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The AI server company says it is shipping more than 100K GPUs per quarter. (0:16) Apple gets a rare downgrade. (2:21) Google faces new threats to its search dominance. (3:37)
This is an abridged transcript of the podcast.
Super Micro Computer (NASDAQ:SMCI) rallied after the AI server company disclosed some positive shipment data.
SMCI says it is currently shipping more than 100,000 GPUs per quarter, has delivered 2,000 liquid-cooled racks since June, and “recently deployed more than 100,000 GPUs with liquid cooling solution for some of the largest AI factories ever built.”
CEO Charles Liang says: “Supermicro continues to innovate, delivering full data center plug-and-play rack-scale liquid cooling solutions. Our complete liquid cooling solutions, including SuperCloud Composer for the entire life-cycle management of all components, are now cooling massive, state-of-the-art AI factories, reducing costs and improving performance.
“Since Supermicro supplies all the components, the time to deployment and online are measured in weeks, not months.”
In today’s trading. The normalized yield curve was nice while it lasted.
Following the strong September payrolls figures, rates continued to move higher, and the 2-year and 10-year Treasury yield curve briefly inverted again. Both yields are hovering around 4%.
Inverted yield curve have been considered a strong predictor of recession. But after an inversion that lasted from July 2022 to September 2024, GDP is still humming along. Even more interesting, the yield curve has re-inverted on a strong jobs figure that offers more support to the soft-landing camp.
As rates move up, we’re back to the good-news-is-bad-news scenario, with stocks under pressure.
James Demmert, chief investment officer at Main Street Research, says “Thursday’s CPI report should show a continued moderation in inflation—validating the Fed’s recent interest rate cuts.”
“In our opinion, the market’s expectations for future rate cuts are too optimistic given the strength of the economy, and this mismatch in expectations may cause volatility, which we believe should be used as a buying opportunity.”
“Our message to investors is that we are in the early stages of a business cycle and bull market with the benefits of the AI tailwinds, which should result in above-average equity returns going forward. Markets going forward will be driven by economic growth and corporate profits and less by Fed policy,” he added.
Among active stocks today. Apple (AAPL) saw a rare brokerage downgrade as Jefferies cut the stock to Hold from Buy.
Analyst Edison Lee says: “We like Apple Intelligence (long-term), as AAPL is the only hardware-software integrated player that can leverage proprietary data to offer low-cost, personalized AI services.”
“But smartphone hardware needs rework before being capable of serious AI, with likely timeline of 2026/27. The high expectations for iPhone 16/17 are premature, in our view.”
Lee lowered his rating on Apple to Hold from Buy and has a $205 price target on the stock.
Wells Fargo cut Amazon (AMZN) to Equal Weight from Overweight, citing pressure on earnings revisions.
“We remain convinced that NA Retail Margins will eventually reach double digits,” analysts said. “But as Amazon management has said multiple times, margin expansion won’t be linear.”
“We, and market consensus, likely became a bit exuberant in our extrapolation of margin expansion trends in 2023 and early ’24 to ’25 and beyond forecasts.”
And J.P. Morgan cut Lamb Weston (LW) to neutral from overweight, saying visibility remains limited.
The analysts said they have three main concerns on fundamentals, which include sluggish restaurant demand, a harder than usual prediction for demand currently, and, even if the demand starts to improve, there’s no guarantee it expands at the same rate as global supply.
In other news of note. Google’s (GOOG) (GOOGL) years-long dominance over the $300 billion search advertising market faces growing threats from newer rivals such as AI and social video.
ByteDance’s (BDNCE) TikTok, which says it has 170 million users in the United States, recently gave brands a way to target consumers based on their search queries, directly challenging Google’s biggest source of revenue. That’s according to The Wall Street Journal.
Another threat is coming from Perplexity AI, a search venture backed by Amazon (AMZN) founder Jeff Bezos. The platform this month will show ads alongside answers generated by AI. Previously, Perplexity relied on subscription revenue for its higher-powered AI capabilities.
Microsoft (MSFT), which is the big backer of Open AI, has inserted ads in AI-generated answers on a limited basis and introduced sponsored links and comparison-shopping ads for a Bing chatbot. Meta (META) could benefit from Meta AI in the Facebook search bar and through its WhatsApp and Instagram apps. Apple (AAPL) could also look to advertising within Apple Intelligence, which is a feature of the iPhone 16 line.
And in the Wall Street Research Corner. Hedge funds continued to buy the dip in Healthcare (XLV). Goldman’s Prime Services desk says it “was among the most net-bought sectors” last week and “saw the largest net-buying in five months, driven entirely by long buys, which outpaced short sales 2.3 to 1.”
Healthcare stocks as a group have declined 3.5% in the past four weeks.
Pharmaceuticals, biotechnology, and healthcare providers and services were the most popular subsectors of the healthcare industry for hedge funds to buy during the week. Every geographic region, led by North America and Europe, saw net buying, Goldman said.
The top healthcare stocks according to our Quant Rating system are Clover Health (CLOV), CareDX (CDNA), Personalis (PSNL), GeneDX (WGS), and CorMedix (CRMD).