Nvidia and an AI ‘tipping point’ spark market rally

For now, Nvidia lives up to the lofty title Goldman Sachs bestowed on it this week: “the hottest stock on planet Earth” after its spectacular earnings report.

Markets are looking higher on Thursday, as are investors’ and governments’ hopes for the rise of artificial intelligence, as strong demand for the chipmaker’s products suggests there is more room for the trend to continue.

Nvidia is up 13 percent in pre-market trading after results that exceeded analysts’ high expectations (and spurred a torrent of lush memes). Jensen Huang, the company’s chief executive, said Nvidia was seeing an “inflection point” in demand for artificial intelligence systems.

Among the highlights:

  • Nvidia’s annual revenue increased a whopping 265 percent year over year to $22.1 billion. It also projected that sales this quarter would reach about $24 billion, easily beating forecasts of $22 billion.

  • Huang told analysts that the results represent the first year of “a 10-year cycle of diffusion of this technology across industries.” Demand is so strong that Huang had to assure analysts that they were allocating chip orders to customers “fairly.”

  • One red flag: Sales fell in China, a once-vital market that has been hit by limits on U.S. exports of some advanced chips.

Market watchers credit Nvidia with fueling the global rally. Stocks in Asia and Europe rose on the news, including ASML, the Dutch chip equipment maker. Meanwhile, the Nikkei 225, a benchmark index in Japan, closed at a record high that surpassed a level last seen 34 years ago, as global investors continue to sell Chinese stocks in favor of Japanese ones.

The sky-high expectations for AI go beyond actions. Some economists have begun to talk about once-in-a-generation productivity gains generated by technology that automates tasks, such as writing emails and proposals.

Washington is also betting even more on AI. Gina Raimondo, the Commerce Secretary, said Wednesday that the CHIPS and Science Act, passed in 2022 to boost domestic chip production with $39 billion in manufacturing incentives, would not be big enough “if we want to lead the world.” ”.

When asking for a “CHIPS Two,” Raimondo mentioned OpenAI, a big Nvidia customer, as a technology company with a “mind-blowing” need for high-end chips to run its products like ChatGPT. (Raimondo made his comments at an Intel event where that company announced a more than $15 billion deal to make custom chips, including artificial intelligence processors, for Microsoft.)

But there is growing skepticism about the rise of AI. Some hedge funds have begun reducing their holdings in Nvidia and other Magnificent Seven tech stocks ahead of Wednesday’s earnings release.

In other AI news:

  • Google said it would do so temporarily suspend an imaging function for Gemini after the AI ​​tool was found to depict some historical figures, such as the founding fathers, as people of color.

  • Sam Altman, CEO of OpenAI, rejected a report from The Wall Street Journal that his company is looking to raise up to $7 trillion.

  • Chinese companies continue to rely heavily on American technology to advance their AI ambitions.

  • A quiet advocate for AI research is Steve Schwarzman, co-founder and CEO of Blackstone.

The Federal Reserve is in no rush to reduce borrowing costs. Minutes from the central bank’s January rate-setting meeting showed that while officials saw “significant progress” in moderating inflation, they remained cautious about lowering rates too quickly. The futures market on Thursday predicted between three and four rate cuts this year, down sharply from a month ago, when traders saw between six and seven such moves.

Boeing replaces the person responsible for its 737 Max program. Ed Clark, who oversaw the factory that makes the 737 Max 9, was the most prominent executive ousted in a leadership shakeup at the aerospace giant. The changes represent the biggest move Boeing has made yet in the wake of an episode in which a door plug on an Alaska Airlines 737 Max 9 fell off mid-flight.

An Alabama court ruling leaves fertility treatments in limbo. The University of Alabama at Birmingham health system said it would suspend in vitro fertilization treatments after the state Supreme Court ruled that frozen embryos should be considered children. There are concerns that other conservative states will follow Alabama’s lead, adding to confusion about the legality of such procedures there and increasing costs.

Nestlé warns that inflation will harm growth. The maker of Nescafé coffee, chocolate bars and pet foods believes that “unprecedented inflation” will undermine customers’ purchasing power, as its 2023 profits fell short of expectations. Earlier this month, Krispy Kreme and Heineken also warned that inflation would raise input costs and cool sales.

This week’s deal that has the digital media industry talking is BuzzFeed’s sale of Complex, the cultural media publication, for $108.6 million to Ntwrk, a live shopping company backed by people like music entrepreneur Jimmy Iovine.

The transaction is a new solution for the embattled BuzzFeed. But perhaps the most interesting angle is Universal Music Group’s investment in Ntwrk as part of the deal, and how that underscores how the music industry is looking to tap into new revenue streams and expand the reach of its artists.

The agreement is to create a new center for “superfan culture.” Ntwrk said in a press release. The e-commerce company, whose founders include Iovine’s son Jamie Iovine, has worked with music artists such as Blackpink and Post Malone on business partnerships. Complex has long been known for its coverage of areas such as hip-hop, sneaker culture, and streetwear.

“I think as time has gone on, there have been a lot of publishers who aspire to get into shopping, or a lot of commerce platforms and they aspire to get into media storytelling to drive more commerce,” Aaron Levant, another co-founder of Ntwrk who is the new CEO of Complex, he told The Hollywood Reporter.

That is what Universal seeks to take advantage of, according to John Janick, president and CEO of the company’s Interscope Geffen A&M brand, who will join the board of directors of the newly combined Ntwrk and Complex. “This partnership will give our artists access to a dynamic network to deepen connections with superfans through unique collaborations and cultural moments,” he said in the statement.

Lucian Grainge, CEO of Universal Music, has also called for strengthening the relationship between artists and fans, including partnerships with other platforms. The company’s merchandise division, Bravado, has worked with artists such as Billie Eilish and Justin Bieber to collaborate with brands.

Universal has been looking to create an updated model for its industry. That included dealing with the proliferation of artificial intelligence and renewing streaming royalties, two reasons the company cited for removing its music from TikTok.


— The code name advisers gave to Capital One’s $35.3 billion acquisition of Discover Financial, DealBook hears. is a reference to Taylor Swift’s successful tourwhich raises the question of whether the executives gave each other friendship bracelets.


Among the Biden administration’s top fiscal priorities was providing more funding for the IRS to collect more taxes.

Armed with tens of billions in new funding allocated by the Inflation Reduction Act of 2022, the agency is beginning to showcase its new efforts, including going after private jet misuse and billionaires using sophisticated evasion strategies. fiscal.

The IRS is cracking down on corporate jet abuse pursuing those who claimed million-dollar deductions on planes that were sometimes used for personal trips. That will begin with dozens of new audits focused on companies, associations and the passengers themselves (who, the agency says, should report those trips as income).

What makes this possible, the IRS says, is the Inflation Reduction Act, which helped pay for new analysis tools. And there’s a lot of money at stake, according to Daniel Werfel, the agency’s commissioner: “On a given taxpayer’s tax return, the amount of the air travel deduction can run into tens of millions of dollars,” he said.

It is part of a broader campaign to step up enforcement. The International Consortium of Investigative Journalists took a look at the agency’s efforts to more closely scrutinize the extremely wealthy, including:

  • Using AI tools to help map complex partnerships to help taxpayers mask their income, something that wasn’t possible before: “We asked for reports on partnerships, but there were only three or four people in the high-wealth data unit at the IRS. “a former Treasury Department official told ICIJ.

  • More sophisticated analysis of cryptocurrencies

  • We announce the hiring of 3,700 new agents

But those efforts face headwinds, including moves by Congressional Republicans to bring back expanded IRS funding, as well as testing these cases in court. “Enforcement has been so weak for so long that there are very few people at the IRS or the Department of Justice who have the relevant experience to go to trial in criminal tax cases,” said Rod Rosenstein, deputy attorney general for the presidency of Donald Trump. the ICIJ

Offers

  • Reddit is said to have signed a $60 million a year deal with Google that would allow the tech giant to use the social media platform’s content to train its artificial intelligence models. (Reuters)

  • Chord Energy agreed to acquire Canada’s Enerplus for about $3.7 billion, the latest in a wave of deals in the North American oil and gas sector. (Bloomberg)

  • “A billionaire bought a part of Manchester United. Now he has to fix it.” (NY)

Policy

The best of the rest

  • How Instagram became an increasingly important news site even as it downplayed “political content.” (NY)

  • The FTC said Twitter employees saved Elon Musk from a hefty fine for violating data protection rules by ignoring some of his demands. (Business Insider)

  • “The Ozempic effect gives Sweetgreen a boost” (Bloomberg)

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