Mad Hedge Technology Letter
May 12, 2023
Fiat Lux
Featured Trade:
(GOOGLE ENTERS THE A.I. GAME)
(GOOGL), (UBER), (MSFT)
Tag Archive for: (MSFT)
Google rolling out a catalog of artificial intelligence products delivered a nice boost to its share price.
I was expecting this at some point and after getting caught off guard by the strategic moves that Microsoft (MSFT) made, I am not surprised they rolled this out so quickly.
Alphabet, the parent company of Google, was up over 4% yesterday.
This is just the beginning of the A.I. revolution and CEO Sundar Pichai has figured out how to keep GOOGL’s share price going up.
All you need to do is keep saying “A.I.” and investors will back up the truck to load as much stock as possible.
This tactic has worked awfully well because if you strip out the stock gains related to A.I. in 2023, the Nasdaq would most likely be down this year.
Tech being as it is, only a handful of companies are able to take advantage of this structural change in the sector.
Personally, I am not so sold on OpenAI’s ChatGPT.
Of course, I can change my mind, but it hasn’t impressed me yet.
I asked a few test questions myself and one of the answers to my question about making a fortune quickly was disappointing.
ChatGPT told me I should become an Uber driver, rent out a single room in my house, and complete online surveys. It then rounded out the answer by telling me to sell my old stuff on eBay.
These are answers that I doubt many would consider ways to make fortunes.
I can see how replacing clerical white-collar jobs could be applicable with this technology, and that means a lot of jobs.
However, the jobs that require using data to make forecasts are not replaceable by A.I. simply because back-tested data can’t just be regurgitated for the future.
Some of the recent hype is nothing more than marketing chutzpah which Silicon Valley is good at.
But I do still think Google is going in the right direction and investors will coalesce around this A.I. love fest without even doing due diligence if the tech works well or not.
Google is attempting to reclaim its crown as the leader in artificial intelligence with PaLM 2, a “next-generation language model” that the company says outperforms other leading systems on some tasks.
Revealing the cutting-edge AI at its annual I/O conference, alongside a foldable Pixel phone and a new tablet, Google said it would be built in to 25 new products and features, as the company moved ahead of competitors after years of producing AI research but few products.
The most obvious way to interact with PaLM 2 will be in Google’s own chatbot, Bard, which is opening up to the general public for the first time and rolling out globally.
Utilizing PaLM 2’s multilingual capabilities, Bard is also available in Japanese and Korean, as well as English, and the company intends to support 40 languages in time.
The key question is Google able to follow through to carry the stock through a recession?
The A.I. pivot won’t get Google through alone because there is no meaningful revenue coming from A.I. yet.
I would most likely believe that Google shares will consolidate if a recession comes to pass at the end of 2023.
The job market at 3.4% has continued to be resilient and big tech has become more efficient by firing all the fake jobs with high salaries.
Even on a strongly red day, Google has still held the day mostly in the green showing readers how effective spinning the A.I. story can be. That should continue until the next big disruptor.
Buy GOOGL on the dip.
Mad Hedge Technology Letter
April 26, 2023
Fiat Lux
Featured Trade:
(THE FORTRESS)
(GOOGL), (MSFT), (NVDA), (META), (TSLA), (AAPL), (AMZN)
This is a seven-stock tech market and there is no point to getting exotic and buying something aside from these 7.
That is what the price action is telling us.
Four of the seven are no other than tech overlords Alphabet (GOOGL), Amazon, (AMZN), Microsoft (MSFT), and Meta Platforms (META). These four Big Tech stocks alone account for 41% of the S&P 500's 2023 gain.
The other three are Apple (AAPL), which reports next week, Nvidia (NVDA), and Tesla (TSLA) stock.
These seven account for 86% of the S&P 500's 2023 gain.
These seven Big Tech stocks have essentially made the market this year and everybody else is dragging behind kicking and screaming.
Part of the great performance has to do with the market's oversold nature in 2022.
Rarely does a market operate at the extremes for so long.
These seven have done more than bounce back.
The January Effect is a seasonal increase in stock prices throughout the month of January. The increase in demand for stocks in January is often preceded by a decrease in prices during the month of December, in part due to tax-loss harvesting.
Second, many of these tech companies have been aggressively cutting costs.
I would even say again that Facebook cutting 25% of staff since 2022 is not enough.
Get rid of 80% like Twitter did.
Even more important, the world's most advanced AI models are coming together with the world's most universal user interface - natural language - to create a new era of computing.
Microsoft helped kick off Big Tech's AI obsession with its multi-year, multi-billion dollar investment in ChatGPT developer OpenAI.
MSFT has since implemented versions of OpenAI's technology in its Edge browser, Bing search engine, Microsoft 365 productivity software, and cybersecurity offerings.
Microsoft leading the AI means that rival Alphabet's Google (GOOGL) is playing catch up. Amazon (AMZN), meanwhile, is working to bring generative AI to its services, while Facebook parent Meta (META) is piecing together teams to kick-start its own efforts.
And while Microsoft’s stock has seemingly benefited from both the AI hype and overall market rebound after a rough 2022, the company's main growth driver continues to be its cloud computing efforts in its Azure unit.
But that growth has drastically cratered over the last year. In Q3 2022, Microsoft reported Azure growth of 46% year-over-year. But that's since fallen each quarter, landing at 27% in Q3 2023.
Part of the reason for this decline was large customers pulling back on spending as higher interest rates challenged global growth. Microsoft is also contending with scarce PC sales, as demand from consumers and business customers falls from pandemic-era highs.
It’s easy to say that tech has fared quite well this year.
However, peel back the layers and the lack of participation in this tech rally is highly worrisome.
In a winner take all economy, we have never been reliant on a small group of stocks to save us from collapse.
Interest rates as high as they mean that without a strong balance sheet, it is tough sledding out there for the growth companies.
In the short term, I fully expect tech companies with poor fundamentals to struggle and show minimal price appreciation as recession risks pile up.
These 7 should be a fortress for investors looking to protect their wealth.
My ad Hedge Technology Letter
April 21, 2023
Fiat Lux
Featured Trade:
(THE CATCH-UP PLAN)
(GOOGL), (MSFT), (CHATGPT)
The tech industry is quickly morphing into a "generative artificial intelligence success story or bust" outcome for many involved.
This came pretty much out of nowhere.
December 2022 was the big announcement that ChatGPT went live and everybody in tech has basically been freaking out since then.
Big ideas like the internet and software also had the same type of effect on tech stocks back in the heyday.
What would have Microsoft (MSFT) been without the computer or Windows?
Even more urgent, once-perceived growth tech companies like Tesla are starting to cut prices of products because the consumer is tapped out these days.
That means tech corporations can’t sell the current product by adding incremental iterations and passing it off as something “groundbreaking.”
Consumers need something more.
Consumers will spend on the next big thing and generative artificial intelligence still has a long way to go, but stocks participating in generative AI are starting to get those premium multiples that were only reserved for tech royalty.
Everyone is hoping to get in on the action, and Alphabet is also racing to build a new search engine and add artificial intelligence features to its existing products in the face of rapid growth in the field by rivals such as Microsoft Bing.
Google is testing new features called "Magi," with more than 160 people working full-time on the project.
Google's new products will try to predict users' needs, with features such as helping users write software code and display ads in search results, and Google is also exploring mapping technology that allows users to use Google Earth with the help of AI and search music through conversations with chatbots.
Samsung Electronics is reportedly considering replacing Google with Bing, the main search engine on its phones, because of Bing's artificial intelligence capabilities. The Samsung contract is expected to generate $3 billion in annual revenue for Google, a revenue stream that is now in jeopardy. In addition, Google has a $20 billion contract with Apple for a similar default search engine, which is up for renewal this year.
Google’s search engine could be swept into the dustbin of history if they don’t get a move on it pronto.
The ecosystems like Apple and Samsung can easily opt for a better engine if Google falls behind and that is exactly what we are seeing from Samsung.
I would probably say that Google got a little too cocky and stopped developing itself.
They thought that nobody could topple them.
The panoramic views from the ivory tower can look nice from the terrace for a while until somebody builds a bigger ivory tower that obstructs the view.
It’s been quite fascinating to see Google’s sense of urgency lately because it was always assumed they were part of a stable duopoly with Facebook.
Google’s panic indicates that Microsoft’s Bing is a real threat to their revenue stream, and at the very minimum, bits and pieces of the new technology will be incorporated into a new version of a search engine that will behave as a supercharged version of Google, the likes we have never seen before.
If Google can catch up, then its stock price will go a lot higher from here.
"Life is not fair; get used to it," said the Founder of Microsoft Bill Gates.
Global Market Comments
April 21, 2023
Fiat Lux
Featured Trade:
(THURSDAY, MAY 18, 2023 TAMPA, FLORIDA STRATEGY LUNCHEON)
(SOME BASIC TRICKS FOR TRADING OPTIONS)
CLICK HERE to download today's position sheet.
Global Market Comments
April 20, 2023
Fiat Lux
Featured Trade:
(HAS AI REPLACED THE BLOCKCHAIN CRAZE?)
(TSLA), (META), (GOOGL), (MSFT), (NVDA), (BBAI), (BZFD), (AI), (RTX), (BKR), (LPSN)
CLICK HERE to download today's position sheet.
Artificial Intelligence (AI) has become a crowd-pleaser and is taking oxygen away from crypto and blockchain.
What has initiated this trend?
Sam Altman and Open AI’s ChatGPT.
Altman wanted to create a non-profit that would use AI technology for the greater good of humanity. His mission was backed by Tesla’s Elon Musk and LinkedIn co-founder Reid Hoffman, thereby ensuring the success of its genesis.
Upon its launch, in just one week, one million users quickly signed up.
ChatGPT can create persuasive marketing messages, ad copy, and complex computer programs.
Altman’s venture may be even considered a challenge to the most established tech giants, such as Google (GOOGL). At a $29 billion valuation, Chat GPT is grabbing attention. Venture capital firms are already in negotiations to acquire a stake in OpenAI.
Despite the NASDAQ’s decline, OpenAI has achieved unprecedented success and a remarkable valuation.
Is ChatGPT only for the sophisticated investor?
No, you can invest in this space via a publicly traded fund that has indirect exposure to ChatGPT. Deep pockets are not necessary.
Microsoft (MSFT) has recently made a $13 billion investment in Open AI, which will cement the tech giant’s partnership. This new alliance will provide critical funding to OpenAI and enable could computing power to run increasingly complex models. Microsoft plans to use OpenAI’s technology in a variety of products, including Bing’s search engine and Microsoft Design.
Nvidia Corporation (NVDA) plays a pivotal role in the tech industry. It is best known for its production of top-end graphics chips, which serve as an important source for AI software models, but its role in the technology space may evolve rapidly as it expands into the developing AI industry.
Although we are in the early stages of the AI movement, many businesses have already grabbed AI and strapped it to their core business. It has become a growing trend and is making those businesses a ton of money. AI is growing far faster than anyone realized and the impact on corporate earnings will be enormous.
BigBear.ai Holdings Inc. (BBAI) has seen its share price increase fivefold because of its use of AI to assist clients in data analysis.
A media company called BuzzFeed Inc. (BZFD), saw its stock price increase more than 300% in just two days after announcing its plan to integrate AI-based content into its “core business.”
C3.ai Inc. (AI) is one of the top-performing software makers, with a 77% rally last month, driven by customers like Raytheon Technologies Corp (RTX) and Baker Hughes Co (BKR).
Another company, LivePerson Inc (LPSN), is attracting much notice with its plans to integrate generative capabilities from OpenAI, causing its shares to surge by as much as 19%.
Baidu (BIDU) also has plans to launch its own version of Chat GPT, but its stock price isn’t impressed yet.
ChatGPT offers impressive advances in the field of AI, which can be helpful in performing various personal and professional tasks. Growth and innovation in this area is certain.
AI technology is powerful, useful, and beneficial for our modern society if used responsibly.
Investment in this area should be done thoughtfully and after much careful research. Microsoft (MSFT) and Nvidia (NVDA) would be excellent choices to start your investment in this space.
