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Soaring Meta Shatters Q4 Expectations: Embarks on AI Expedition

+ US housing market | Vision Pro sales | Meta's AI chips

ANALYSIS

Stanley Druckenmiller's High-Stakes Bets on Nvidia, Coupang, Microsoft Highlight AI Market Potential

Billionaire Stanley Druckenmiller has placed 39% of his $2.8 billion portfolio in three tech shares: Nvidia, Coupang and Microsoft. Nvidia's dominance in AI computing chips market and its integrated AI stack strategy positions it well for the future. South Korea's e-commerce leader Coupang may replicate its market success in Taiwan, while Microsoft remains a solid bet due to its robust SaaS market share and growing presence in the cloud infrastructure space.

Bessemer Introduces New Valuation Metric 'The Rule of X' for Tech Investors

Bessemer Venture Partners challenges the popular Rule of 40 metrics, suggesting that growing companies should prioritize growth over free cash flow (FCF) margins. The venture firm offers a new metric, Rule of X, stressing that growth should ideally be valued at least 2-3 times more than FCF margin for businesses with positive FCF. The modified rule reportedly aligns better with public market valuation correlations.

EARNINGS

Alphabet Stock Sinks Despite Cloud Success: Ad Revenue Disappoints (8-minute read)

Alphabet's stock slipped over 5% following Q4 earnings that fell short of anticipated ad revenue, despite other areas exceeding expectations. Revenue hit $72 billion, a year-over-year increase, but ad sales disappointed investors. Google Cloud, however, saw a revenue increase of 26%, surpassing projections. The company's efforts to improve efficiency were highlighted alongside their focus on AI expansion. Despite recent layoffs, Google is looking to target AI growth areas, treading behind Microsoft's stride in AI product development.

Soaring Meta Shatters Q4 Expectations: Embarks on AI Expedition (7-minute read)

Meta beat Q4 expectations with an adjusted EPS of $5.33 on a $40.11 billion revenue, surpassing the projected $4.94 EPS and $39.01 billion revenue. The company anticipates Q1 revenue between $34.6 billion and $37 billion, exceeding the predicted $33.6 billion. While Meta’s Reality Labs reported another $4.65 billion loss, it generated an unexpected $1.07 billion in revenue. The company also declared its long-term strategy to develop open-source generative AI, aiming to mimic human cognition and learning capabilities. Meta also, for the first time ever, proposed a 0.50 cent dividend.

📝 Analysis: We find the signaling of the new dividend policy to be an interesting move. Meta has previously done stock buybacks but has no dividends.

Most often, tech/growth companies do not pay dividends, given that they see enough re-investment opportunities to act on. Buybacks can be more opportunistic, as they should be used when management finds their share fairly to low-valued.

We believe that the dividend from Meta is a reaction to the current big tech M&A hostility. This means that Meta knows that despite that M&A might be a more valuable creative way to use their cash, they will not be able to do so.

Will Alphabet follow suit? Microsoft and Apple already do dividends. Well, Alphabet most often follows its own way, but the likelihood might have increased.

Microsoft Soars Past Expectations, AI Influences Azure Growth (7-minute read)

Microsoft's Q2 earnings surpassed expectations with $2.93 adjusted EPS on $62 billion revenue, only to see a slight drop in stock. Cloud revenue led the way with $33.7 billion, bolstered by AI services. The tech giant has leveraged AI across multiple sectors, outpacing rival Apple by market cap. Amid an ongoing investment race in AI technology, Microsoft's copilot productivity platforms have begun to generate returns. Despite recent controversy over inappropriate uses of AI, the technology is projected to continue its dominating course.

Amazon Beats Earnings Expectations; AI-powered Rufus Ushers New E-commerce Era (8-minute read)

Amazon's Q4 earnings surpassed expectations at nearly $170 billion versus a $166.2 billion forecast, marking an increase from the previous year's almost $150 billion. The company has introduced an AI-powered shopping tool, Rufus, and projects substantial revenue growth from AI advancements for its cloud business. Despite recent staff cuts in Prime Video, MGM Studios, and Twitch, Amazon continues to invest in AI development, including a possible $4 billion investment in AI startup Anthropic.

Apple Defies Estimations, But China Sales Disappoint: The Full Story (5-minute read)

Apple reported first-quarter sales and profit that surpassed Wall Street expectations, buoyed by iPhone sales growth. However, China sales fell short of analyst predictions. Total devices reached 2.2 billion, up from 2 billion a year ago, largely due to strong iPhone results outside China. Despite the encouraging figures, Apple has been overtaken by Microsoft as the world's most valuable company and has seen its stock drop by over 3% in 2024."

NORDICS

Evolution's Record EBITDA Margin Shows Resilience Amid Global Challenges: CEO-comments (9-minute read)

Evolution's operating revenue rose 28.2% to 441.1 MEUR in Q2 2023, reaching the highest-ever quarterly EBITDA margin of 70.7%. The live casino business, constituting 84% of operations, increased by 33.5%. Despite a 4% decrease in RNG business revenue, the segment remains promising and profitable. The company further launched a game, "Funky Time," and harbors various innovative launches for 2023, aiming for over 100 games, including live games. Evolution's plan for studio expansion in North America and Latin America, coupled with consistent cash flows, signals continued growth against macroeconomic adversities.

ECONOMICS & MACRO

Evergrande Liquidation Threatens Global Economy Amid Chinese Property Crisis

China's Evergrande Group, one of the largest property developers, has been ordered to liquidate by a Hong Kong court after failing to reach a restructuring deal for its $300 billion debt. The process could negatively impact China's economy, already grappling with the fallout from the pandemic and downturns in the property sector. The liquidation may also trigger more lawsuits and could affect global economies, including Australia, due to a slowdown in the Chinese property market.

US Housing Market Set for Spring Rebound Amid Easing Mortgage Rates

The US housing market is poised for a spring rebound owing to favorable economic conditions, with a drop in the average rate for a 30-year loan propelling more supply and demand. However, the potential boom hinges on the trend of mortgage rates. Despite a dip in mortgage application activity, there's a growth in homebuyers' interest. Experts predict the Federal Reserve might cut rates by 225 basis points by early 2025, and this along with sustained low inflation could stimulate the sector.

TECH

Tech Giants Retrench as Efficiency Drive Sparks Widespread Layoffs - Alphabet, Amazon, UPS, among others, are implementing significant layoffs as they target greater efficiency. This follows warnings of a slowdown in the labor market.

Apple's Vision Pro Headsets Surpasses 200,000 Sales Mark - Apple's Vision Pro headsets hit 200,000 sales in 10 days, despite analysts predicting a possible demand decline due to its niche market and high price.

Silicon Valley investors amass $300bn amid startup funding caution - US venture capitalists are hoarding $311bn in unspent cash, shunning risky Silicon Valley startups, and seeking ways to return capital to investors.

AI

AI-Powered Search Engine Perplexity Challenging Google's Dominance

Perplexity, an AI-powered search engine, is set to challenge Google's control of the market. The engine, developed by an AI research team from OpenAI and Meta, combs the internet and writes summaries instead of displaying links. The startup has been attracting major attention, with investors like Jeff Bezos fuelling a recent $74 million funding round. Perplexity Pro, the paid version, offers access to more powerful AI models and features like file uploads. Though perfection is yet to be achieved, Perplexity represents a potential shift in the search engine market, forcing Google to adapt or lose ground.

Meta's Artemis AI Chip Aims to Curb Nvidia GPU Dependence

Meta intends to lessen its dependence on Nvidia chips by deploying its AI chip, "Artemis", specifically designed for running AI models. The chip will be launched this year, working alongside GPUs supplied by Nvidia and other providers. This step aims to control the cost of AI workloads, with a spokesperson confirming favorable results in tests for Meta-specific workloads.

Ranking Reveals Most Popular AI Tools for Investors

Visual Capitalist has published a ranking of the most popular AI tools. The link provided provides access to the complete list and insightful details.

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