Getty Images

Nvidia's tide is no longer lifting other boats

The chipmaker is pulling away from its peers and industry.

6/10/24 12:25PM

The AI boom is narrowing.

More and more, Nvidia stands alone in driving this particular theme within the stock market.

The chip designer’s operating results show that spending on AI clearly isn’t slowing down. But lately, investors seem to be treating this more and more as a winner-takes-all situation than one in which a rising tide lifts all boats. The post earnings report rally that pushed the stock into the $3 trillion market cap club has seemingly not produced many positive spillovers for other companies.

The different ways to slice and dice it:

The 21-day correlation between the daily percent change in Nvidia and its 10 closest peers (per Bloomberg’s filter) has collapsed to virtually zero – that is, there’s no longer any connection there.

The correlation between the daily change in Nvidia and the broader iShares Semiconductor ETF (SOXX) is much stronger (42%) than for the aforementioned smaller handful of its peers. But even so, this relationship has weakened to the 5th percentile relative to its history (going back to August 2001). That’s particularly striking given that Nvidia’s weight in this ETF has increased from less than 0.1% to more than 11% over this period.

And remember when utilities were an AI play thanks to the heightened demand for energy from data centers? Yeah, that was a fun month. As Bloomberg’s Joe Weisenthal notes, utilities rallied 15% from around the time the stock market bottomed in mid-April. More recently the sector ended last week as the worst performing S&P 500 sector for three straight sessions.

Nvidia’s no longer driving the performance of its peers, its industry group, or associated bank-shots in different sectors. The good news for investors, from an index level perspective, is that the stock continues to power higher — and there’s no way that Nvidia will stop driving Nvidia’s performance.

Luke Kawa32m

Memory stocks soar as AI supporting cast repairs damage from steep November declines

Not much rhyme or reason to it, but memory stocks are ending the week with a stellar showing.

Shares of Micron, the high-bandwidth memory specialist, hard disk drive sellers Seagate Technology Holdings and Western Digital, and flash memory company Sandisk are all rising today.

Three of these stocks dropped about 20% as credit risk seeping into AI and a downturn in speculative momentum stocks weighed on the theme in November, with Sandisk faring the worst.

Micron, Western Digital, and Seagate have all since rebounded strongly and are about 5% or less from reclaiming all-time highs, while Sandisk has made up the least ground.

While GPUs (and, more recently, TPUs) get most of the headlines, data centers also need a boatload of memory chips that store information and feed it to those processors.

Nia Warfield4h

Ulta soars as Q3 beat sparks flood of price target hikes

Ulta’s latest makeover is happening on Wall Street. Shares leapt Friday morning as analysts hiked their price targets after the beauty retailer topped Q3 estimates and raised its full-year outlook after the bell Thursday.

Earnings came in at $5.14 per share, handily beating analyst expectations of $4.64. Revenue also topped estimates at $2.86 billion, compared with the $2.72 billion expected. Ulta has benefited from resilient beauty spending, even as consumers pull back elsewhere and hunt more aggressively for discounts.

Ulta now expects full-year net sales of about $12.3 billion, up from a prior forecast of $12.0 billion to $12.1 billion. The retailer also lifted its earnings outlook to $25.20 to $25.50 per share, up from $23.85 to $24.30 previously. This marks Ulta’s second straight quarter of hiking its sales and profit forecast. Analysts are taking note:

Goldman Sachs maintained its “buy” rating and raised its price target to $642 from $584.
DA Davidson maintained its “buy” rating and raised its price target to $650 from $625.
JPMorgan maintained its “outperform” rating and raised its price target to $647 from $606.
Baird maintained its “outperform” rating and hiked its price target to $670 from $600.
Telsey Advisory maintained its “outperform” rating and raised its price target to $640 from $610.
Piper Sandler maintained its “outperform” rating and raised its price target to $615 from $590.
Canaccord Genuity maintained its “neutral” rating and raised its price target to $674 from $654.

Max Knoblauch5h

Southwest cuts its earnings outlook on lost revenue due to government shutdown

Another big four airline has put a price tag on the 43-day government shutdown.

Southwest Airlines on Friday said lower revenue due to a temporary decline in demand during the shutdown, together with higher fuel costs, will ding its annual earnings before interest and taxes by between $100 million and $300 million. The carrier lowered its full-year EBIT outlook to $500 million, down from a prior range of $600 million to $800 million.

According to Southwest’s filing, bookings have returned to previous expectations following the end of the shutdown. Its shares dipped down about 1% in premarket trading.

The carrier joins Delta Air Lines in assigning a cost to the government closure. Earlier this week, Delta said the shutdown would cost it $200 million in the fourth quarter.

Luke Kawa5h

Netflix is acquiring Warner Bros. and HBO assets for less than it’s spent to add content since the pandemic started

What would you, as a viewer, rather watch:

Every new piece of content that’s appeared on Netflix since the pandemic started, or all the original series ever produced by HBO as well as the 100-year-plus portfolio of Warner Bros. films?

That’s one lens through which to view the streaming giant’s agreement to buy Warner Bros. studio and streaming assets for an equity value of $72 billion or an enterprise value of $82.7 billion (which factors in the debt Netflix is assuming from the acquired entity).

Since the end of 2019, Netflix has sent over $87 billion in cash out the door to add content assets to its vast library.

The good news is that presumably, you won’t have to make that choice. Presumably, in the event that this merger is approved and any existing distribution deals lapse, this library will be rolled up under one roof. That’ll probably entail higher subscription costs for Netflix subscribers; what the net cost for those who subscribe to both services ends up being is one of many things that are very much up in the air.

“By adding the deep film and TV libraries and HBO and HBO Max programming, Netflix members will have even more high-quality titles from which to choose,” per the press release. “This also allows Netflix to optimize its plans for consumers, enhancing viewing options and expanding access to content.”

Luke Kawa6h

Oklo slides after launching $1.5 billion at-the-market equity offering program

Oklo has no revenues and an extremely high valuation.

Put the two together and this happens:

After the close on Thursday, a filing showed that the nuclear energy company entered into a pact with various financial institutions to sell up to $1.5 billion worth of its stock in an at-the-market equity offering program.

Shares are down about 5.5% as of 7:20 a.m. ET.

This is Oklo’s third equity offering of the year, per Bloomberg data.

The stock had been on a tear recently ahead of this announcement, rising nearly 30% over the prior three sessions amid elevated options market activity.