Amazon is introducing AI chips aimed at competing with Nvidia. (Photo by Cesc Maymo/Getty Images)
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Important points
Markets remain calm despite South Korea’s Marshall Act and its repeal AI stocks soar as Salesforce and Marvell lead profits Amazon takes on NVIDIA with new AI chips and partnership
Tuesday was one of the slowest trading days of the year, with stocks little changed. All major indexes were largely unchanged on a day that started with shocking news from South Korea. But today there will be some revenue reporting, an ADP report on private payrolls and a speech from Fed Chairman Jerome Powell.
Tuesday morning began with news that South Korean President Yoon Seok-yeol accused the opposition Democratic Party of being aligned with North Korea and declared marshal law. However, within just a few hours, Congress voted to repeal the order. There was a lot of disruption, and ultimately the impact on the market slowed. This order and its subsequent repeal took place overnight in South Korea, with many citizens asleep throughout the ordeal. In the United States, bond prices initially rose on the news, but then fell back as conditions began to stabilize. Tuesday’s outcome is expected to result in the president resigning or being impeached. Also, international news reports that French Prime Minister Barnier’s cabinet is facing a vote of no confidence today. If the government were to collapse, it would have an impact on the euro, potentially causing it to fall even further than it currently is. What’s interesting about this is that the incoming Trump administration supports a weaker dollar to boost exports. The question here is whether if the euro continues to depreciate, we will start some kind of currency war.
Here we are back at home, and the season for financial statements is almost over. As it stands, fourth-quarter earnings appear to be up 5.8% year-over-year. This is the fifth consecutive quarter of growth. Perhaps most importantly, only 61 out of 500 stocks issued negative forward guidance, according to FactSet. This is the lowest number of companies since the fourth quarter of 2021. One of the last S&P 500 companies to report earnings this morning was Salesforce. A big takeaway from the report was guidance that there was more enthusiasm for Agentforce, the company’s artificial intelligence (AI) chatbot. The stock is up 14% premarket. We also heard from Marvell, which has outperformed its revenue due to strong demand for AI. I think both of these earnings show that the AI industry is still going strong and will probably carry over into next year’s first quarter earnings, if not more. Finally, Dollar Tree stock is up about 5% premarket on better-than-expected earnings.
Speaking of AI, Amazon on Tuesday unveiled a massive AI supercomputer using its Trainium chip. The company also announced new servers powered by the chip. But what really stood out to me was the fact that Apple is a customer of the Trainium chip. The AI effort is part of the AWS division, and what this announcement really represents is Amazon entering the AI chip space as a competitor and replacement for Nvidia. I think this is a very interesting development since Amazon has already made big inroads by receiving ad dollars from Google and now they are trying to take on Nvidia. This is a company I would like to keep an eye on in the future.
So far today, Nasdaq futures are up more than 0.5% on strong earnings from Salesforce and Marvell. This also has the effect of further reducing volatility, with the VIX index hovering just above 13, near some of its lowest levels this year. ADP’s report was a little weaker than expected, so it will be interesting to see if this bodes well for Friday’s payroll numbers. As always, I stick to your investment plan and long-term goals.
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