🔻The Rise and Fall of Ackman’s IPO Dreams

Good afternoon! Amid all the hustle and bustle on Earth, you might have missed this: the two astronauts who rode Boeing's Starliner to the International Space Station are still up there, with no return date in sight due to issues with their spacecraft.

What was supposed to be an eight-day mission has turned into a 55-day space-cation. They're staying positive and keeping busy, but let's be real – their small talk must be getting pretty repetitive by now.

MARKETS

• Tech stocks saw a selloff, causing both the S&P 500 and Nasdaq to decline ahead of major earnings reports from the Magnificent Seven due within the next day. Conversely, the Dow continued to climb, poised to achieve its best monthly performance since December.

• Treasury yields stayed relatively unchanged as investors awaited the FOMC announcement set for tomorrow.

• Oil prices fell below $75, reaching their lowest point since early June due to continued selling pressure.

• Gold prices rose on expectations that a rate cut might occur sooner rather than later.

STOCKS
Winners & Losers

What’s up 📈

• F5 ($FFIV) skyrocketed 12.99% following a stellar beat-and-raise earnings report

• JetBlue Airways ($JBLU) jumped 12.31% after reporting an unexpected profit for the last quarter, defying analyst expectations of a loss

• Tenable Holdings ($TENB) surged 9.30% as the cybersecurity firm indicated its openness to acquisition offers

• PayPal ($PYPL) climbed 8.59% after posting impressive earnings, easing concerns over Apple's entry into the online payment market

• Affirm Holdings ($AFRM) edged up 2.31% after Bank of America analysts upgraded its rating from "neutral" to "buy.”

What’s down 📉

• Merck ($MRK) plummeted 9.84% despite strong Q2 earnings, with investors reacting negatively to a decline in Gardasil sales

• CrowdStrike ($CRWD) dipped 9.72% following Delta's announcement that it will seek damages from the cybersecurity company after canceling 7,000 flights

• Nvidia ($NVDA) slid 7.04% as investors continued to shift from big tech stocks to smaller ones

• Diageo ($DEO) dropped 4.66%, marking the first sales decline since the pandemic as customers reduced their alcohol consumption

• Tesla ($TSLA) fell 4.08% after announcing a recall of 1.8 million cars in the US due to hood issues

IPO
Bill Ackman’s IPO Rollercoaster — From $25B Dreams to $2B Reality Check

Bill Ackman, the hedge fund maestro behind Pershing Square Capital Management, is learning the hard way that market sentiment can be as volatile as a TikTok trend. Ackman’s latest venture, Pershing Square USA (PSUS), aimed to dazzle Wall Street with a $25 billion IPO. But, as it turns out, investors weren’t exactly throwing confetti. Now, he’s looking to raise a more modest $2 billion.

Ackman’s initial $25 billion target for PSUS would have been a jaw-dropping record for closed-end funds. However, after a reality check from the market, he slashed the goal to a more humble $2 billion. The IPO, now set at 40 million shares priced at $50 each, also offers underwriters the option to snag an additional six million shares. While Ackman might be recalibrating his expectations, this IPO still holds the potential to make a splash—just more of a pebble than a boulder.

Investor Woes and Social Media Strategy

Ackman’s ambition hit another snag when Seth Klarman’s Baupost Group decided to pull out of a $150 million investment. Ouch. Additionally, the launch was delayed as the SEC took a closer look at some private correspondence Ackman sent to potential investors. Even the big guns at Pershing Square can’t escape the regulatory microscope.

Known for his bold investments and even bolder opinions, Ackman took to social media to drum up support. With 1.3 million followers on X (formerly known as Twitter), he’s not shy about sharing his thoughts—whether they’re about politics, market strategies, or his own vacation musings. Despite his digital charisma, convincing investors to jump on the PSUS bandwagon has proven tricky. Ackman’s recent social media escapades included a campaign that led to the ousting of Harvard’s president and a public endorsement of Donald Trump. While these moves might boost his follower count, they haven’t translated into IPO dollars just yet.

The Road Ahead

Even with its setbacks, the Pershing Square USA IPO is oversubscribed, suggesting that there’s still significant interest. Ackman’s long-term performance has been impressive, with Pershing Square Capital Management delivering 36 times the returns over the past 20 years compared to the S&P 500’s seven times returns.

For now, all eyes are on Ackman as he navigates these choppy waters. Will his bold moves pay off, or is this a rare misstep for the hedge fund titan? Only time, and the final IPO figures, will tell.

NEWS
Market Movements

• Apple ($AAPL) released a preview of its AI features, with a waitlisted developer beta announced yesterday. The tech giant also revealed that its AI models were trained on Google's custom chips

• AMD ($AMD) reported better-than-expected revenue, driven by robust growth in its data center segment

• The hottest IPO of the year is an $18 billion cold storage facility operator

• IPO proceeds year to date have already surpassed $23.2 billion, outpacing the $19.4 billion raised in all of 2023

• Synchron, a Neuralink rival, allows patients to control Apple Vision Pro with their thoughts

• President Biden unveils a Supreme Court reform plan, including term limits for justices

• The U.S. has delayed the implementation of new tariffs on China by at least two weeks

• BYD's first electric supercar has entered production

• Spirit Airlines ($SAVE) will begin offering premium seating options for its passengers

• McDonald's ($MCD) reported a 1% drop in same-store sales, marking its first decline since 2020

• Starbucks' ($SBUX) Q3 revenue and same-store sales growth fell short of expectations

EARNINGS
⛈️ Microsoft’s Cloud Rain on Earnings Parade

In a classic case of “so close, yet so far,” Microsoft ($MSFT) reported fiscal fourth-quarter earnings that beat expectations, only to see its stock plummet over 5.79% in after-hours trading. Why? Investors fixated on the company’s disappointing Azure cloud revenue.

Earnings Beat but Cloud Disappoints

Microsoft’s revenue soared 15% year-over-year to hit $64.73 billion, topping the expected $64.39 billion. Earnings per share (EPS) also nudged ahead of forecasts, coming in at $2.95 versus the anticipated $2.93. However, the real drama unfolded around Azure’s performance. The cloud segment grew by 29%, missing the 31% growth analysts had penciled in. This is the first time Azure has fallen short of expectations since 2022.

The broader Intelligent Cloud division, which includes Azure, Windows Server, Nuance, and GitHub, reported $28.52 billion in revenue—just shy of the $28.68 billion consensus. Despite GitHub’s impressive $2 billion annual run rate, it wasn’t enough to quell investor concerns.

By the Numbers

• Revenue: $64.73 billion (up 15% YoY) vs. $64.39 billion expected

• Earnings per Share (EPS): $2.95 vs. $2.93 expected

• Intelligent Cloud Revenue: $28.52 billion vs. $28.68 billion expected

• Azure and Other Cloud Services Growth: 29% vs. 31% expected

Market Reaction and Future Outlook

While the Azure miss stole the spotlight, Microsoft’s other segments performed admirably. The Productivity and Business Processes unit, featuring Office and LinkedIn, brought in $20.32 billion, beating expectations. The More Personal Computing division, which houses Windows, gaming, devices, and search advertising, reported $15.90 billion, also surpassing forecasts.

CEO Satya Nadella highlighted that AI services contributed significantly to Azure’s growth, adding 8 percentage points. Yet, this AI boost wasn’t enough to soothe investor nerves.

Microsoft’s shares had climbed 12% year-to-date before this report, outpacing the S&P 500’s 13% gain. However, the post-earnings dip reflects the market’s laser-focus on cloud performance, especially as Microsoft vies with Amazon and Google in the lucrative AI and cloud sectors.

As Microsoft recalibrates its cloud strategy and continues to push AI capabilities, investors will be watching closely to see if the tech giant can turn its cloud fortunes around in the coming quarters.

EARNINGS
Chips Ahoy! AMD’s Data Center Sales Surge 115%

AMD ($AMD) just dropped some serious mic-worthy news: their data center sales have more than doubled in a year. Investors are loving it, with shares spiking 7.59% in extended trading. Let’s break it down.

Earnings Breakdown

AMD's second-quarter performance outshined Wall Street’s expectations, fueled by the surging demand for AI chips. Here are the key figures:

• Earnings per Share (EPS): 69 cents vs. 68 cents expected

• Revenue: $5.83 billion vs. $5.72 billion expected

• Data Center Revenue: $2.8 billion, up 115% year-over-year

• MI300 AI Chip Sales: Over $1 billion for the quarter

AI Chips and Data Center Dominance

The tech giant's data center segment, which includes their MI300X AI chips, posted an impressive 115% increase in revenue year-over-year. This surge helped push the company’s overall performance above expectations. AMD's CEO, Lisa Su, highlighted that AI services significantly contributed to this growth, and the company now projects data center GPU revenue to exceed $4.5 billion in 2024, up from the previous $4 billion forecast.

Other Segments and Market Reaction

While the data center segment stole the spotlight, here are some other parts of AMD’s business:

• Client Segment (PC Chips): $1.5 billion, up 49% year-over-year

• Gaming Revenue: $648 million, down 59% year-over-year

• Embedded Segment: $861 million, down 41% year-over-year

AMD's shares have faced a 6% dip in 2024, but this latest earnings report has turned things around, putting them back in the spotlight as a key player in the AI and data center markets. As the tech world eagerly awaits Nvidia and Intel's upcoming earnings reports, AMD has set the bar high.

Calendar
On The Horizon

Tomorrow’s labor market reports, including the ADP report and the employment cost index, are on deck. But let’s be honest, they’re all playing second fiddle to the big star: the FOMC announcement.

The Federal Open Market Committee, the Fed's decision-making arm, has one job: balancing inflation and employment. With inflation in the spotlight, the Fed's moves on interest rates will be crucial. This week’s job reports matter, but the real focus is on how close the Fed is to easing up on rate hikes.

Before Market Open

• Boeing ($BA): Trouble in the skies and on the ground. Sales of the 737 Max are nosediving, and China is distancing itself from Boeing. Despite this, Wall Street remains optimistic, with an average price target 15% above current levels. Expected: $3.51 EPS, $6.85 billion in revenue.

• Marriott International ($MAR): The hospitality giant thrived post-pandemic with revenge spending, but the travel boom is slowing. Investors are eager to hear how Marriott plans to attract more budget-conscious travelers. Expected: $2.47 EPS, $6.48 billion in revenue.

After Market Close

• Meta Platforms ($META): Next up in the Mag 7 parade, Meta’s spending spree on AI, including the new Llama 3.1 model, is under the microscope. The focus will be on how these investments impact cash flow and margins. Expected: $4.72 EPS, $38.30 billion in revenue.

• Arm Holdings ($ARM): With a staggering 94% rise in 2024, Arm’s valuation is in question. Shareholders are keen to see continued strong demand for semiconductors without sacrificing margins. Expected: $0.34 EPS, $903.57 million in revenue.