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Vested Shorts: Meta prioritizes AI expansion, Tesla’s pivot, Alphabet market cap tops $2T, and Stripe reintroduces crypto

by Parth Parikh
April 27, 2024
4 min read
Vested Shorts: Meta prioritizes AI expansion, Tesla’s pivot, Alphabet market cap tops $2T, and Stripe reintroduces crypto

In today’s edition

  • Meta: AI investment surge
  • Tesla: Cost-centric shift
  • Micron: Chips act impact
  • Alphabet: Strong Q1 numbers
  • Crypto: Mainstream payments

Market Snapshot

US stock markets concluded the week on a high note, with major indices snapping their recent losing streaks, fueled by robust quarterly earnings. The Nasdaq Composite led the rally, surging 4.2% to close at 15,927.90, marking a decisive end to four weeks of losses. This surge was largely propelled by a jump in Alphabet’s shares following their strong quarterly report, which in turn lifted the broader technology sector.

The S&P 500 also rebounded from recent declines, finishing the week up 2.7% at 5,099.96. This recovery broke a three-week trend of losses, reflecting a broader market optimism. Meanwhile, the Dow Jones Industrial Average posted more modest gains, rising 0.7% for the week to close at 38,239.66.

Investor sentiment was also influenced by economic data. The Commerce Department’s March Personal Consumption Expenditure (PCE) price index, a key measure of inflation, rose by 0.3% for both overall and core rates, aligning with analyst predictions. Although these figures met expectations, the year-over-year data slightly exceeded forecasts, suggesting a persistent inflationary pressure. Nonetheless, the alignment of the monthly figures with expectations provided some relief to investors, who had been increasingly concerned about rising inflation. 

Stock market closing data for the week from April 22nd to 26th, 2024

News Summaries

Meta Platforms (Explore: META) is recalibrating its financial strategy, emphasizing substantial investments in artificial intelligence to remain competitive in a rapidly advancing technological sector. The company’s first-quarter 2024 earnings revealed a revenue increase to $36.5 billion, just above forecasts, affirming its financial health. However, Meta also announced a significant rise in its projected capital expenditures for the year, up to $40 billion from $28.1 billion last year, to support an ambitious AI roadmap. This increase in spending is part of a broader strategy to build out large-scale AI services and infrastructure, which Zuckerberg contends will be crucial for developing future monetizable products. While this approach aims to position Meta at the forefront of AI innovation, aligning with industry leaders like Google and Microsoft, it has also led to investor apprehension, as evidenced by a notable decline in share price.

Facing a challenging market characterized by a 35% year-to-date stock decline, Tesla  (Explore: TSLA) CEO Elon Musk addressed investors with a pragmatic shift in strategy amid escalating competition from Chinese electric vehicle manufacturers. During his presentation, Musk outlined plans to expedite the launch of new, more economical models to counter the burgeoning threat from China, particularly BYD’s Seagull EV, priced under $10,000. This strategic pivot involves leveraging existing production lines to reduce costs and speed up production, a move away from the initially ambitious $25,000 Model 2 concept. Despite disappointing first-quarter results and a concerning cash outflow—the first since the pandemic began—Tesla is adjusting its approach to focus on affordability and scalability. This adjustment aims to stabilize Tesla’s position by introducing cost-effective models quicker, ensuring the company remains competitive against lower-priced international offerings while continuing to innovate in self-driving technology.

US chipmaker Micron Technology (Explore: MU) is set to significantly enhance its manufacturing capabilities with over $13 billion in government funding and loans facilitated by the 2022 Chips Act. This financial support aims to establish memory chip production facilities in New York and Idaho, a strategic move by the Biden administration to diversify critical semiconductor supply chains currently dominated by Asian markets. Micron’s plan includes a $125 billion investment over the next twenty years in these states, reflecting a long-term commitment to bolstering domestic chip production. This initiative aligns with the administration’s goal of producing 20% of the world’s leading-edge chips in the US by 2030, positioning Micron at the forefront of the US’s effort to reclaim technological sovereignty, particularly as geopolitical tensions influence trade and security strategies.

Alphabet, the parent company of Google (Explore: GOOG), experienced a significant 10% increase in market value, surpassing $2 trillion after announcing robust first-quarter results and its inaugural dividend. Revenue surged by 15% to $80.5 billion, surpassing expectations and showcasing a 57% increase in net income to $23.7 billion, which also exceeded analyst predictions. This financial uplift was attributed to growth across key business segments, including Search, YouTube, and Cloud. The declaration of a 20 cents per share dividend, totalling nearly $2.5 billion, marks a strategic shift in capital distribution, aligning Google with peers like Meta in rewarding investors through regular dividends. This move, alongside Alphabet’s increased capital expenditure forecast to $48 billion for the year—up nearly 50% from the previous year—underscores its deepening commitment to expanding its AI capabilities and infrastructure despite the high costs associated with pioneering technological advancements.

From the World of Crypto

Stripe, the payments powerhouse, is set to reintegrate cryptocurrency into its payment options, starting with transactions in USDC stable coins. It has been on hiatus since 2018 when the market downturn led it to pull back from crypto. 

This reintroduction includes support for instant settlement on-chain and automatic conversion to fiat currencies, utilizing blockchains like Solana, Ethereum, and Polygon. The integration of stablecoin payments into Stripe’s checkout suite is scheduled for the upcoming weeks, reflecting a renewed commitment to exploring digital currencies amid a broader acceptance and improved user experience in crypto payments. 

Stripe co-founder John Collison’s live transaction on Solana using the Phantom wallet demonstrated its decision to pivot back to crypto. This move is noteworthy given the company’s $65 billion valuation and processing of over $1 trillion in transactions last year. It signals a significant endorsement of cryptocurrency’s viability in mainstream finance, suggesting potential expansions to other digital currencies in the future.

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