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In today’s edition
- OpenAI and Reddit collaboration
- SoftBank’s AI pivot
- Walmart’s strong Q1
- BlackRock and largest bitcoin fund
Market Snapshot
Major US equity benchmarks closed mixed on Friday, but still recorded solid gains for the week, encouraged by signs that inflation might be easing from its early 2024 rise. The Dow Jones Industrial Average achieved its third record-closing high of the week, surpassing the 40,000 mark for the first time and ending at 40,003.59, reflecting a 1.2% increase.
The S&P 500 index marked its fourth consecutive weekly gain, driven by renewed optimism for lower interest rates following Wednesday’s release of the Consumer Price Index (CPI) report, which showed cooler-than-expected results. This CPI data, combined with signs of economic softening, led investors to increase the likelihood of Federal Reserve rate cuts by the end of the year. The S&P 500 closed at 5,303.27, up 1.5% for the week. Meanwhile, the Nasdaq Composite continued its upward trend, finishing the week at 16,685.97, a 2.1% weekly gain, showcasing strong performance amidst broader market optimism.
Stock market closing data for the week of May 13th to May 17th, 2024
News Summaries
OpenAI has entered a partnership with Reddit (Explore: RDDT) to access content from the platform, enhancing ChatGPT with up-to-date information while enabling Reddit to integrate more AI tools. This move aligns with OpenAI’s strategy to secure reliable data sources amidst growing competition and ongoing copyright disputes. The financial terms remain undisclosed, but the announcement has led to a significant increase in Reddit’s stock. OpenAI has also made similar deals with various media outlets, including the Financial Times and the Associated Press, while facing legal challenges from publishers like The New York Times over content usage. This trend reflects a broader effort among social media platforms to monetize their data in response to the AI boom.
SoftBank (Explore: SFTBY) has recorded a net profit of $1.5 billion for the second consecutive quarter, significantly surpassing analyst expectations, although it posted a full-year net loss of $1.4 billion due to a weak start to the fiscal year. This profitability surge is largely attributed to the rising valuation of Arm, its UK chip designer subsidiary, which is pivotal to SoftBank’s AI strategy. Despite previous skepticism and asset sales, SoftBank, under Masayoshi Son’s leadership, is now aggressively pivoting towards AI, leveraging Arm’s central role. The group has built a cash reserve of $41 billion, indicating readiness for substantial AI investments. Recent strategic moves include a $1 billion investment in the UK self-driving car start-up Wayve, funded directly by SoftBank rather than its Vision Funds, reflecting the emphasis on AI-driven ventures without the need for immediate exits. This approach signals SoftBank’s commitment to long-term growth in the AI sector, despite the broader challenges and market fluctuations.
Walmart’s (Explore: WMT) first-quarter results exceeded expectations with a 6% revenue increase and a 3.8% rise in US comparable sales, driven not by inflation but by higher transaction volumes and frequency. The company’s emphasis on value and convenience resonated with consumers, evidenced by a 22% increase in e-commerce sales and significant market share gains, particularly among households earning over $100,000 annually. Despite stretched consumer budgets, non-discretionary spending surged, with grocery sales rising mid-single digits and private brand items, priced mostly under $5, making up over half of checkouts. The strong performance, reflecting robust consumer spending on essential goods, propelled Walmart shares up 7%, setting a new high.
From the World of Crypto
BlackRock is on the verge of running the world’s largest bitcoin fund, amassing $16.7 billion in assets through its spot bitcoin ETF (Explore: IBIT), launched just four months ago. This positions BlackRock just under $1 billion behind market leader Grayscale. The fund’s rapid growth, driven by rising client interest, marks a stark contrast from CEO Larry Fink’s 2017 skepticism of bitcoin as an “index of money laundering.” BlackRock’s success follows the SEC’s January approval of ETFs investing directly in bitcoin, a significant regulatory shift that has also benefited Fidelity (Explore: FBTC), which has attracted $9.3 billion in assets.
In addition to its bitcoin ETF, BlackRock has launched the fastest-growing tokenized Treasury fund, the Buidl fund, which has overtaken Franklin Templeton’s tokenized fund by attracting $382 million. Crypto hedge funds and market makers have started using Buidl as collateral for trading, thanks to its yield, unlike stablecoins such as USDC and USDT. BlackRock’s strategic moves include investments in platforms like Securitize and Circle, highlighting a deliberate, multi-year approach to integrating institutional quality into the digital assets ecosystem.
BlackRock’s entry into the digital assets market signals a broader trend among large asset managers exploring blockchain technology. The company has tested tokenization on private blockchains and launched a public blockchain-based Treasury fund on Ethereum, aiming to expedite settlement processes. As the US shifts to requiring trades to settle within one business day, BlackRock and other asset managers are evaluating blockchain’s potential to revolutionize financial transactions by enabling near-instant settlement, pointing to a future where large parts of the financial system could operate on blockchains.
