🍎 Apple Surges $112B on AI Annoucements

Plus, US Banks Plummet on Earnings...

April 14, 2024

TOP STORY
🍎 Apple Surges $112 Billion on AI Annoucements

Apple had its best day since May on Thursday, with the stock rising over 4% after announcing an AI focused Mac revamp.

💻 Apple plans to refresh its Mac computer lineup with processors that have AI capabilities, slated for release late this year.

📲 The company is also rumored to be releasing an AI-enabled iPhone this fall, which investors hope will spur a ‘5G-Like Upgrade Cycle.’

 😅 A much-needed turnaround

A turnaround is badly needed to break Apple’s four-quarter streak of revenue declines, its longest in more than two decades. Year-to-date, Apple is down 5%, while rival Microsoft is up ~14%, and the broader S&P is up 8%.

Apple has also been facing a number of legal headwinds, including:

🏷️ Trading at a Discount?

Many analysts see Apple’s recent slump as a buying opportunity, and the Blossom community seems to mostly agree, with Apple ranking as the #7th most bought stock this week.

Apple optimists pin the recent underperformance on a “lack of defined AI strategy” and call out the company’s cash flow, balance sheet, and gross margins as strong selling points.

Based on its Price to Earnings ratio, Apple still remains at a ‘discount’ to all stocks in the Magnificent 7:

🤖 AI is the New Battleground

It’s no surprise that it took an AI announcement to spur Apple’s turnaround, with generative AI firmly taking the spotlight as the new battleground for Big Tech.

Bloomberg projects that sales of generative AI software will surge from $5 billion in 2023 to $318 billion by 2032, with an annual growth rate of approximately 59%, so it’s no wonder AI is the top focus for the tech giants.

Whether AI is enough to drive Apple’s turnaround remains to be seen, and we’ll likely have to wait for Apple’s Worldwide Developers Conference on June 10-14 for the full AI rollout plan.

🏆 Apple is the most held technology stock on Blossom, with 5,164 shareholders. The second highest is Microsoft with only 2,915 holders.

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TOP STORY
🏦 US Bank Stocks Plummet after Beating Q1 Earnings, Why?

JP Morgan beat Q1 earnings with a quarterly profit of $13.42 billion, up 6% from last year - so why did the stock plummet 6.5%?! 😱

😳 This marked the bank’s worst post-earnings reaction in 15 years, so let’s unpack it…

🚨 Net Interest Income (NII) Guidance

JP Morgan, and the rest of the US banks, have made massive gains from the high interest rates of the past two years as they’ve passed interest rate rises to depositors more slowly than borrowers.

Everyone knew this couldn’t last forever, but JP Morgan’s announcement that it was leaving its Net Interest Income outlook unchanged at $90B was a sign that the ‘good times’ were coming to an end quicker than expected.

Customers have been, unsurprisingly, moving money into accounts with higher savings rates. I can personally attest to this, only holding $150 in my bank account, which pays a measly 0.40% 😭

❝

We would still expect to see ongoing migration and yield seeking behaviour

Jeremy Barnun, JP Morgan CFO

🏦 Not the Only One

While JP Morgan was hit the hardest, the other big banks also fell on earnings this week:

  • 📉 Wells Fargo (WFC) fell 1.41%

  • 📉 Citigroup (C) fell 3.21%

  • 📉 JP Morgan (JPM) fell 7.45%

Poor performance from the banks and broader fears of increasing inflation also led to the broader market’s worst day since January, with the S&P ending the week down 1.7%.

These inflation fears have dashed hopes of the Fed lowering rates anytime soon, forcing investors to recalibrate. For a deeper dive on the inflation data this week, check out Mark Beavis' deep dive in his newsletter ‘The Pulse’.

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“I’d love the Fed to be in a position to cut rates later this year, but the data is just not close to being there, at least yet.”

Jason Furman, Former Chair of Council of Economic Advisors to the President

👀 All Eyes on BofA and Morgan Stanley

Following JP Morgan, Citi, and Wells Fargo’s rocky week, eyes will be on Bank of America and Morgan Stanley, which are set to report earnings this week alongside other big names like Netflix, Procter & Gamble, and Taiwan Semiconductor Manufacturing.

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🎙️ Top Discussions this Week

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