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In today’s edition
- Netflix: Subscriber strategy shift
- BlackRock: Record asset growth
- Microsoft: Strategic UAE alliance
- Meta: Llama 3
- Bitcoin miners’ strategic hoard
Market Snapshot
The S&P 500 and Nasdaq Composite faced significant declines, marking a challenging week for the major US stock market indices amid escalating geopolitical tensions and diminishing hopes for a reduction in interest rates. The S&P 500 index closed the week at 4,967.23, recording a 3.5% drop, while the Nasdaq Composite ended at 15,282.01, tumbling 5.5%.
The declines reflect investor concerns that were compounded by global uncertainties and a recalibration of expectations regarding the Federal Reserve’s interest rate policy. The S&P 500, which has shed 5.5% of its value since reaching a record close on March 28, is now over halfway to the traditional correction threshold of a 10% decline. Meanwhile, the Nasdaq has fallen even more sharply, decreasing by 7.1% since its last record close on April 11.
Stock market closing data for the week from April 15th to 19th, 2024
News Summaries
Netflix (Explore: NFLX) surpassed earnings expectations, driven by a 54% increase in operating income and the addition of 9.3 million subscribers, as its anti-password sharing measures proved effective. Despite this growth, Netflix shares dipped following the announcement that it would cease regular subscriber count disclosures, shifting focus to engagement metrics and revenue diversity, including advertising. This move reflects an evolving strategy where subscriber numbers, traditionally a key investor metric, are deemed less precise for assessing company performance under new subscription models. This pivot occurs alongside content enhancements and a foray into sports streaming, illustrating Netflix’s broader efforts to maintain profitability and market relevance amidst evolving viewer habits and competitive pressures.
BlackRock (Explore: BLK), the world’s largest money manager, has reported a 36% increase in net income to $1.57 billion for the first quarter, with revenues rising by 11% to $4.7 billion, surpassing analyst expectations. This growth is largely attributed to the successful launch of a spot bitcoin exchange-traded fund (Explore: IBIT), which amassed $18.7 billion in assets, and a general boost from equity markets that propelled its total assets under management to a record $10.5 trillion. Despite these gains, net inflows were somewhat tepid at $57 billion, reflective of investor hesitancy amidst high-interest rates. BlackRock’s strategic investments in technology and infrastructure, particularly in areas related to decarbonization and digitization, are also noteworthy, promising further growth opportunities. Additionally, the firm is benefiting from stable revenue streams through its Aladdin technology platform, even as it plans for an efficient future workforce supported by artificial intelligence.
Microsoft’s (Explore: MSFT) recent $1.5 billion partnership with UAE-based G42, backed by the country’s sovereign wealth fund Mubadala, marks a significant pivot in AI geopolitics, aligning more closely with US interests and distancing from Chinese influence. This deal, facilitated by US Commerce Secretary, grants Microsoft a board seat at G42 and will see G42 adopt Microsoft’s Azure platform, enhancing their operational collaboration. In a strategic move, G42 will remove Huawei equipment from its systems and has already divested from Chinese firms like ByteDance. This partnership not only secures a stronger foothold for Microsoft in the Gulf but also reflects broader U.S. strategies to dominate global AI development and governance, particularly as both countries—the US and China—vie for technological supremacy.
Meta (Explore: META) has launched Llama 3, a new AI model that enhances user interaction by addressing previous versions’ reluctance to respond to simple queries and eliminating perceived biases. Llama 3 boasts improved reasoning capabilities and will be available in two sizes with 8 billion and 70 billion parameters, significantly smaller compared to GPT-4 Turbo’s rumoured 1.76 trillion parameters and Claude 3 Opus’s believed 2 trillion parameters. Unlike its competitors, Google and OpenAI, Llama 3 will be open-sourced, allowing developers to utilize the technology freely, although larger companies like Apple will incur charges. This release aligns with Meta’s broader strategy to integrate AI across its product suite, including WhatsApp and Facebook Messenger, though it faces regulatory scrutiny in the EU and UK. As part of its ongoing development, Meta is also preparing a significantly larger 405 billion parameter model, pending safety evaluations.
From the World of Crypto
Cryptocurrency miners, anticipating a significant decline in rewards due to the halving event, are amassing bitcoin in record numbers. Companies like Marathon Digital (Explore: MARA), CleanSpark (Explore: CLSK), and Bitfarms (Explore: BITF) have accumulated about $2.8 billion worth of bitcoin collectively, a strategic move to offset the impending reduction in mining incentives. This halving event, a mechanism built into bitcoin’s protocol to control inflation, will reduce the daily bitcoin reward from 900 to 450. Despite the potential for reduced profitability, miners are betting on a rise in bitcoin’s value—mirroring trends observed in past halving events—where a decrease in supply led to substantial price increases.
This strategy is underpinned by recent positive movements in the bitcoin market, such as a 121% increase in value over the past six months, driven by new regulatory approvals and investor interest. However, the industry remains vulnerable to shifts in market dynamics and regulatory environments, with substantial short positions held against mining companies reflecting ongoing scepticism about their long-term viability. Miners are also exploring additional revenue streams, like transaction fees from increased network activity, to maintain profitability amidst the evolving landscape and competitive pressures within the sector.
