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  • 📉 Big Tech's Big Tumble — The Great Selloff

📉 Big Tech's Big Tumble — The Great Selloff

+ SearchGPT (OpenAI's competitor for Google) + tomorrow's calendar/ pre-market earnings

Good afternoon! The FTX bankruptcy is turning out to be one of the best investments ever... if you jumped in after the collapse. Diameter, a $17B hedge fund, hit the jackpot with a bold bet on FTX claims.

Post-bankruptcy, Diameter started snapping up claims from distressed creditors, building a $400M position in FTX’s leftovers. These claims, initially worth mere pennies, have skyrocketed to potentially over 120 cents, thanks to surging crypto prices and Diameter’s sneaky stake in Anthropic, an OpenAI competitor. Bitcoin was hovering around 16-17k when FTX went under.

While FTX’s founder, Sam Bankman-Fried, sits behind bars, Diameter is redefining the meaning of a "locked-up" investment.

MARKETS

  • The S&P 500 briefly entered positive territory this afternoon but couldn't maintain its gains, slipping into the red by the end of trading. The Dow Jones surged by 585 points at its peak today, but later in the afternoon, it lost some steam. However, it still ended the day on a positive note. Meanwhile, the Nasdaq continued to be weighed down by a tech selloff that lasted most of the afternoon.

  • Treasury yields dipped slightly due to upbeat GDP news, though the main focus for investors remains the upcoming PCE announcement.

  • Bitcoin took a slight hit today, ahead of a major crypto conference that could influence the digital asset industry's direction for years to come

STOCKS
Winners & Losers

What’s up 📈

  • Viking Therapeutics ($VKTX) skyrocketed 28.31% today as the pharma company moved its weight-loss drug into Phase 3 clinical trials

  • ServiceNow ($NOW) surged 13.19% on a strong earnings report, solidifying the software company's position as a beneficiary of the AI trade

  • Airline stocks took off today, driven by upbeat news from two major players. Southwest Airlines ($LUV) leaped 5.64% after reporting impressive earnings, while American Airlines ($AAL) climbed 4.23% despite forecasting lower profits for the next quarter.

  • IBM ($IBM) jumped 4.36% after surpassing earnings expectations due to high AI bookings

  • Tesla ($TSLA) rebounded 1.97% after a rough day yesterday, as investors continue to digest a mixed earnings report

What’s down 📉

  • Edwards Lifesciences ($EW) plunged 31.27% due to a mixed earnings report and management’s guidance indicating declining sales for its key heart valve replacement therapy next quarter

  • Universal Music Group ($UMG) nosedived 23.54% after subscription and streaming revenues fell well short of analyst expectations

  • Ford ($F) tanked 18.40% in its worst trading day since 2009, missing profit expectations and offering no positive forecast for the upcoming quarters

  • Lululemon ($LULU) dropped 9.09% following a downgrade from Citi analysts from “buy” to “neutral,” citing a sales slowdown

  • Royal Caribbean ($RCL) dipped 7.61% as the company reported a slowdown in demand

TECH
Big Tech's Big Tumble — The Great Selloff

What goes up must come down—or in this case, nosedive. Tech stocks, the high-flyers that catapulted every major index to record highs this year, are now leading a dramatic market selloff. Tesla ($TSLA) and Alphabet ($GOOGL) reported underwhelming earnings on Tuesday, triggering a widespread market selloff on Wednesday that left both the Nasdaq and S&P 500 with their worst trading day since 2022. The downward spiral continued on Thursday, with tech stocks hemorrhaging $1.2 trillion in market value over 48 hours.

Who's Hurting?

  • Nvidia: Down 6.65% in the last five trading sessions.

  • Alphabet: Slipped 6.14%.

  • Tesla: Plummeted 11.07%.

Why the Plunge?

The tech tumble boils down to a combo of waning confidence in AI returns and shifting macroeconomic winds that have made other market areas suddenly look more tempting.

Earlier this month, data showed inflation decelerating, which pumped up hopes that the Federal Reserve might finally cut interest rates in September. This rate-cut optimism has investors looking beyond tech, eyeing sectors like small caps for potential boosts.

Tech valuations have soared so high this year that they’re starting to seem overinflated, leading investors to cash out and hunt for value elsewhere. Plus, earnings are spotlighting the big question: Can AI companies actually cash in on their massive investments in artificial intelligence? Right now, investors aren’t convinced they’ll get enough bang for their buck.

The Silver Lining

While tech’s slump is dragging down the S&P 500, other sectors are quietly thriving. Sectors like utilities and healthcare are up since July 11 as investors pivot away from tech.Even a small shift out of tech could mean significant inflows into other areas, leading to potentially strong performances in those sectors.

AI enthusiasts argue this tech selloff is just a pause, not the end. The belief is that as the market processes earnings and company commentary, the tech sector, especially those linked to AI, will bounce back and continue their bullish run.

The Takeaway

In the face of the market's ups and downs, the classic advice holds true: stay diversified. Spreading investments across various sectors can help cushion against the volatility seen in tech. While the allure of tech and AI is strong, balancing your portfolio with stable sectors like utilities and healthcare can provide a safety net. Diversification isn't just a strategy—it's a necessity for navigating the unpredictable market landscape.

NEWS
Market Movements

AI
Say Hello to SearchGPT — OpenAI’s competitor for Google

Making Google ($GOOGL) and Perplexity sweat, OpenAI’s SearchGPT is here as a prototype. The plan? To eventually merge it into ChatGPT.

A Smarter Search Experience

OpenAI is diving headfirst into the search engine game with SearchGPT, an AI-powered search engine that’s set to shake things up. Unlike your traditional search engines, this one doesn't just throw links at you. Instead, it organizes and explains the results. Imagine asking about music festivals and getting a neat summary with descriptions and links. Or looking up when to plant tomatoes and getting a detailed breakdown of varieties and best planting times.

Google and Perplexity, Watch Out

At first, SearchGPT is exclusive to 10,000 lucky test users. OpenAI’s Kayla Wood mentioned they’re partnering with third-party content providers to build the search results, aiming to eventually integrate this feature directly into ChatGPT. Google’s been scrambling to add AI to its search engine, fearing users might jump ship to this new, smarter tool. OpenAI is also eyeing Perplexity, which touts itself as an AI "answer" engine but has faced backlash for allegedly ripping off content.

What’s Next for OpenAI?

SearchGPT is all about collaborating with news partners like The Wall Street Journal and Vox Media to ensure content creators are happy and fairly represented. OpenAI promises clear, in-line attributions and links, so you know exactly where the information is coming from. By launching as a prototype, OpenAI has a buffer for any hiccups—like the infamous Google AI Gemini depicting historical figures with inaccurate skin color. Despite its success, OpenAI’s costs are soaring, potentially hitting $7 billion this year. SearchGPT is free for now, but with no ads yet, monetization strategies are a must for sustainability.

In Summary: SearchGPT is not just another search engine—it’s a smarter, more integrated way to find information. Watch out, Google and Perplexity; OpenAI is coming for you.

Calendar
On The Horizon

Tomorrow's a big one—Fed officials and investors are eagerly awaiting the June Personal Income and Expenditures (PCE) report. This key indicator will shed light on how effectively inflation is being tamed.

  • In May, PCE was flat, while core PCE, excluding energy and food, nudged up by 0.08%. For June, economists are forecasting a similar 0.08% increase in PCE and a slight 0.10% rise in core PCE, driven by decreasing goods prices and slower rent inflation.

  • If the predictions hold true, Wall Street could have a reason to cheer. Fed Chair Jerome Powell has hinted that the Fed might cut interest rates even before hitting the 2% inflation target. Another month of significant slowdown could accelerate those rate cuts.

Before Market Open

  • Bristol-Myers Squibb ($BMY): Despite solid earnings last quarter, BMY has been on a downward trend all year due to looming patent expirations. Investors are keen to hear the company’s strategy to strengthen its product pipeline, especially after its $14 billion acquisition of KarXT. Expected: $1.53 EPS, $10.56 billion in revenue.

  • Colgate ($CL): With shares up 21% year-to-date, Colgate has defied consumer spending worries. Investors will focus on the performance of its pet nutrition segment and whether the high valuation is justified. Expected: $0.79 EPS, $4.59 billion in revenue.

  • 3M ($MMM): After a sell-off following a gloomy 2024 outlook, 3M shares have been gradually recovering. Shareholders are looking for confirmation of their optimism, especially after sticking with the stock post-dividend cut. Expected: $1.68 EPS, $5.86 billion in revenue.