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In today’s edition,
- Microsoft’s gaming strategy
- HSBC joins Cips
- Tesla: Beyond cars
- China’s chip challenge
- Outflow from crypto ETFs
Market Snapshot
This week, the Nasdaq Composite was the only major US stock index to register a gain, rising 0.16% thanks to strong performances from tech companies like Tesla and Texas Instruments. In contrast, the S&P 500 and the Dow Jones Industrial Average faced declines, falling 0.96% and 2.68%, respectively, ending a six-week winning streak.
The surge in the 10-year Treasury note yield, which increased 60 basis points over the month, played a significant role in curbing investor enthusiasm, particularly impacting rate-sensitive sectors such as industrials and materials. These sectors ranked among the week’s worst performers, while consumer discretionary and information technology sectors fared better due to robust earnings. Market volatility increased as initial gains were eroded, reflecting investor caution amid rising yields and the looming elections.
Stock market closing data for the week of Oct 21st to Oct 25th, 2024
News Summaries
Tesla’s financial success now relies on more than car sales. This sets it apart from companies like Volkswagen and General Motors, which are struggling with high costs and low demand. In the third quarter, Tesla sold $20 billion worth of vehicles and reduced production costs. However, a lot of profit came from selling carbon credits and its expanding battery and solar panel business. These areas boost Tesla’s revenue and stock value. Currently, Tesla is valued at $750 billion. This reflects investor confidence not just in its cars, but also in Elon Musk’s broader vision. This vision includes projects like self-driving robotaxis and the humanoid robot, Optimus. So, Tesla’s market value is more about faith in Musk’s innovative plans than just car sales profits.
Microsoft’s $75 billion acquisition of Activision Blizzard is a big move to change gaming. It plans to offer “Call of Duty: Black Ops 6” on Game Pass. Users can pay $19.99 monthly or $69.99 for a one-time purchase. This setup aims to make games accessible without needing a console. As of early 2022, Game Pass had 34 million subscribers, a small fraction of the 3.1 billion global gamers. This shows the tough job ahead in shifting people from buying games to subscribing. Analysts and gamers are skeptical. They worry about streaming quality and whether the subscription model works, especially with many top games being free. Still, if Microsoft can overcome these challenges, it could make gaming more accessible, aiming to create a Netflix-style service for games.
HSBC Hong Kong has joined China’s Cross-Border Interbank Payment System (Cips). This move enhances the global use of the renminbi. It was announced in Beijing and allows faster, cheaper transactions in China’s currency, challenging the US dollar’s dominance. The decision reflects HSBC’s strategy to adapt to customer needs in a changing economy. Although the renminbi’s international presence is growing, it still doesn’t match China’s economic size. This shift comes as the world moves away from the Swift system. Some Russian banks were excluded from Swift due to geopolitical tensions, emphasizing this change. While Swift remains vital, Cips is growing. It now includes countries in China’s Belt and Road initiative, indicating a shift in global financial communication.
China is making noticeable strides in the memory chip market, yet the immediate risk to leading companies like Samsung, SK Hynix, and Micron remains limited. Despite a jump in China’s DRAM capacity from 4% to 11% in just one year, and projections to reach 16% next year, the real-world impact is still moderate. This is because ChangXin Memory Technologies (CXMT), a key player in China, hasn’t yet matched the production quality of its competitors—its chips store less data per unit and have a higher rate of production failures. Right now, China’s growth mostly impacts older-generation chips, causing their prices to drop. This poses a bigger problem for smaller companies that focus on these older products than for the big three, who dominate the high-end market. Even though China is pushing hard and investing big, it still lags about six to eight years behind in technology, partly due to export controls from the West. Yet, with China accounting for a significant chunk of global DRAM demand, there’s a real chance Chinese companies could start fulfilling more of this domestic need. If this happens, it could lead to overcapacity issues for the Korean and U.S. giants, forcing them to cut back production. For now, though, the top players are relatively safe but will need to keep a close watch as China continues to advance.
From the World of Crypto
This week, cryptocurrency markets fell. This coincided with a shift in US spot Bitcoin ETF investment patterns.
Bitcoin’s price fell by 2.5% to $65,800, while Ethereum saw a sharper decline of 5%, dropping below the $2,500 mark. Other cryptocurrencies like Solana held steady, but Polkadot decreased by 3%.
This movement followed a report from Farside Investors. It noted, for the first time in two weeks, ETFs faced a $79 million net outflow in a single day. The ARK 21 Shares Bitcoin ETF saw the biggest withdrawal at $134 million. In contrast, BlackRock’s iShares Bitcoin ETF attracted $43 million. However, this was a sharp drop from the previous day’s $329 million.
Despite fund outflows, Bitcoin investments are still strong. According to CryptoQuant, over 92% of holders are in profit. Most Bitcoin was bought at around $55,000, fueling this profit. This could lead some traders to sell, causing potential price drops.
In other news, Tesla, once thought to have sold its Bitcoin, still holds it. Arkham Intelligence clarified that Tesla’s recent transactions were just internal moves. The company still has 11,509 BTC. This suggests Tesla is reorganizing its assets, not selling, and remains heavily invested in Bitcoin.
