Week ending 26/07/24 – what is happening in Big Tech?
Gareth and Jeremy are joined this week by Ian Robertson to bring a "tech perspective" given the tumble in US mega-cap tech stocks.
Markets reacted in a cautious way to Biden's decision to step aside in favour of Kamala Harris, and there are some signs that global economies remain fragile. We also had warnings and downgrades from a number of bellwether stocks - notably Unilever and Nestle, as well as UPS and a slew of automotive players.
But a big theme this week has been a retracement from Tesla and Alphabet whose AI investments seem to be concerning their investors, with consequent extrapolation to Nvidia and its "entourage".
Ian reprises his recent blog on AI - with his view that "this time it's different"...we're not in a Cisco-style collapse from the early-2000s. Telco spend in the late 1990s was arguably unsustainable and all chasing the same customer wallets...this time around, the cash is plentiful, the expected use cases are many and varied, and hopefully investors' expectations are being managed. Big Tech is spending vast sums on AI - and mainly Nvidia hardware to run it. Some of them will get it wrong, but probably not all...and there could be a crop of newly-emerging players we've never heard of yet, but who come through with killer AI applications to dominate new industries. Next week's reporting from Microsoft, Meta, Amazon and Apple should tell us a bit more about how the big players are finding things... To hear more from our tech team on this and other tech news, read the latest Talking Tech Insights or listen to their podcasts.
The Trump "rotation trade" started off as a risk-on psychology pushing traders to "bank" their gains in the mega-cap tech names and hunt (or forage) for better returns in smaller stocks and (even) international markets such as the UK. Sadly, this is now morphing into more of a risk-off attitude, with nervousness around a number of asset classes. Within this, the UK economy appears more resilient than a struggling Europe and what seems to be a slowing USA.
Progressive client commentary centred on Beeks Financial Cloud and STV Group, both of which delivered positive news and signs of strong growth in both cases.
Next week sees a flurry of data - notably the UK interest rate decision (potentially a 25bp cut, but nothing guaranteed), European GDP growth and US jobs data as well as a hopefully-unexciting US Fed rate decision. Jeremy has for some time been highlighting the challenges facing Japan - any shock moves next week (they have an interest rate decision due) could have ramifications greater than you might think...
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