US companies bested the S&P 500 by 90 basis points, its biggest outperformance of the month.

Breadth was also positive, ending the streak of sessions where the S&P 500 went one way and the advance-decline line went in the opposite direction. The weirdness of this five-session streak, which tied a record from April 1999, is now over.

Real estate, consumer discretionary, and communication services were the best-performing S&P sector ETFs; consumer staples and materials lagged. Amazon continued its strong run of form with a 2.2% gain, while Meta closed up 1.3%.

Micron fell 7.1% despite reporting better than expected quarterly results, as its guidance was merely in line with, rather than above, analysts’ expectations. Demand for its HBM chips (which support the AI data center build out) is solid, sold out through August 2025, while the outlook for semiconductors for the PC and mobile markets are considerably less rosy.

Walgreens had its worst day since at least 1980, plummeting 22% after cutting its guidance and announcing tons of store closures would be in the offing.

Chewy spiked as much as 34% after Keith Gill, aka Roaring Kitty, tweeted a picture of a dog. However, the move reversed sharply, with the stock ending down 0.3%.

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Alibaba gains as Q2 cloud revenues beat estimates on “robust AI demand”

China’s leading cloud giant is cashing in on the huge appetite for AI compute.

Alibaba ADRs are up big in premarket trading after the e-commerce and cloud giant reported second-quarter sales above analysts’ estimates.

Revenues in its Cloud Intelligence Group rose to 39.8 billion yuan (~$5.6 billion) for the three months ended September 30, ahead of estimates for roughly 38 billion yuan (~$5.35 billion).

“We have entered into an investment phase to build long-term strategic value in AI technologies and infrastructure and a consumption platform integrating daily life services and e-commerce,” said CEO Eddie Wu. “Robust AI demand further accelerated our Cloud Intelligence Group business, with revenue up 34% and AI-related product revenue achieving triple-digit year-over-year growth for the ninth consecutive quarter.”

For traders, the potential benefits from establishing a dominant cloud position in the region are outweighing Alibaba’s bottom-line figures. The positive reaction to these quarterly results comes despite adjusted net income falling 72% compared to the same quarter in 2024.

Management made it clear that profits are not the top near-term priority.

“We are re-investing our profits and free cash flow for the future while near-term profitability is expected to fluctuate,” added chief financial officer Toby Xu in the press release. “Over the past four quarters, we have deployed approximately RMB120 billion in capital expenditure toward AI and cloud infrastructure.”

This continues the trend of Alibaba’s commitment to AI capex being received enthusiastically by the market. Ahead of earnings, the company announced that its Qwen AI app was downloaded more than 10 million times in a week following its relaunch.

Elsewhere, its domestic e-commerce business — still far and away the firm’s biggest revenue driver — beat sales estimates, while international digital commerce came up short.

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Sandisk jumps on S&P 500 inclusion announcement

Sandisk was up as much as 6% in premarket trading after S&P Global announced that the flash-memory card maker will join the S&P 500 index on November 28, 2025, replacing advertising giant Interpublic Group, which is being acquired by Omnicom.

Sandisk’s inclusion comes nine months after it was spun off from its parent company, data storage giant Western Digital. Since listing on the NASDAQ, the stock has been on a tear, with its shares soaring more than 500% this year, pushing its market cap to ~$33 billion. That's more than double what Western Digital originally paid for the company when it bought Sandisk back in 2016 for roughly $16 billion in a bid to expand into flash memory chips, as its traditional hard disk drive business faced mounting pressure.

The company sells high-speed flash memory for consumer electronics like phones and cameras, and is pushing deeper into the data center supply chain. Its latest quarterly earnings showed strong momentum, with a 23% year-over-year increase in sales and solid guidance that topped Wall street estimates.

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Google jumps, Nvidia and AMD fall on report that the search giant is in talks to sell “billions of dollars” of its custom AI chips to Meta

Google is climbing in premarket trading while Nvidia and Advanced Micro Devices have dropped on the heels of a report from The Information that has the search giant muscling in on the chip designers’ turf.

Per the report, Meta is in discussions with Google to spend “billions of dollars” to use its AI chips in the social media company’s data centers starting in 2027, and to begin renting access to Google chips from its cloud business next year.

Historically, Google has rented access to these chips through its cloud business rather than supply them directly to third parties. The report suggests that insiders believe a more direct foray could allow the company to grab a market share in chips amounting to about 10% of Nvidia’s annual revenue.

Google’s AI chips — TPUs, or tensor processing units — are having a moment. These semiconductors were used to train its latest genAI model, Gemini 3, which has received rave reviews, and are cheaper to use than Nvidia’s offerings. That’s sent the stock to record highs, surpassing Microsoft in market value along the way.

According to The Information, Meta is even mulling using TPUs for training, considered a much more demanding task, rather than just inference alone.

Shares of Nvidia have slumped more than 3.5% as of 5:20 a.m. ET, AMD, which sell GPUs for use in data centers, is down around 3% by the same point, while Google has moved over 3% in the other direction.

During Nvidia’s conference call last week, CEO Jensen Huang was asked about the competitive threat posed by custom chips. He responded by talking up the difficulty of inference (“How could thinking be easy?”). That’s a not-too-subtle nod to the idea that his company’s GPUs will be the more effective solution compared to more cost-effective options. He also touted the company’s CUDA software as a selling point, because it’s more commonly used and therefore makes it easier for its buyers to go on and sell AI computing capacity.

Google has aimed to make its JAX software easier for developers over time by making its TPUs operable via open-source software tied to PyTorch (invented by Meta), overhauling how errors are reported, and introducing an extension that makes it easier to write custom code, among others.

Tasha Matsumoto

Tech rally drives stocks higher as AI trade is back on

Stocks kicked off the holiday week with a tech-fueled rally, led by Broadcom.

CHICAGO, IL - NOVEMBER 09: Chicago Bulls General Manager Gar Forman (R) and Chicago Bulls Charities Vice President Nancy Forman prepare to carve turkeys while mascot Benny the Bull observes during the team's 12th Annual Thanksgiving Dinner.

Citi analyst Scott Chronert Investor exhaustion

After volatile year, Citi analyst sees risks of investor exhaustion

Citi US Equity Strategist Scott Chronert laid out his case for the markets to largely chop sideways for the rest of the year.

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