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In today’s edition
- Alphabet grows despite AI usage
- OpenAI launches Google’s rival SearchGPT
- LVMH’s growth stalls
- WhatsApp’s US boom
- Ether ETFs start modestly
Market Snapshot
After a tough week, the stock market rose sharply on Friday, driven by strong earnings and favorable inflation data, raising hopes for a possible interest rate cut. Despite the Friday rally, the S&P 500 and Nasdaq fell 1.5% and 3.2% respectively for the week, while the Dow gained 0.4%.
The week closed on a high note with the release of June’s Personal Consumption Expenditures (PCE) price index, which showed a small month-over-month increase. Although its annual rise was slightly above expectations, it remained below the Fed’s year-end projection. This data fueled optimism that the Fed might ease interest rates, supporting a strong market rebound on Friday and lifting investor sentiment.
Stock market closing data for the week of Jul 22nd to Jul 26th, 2024
News Summaries
Alphabet’s (Explore: GOOG) second-quarter revenues hit $84.7 billion, up 14% from last year. This growth was due to its advertising and cloud computing divisions. The advertising vertical saw an 11% increase to $64.6 billion, while Google Cloud surged by 29% to $10.3 billion. Despite this growth, ad revenue growth slowed compared to previous quarters. Alphabet has invested $13 billion in AI and cloud tech this quarter, double last year’s spending. These investments show Alphabet’s commitment to leading the tech industry. This is amid some early challenges in AI implementation. Net income jumped 28% to $23.6 billion. This shows effective management and successful investments in AI and cloud infrastructure. These strategies will not only boost Alphabet’s services but also promise significant returns.
OpenAI is entering the search business with its new tool, SearchGPT. It aims to challenge Google’s dominance in the search engine segment. Google dominates over 90% of the global search market. OpenAI backed by a $13 billion investment from Microsoft launched SearchGPT which merges generative AI with traditional search. It also links to external websites. This gives OpenAI an edge over Google, which has been slow to adopt generative AI in its search engine. Google’s search business made $175 billion last year, showing its market strength. Yet, Google has been slower in fully embracing and integrating artificial intelligence into its products and services compared to its peers. Meanwhile, OpenAI is boosting SearchGPT’s reliability and quality. It’s partnering with major publishers like News Corp and Axel Springer. With this partnership OpenAI aims to solve past AI accuracy issues and address concerns about using copyrighted content. OpenAI’s move could reshape the future of search. It may provide a more interactive, updated user experience. This reflects a tech industry shift toward more advanced, user-focused search tools.
LVMH (Explore: LVMUY) reported a 1% rise in second-quarter organic sales. They totalled €20.98 billion, below the 3% growth forecast. The company’s shares fell by 4.7%, reflecting a broader slowdown in the luxury sector. The downturn is due to less spending by Chinese consumers. This hit other luxury brands like Hermès and Kering, which saw their stocks drop. The decline in the Asian market, excluding Japan, was particularly notable with a 14% drop in sales. Despite these challenges, LVMH’s diverse operations, spanning fashion, jewellery, and wines, showed some resilience. The fashion and leather goods division grew by 1%, though it slowed. Selective retailing, including Sephora, grew by 5%. Operating profits dropped by 6% because of weaker wine and spirit sales and unfavourable currency exchanges. During this luxury market slowdown, brands are focusing on their strengths and global presence to adapt and grow.
WhatsApp, owned by Meta Platforms (Explore: META) has hit a new high of 100 million monthly active users in the US. This shows growth in a market dominated by Apple’s iMessage and standard texting. Meta’s strategy is to promote WhatsApp as a versatile messaging tool. It unites iPhone and Android users. A recent TV ad with the “Modern Family” cast highlighted this. This campaign highlights WhatsApp’s unifying chat across different systems, boosting user engagement. Additionally, the US sees a surge in daily users and messages, both up by over 10% from last year. This underscores WhatsApp’s growing popularity. This growth is crucial for Meta. It is developing WhatsApp’s business potential, especially through click-to-message ads. These ads link users from Facebook or Instagram to businesses, generating significant revenue. WhatsApp’s rising popularity in the US could boost the company’s bottom line. As analysts predict a 20% jump in sales, highlighting the app’s crucial role in driving financial growth.
From the World of Crypto
The US Securities and Exchange Commission (SEC) has approved spot Ethereum ETFs. This is a milestone for crypto investments. This follows the earlier introduction of Bitcoin ETFs. It shows a growing regulatory acceptance of cryptocurrencies. New ETFs include those from financial giants like BlackRock and Fidelity and a $9.3 billion trust from Grayscale Investments. Ether’s price rose only 1% after the launch. This showed the market’s reserved response despite high hopes.
The initial trading performance of these Ether ETFs showed varied investor interest. On the first day, BlackRock, Bitwise, and Fidelity had the highest inflows. They totalled $267 million, $204 million, and $71 million, respectively. On the other side, Grayscale saw a $484 million fund withdrawal, likely due to its high fees. The total inflow for the nine new Ether ETFs amounted to about $108 million, contributing to an overall trading volume of roughly $1.1 billion. This is modest compared to the Bitcoin ETFs. They drew bigger sums and trading volumes on their debut. This reflects Bitcoin’s stronger market presence and its simpler story as a digital gold alternative.
Expectations for the Ether ETFs over the next six months are low. Projections suggest they may attract about $3.5 billion in total assets. That’s far less than the $17 billion gained by Bitcoin ETFs since their launch. The slower start for Ether ETFs is due to Ethereum’s complex role. It is both a store of value and a platform for many blockchain apps. Traditional investors may find this hard to understand. Grayscale’s strategy to keep a high 2.5% management fee for its primary Ethereum ETF, contrasts with its newer, cheaper “mini” version. This highlights the industry’s struggle to attract investors while remaining profitable.
Overall, the SEC’s step could boost crypto adoption in traditional finance. But, Ethereum’s unique traits may mean its market diverges from Bitcoin’s.
