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David Fuller and Eoin Treacy's Comment of the Day
Category - Technology

Tech's Big Day Tarnished as Microsoft, Google, TI Disappoint

This article from Bloomberg may be of interest to subscribers. Here is a section:

The demand outlook was particularly dire in the semiconductor industry, which had been one of the hottest sectors during the pandemic. Texas Instruments, whose chips go into everything from home appliances to missiles, saw shares tumble after its weak forecast signaled that the chip slump is spreading beyond computing and phones into other businesses. The stock lost 5%, while Analog Devices Inc., ON Semiconductor Corp., and Marvell Technology Inc. also dipped.

South Korean chipmaker SK Hynix Inc. reported a 60% decline in profit and said it would cut capital expenditures by more than half. It warned of “an unprecedented deterioration in market conditions.” Hynix is joining fellow memory makers Micron Technology Inc. and Kioxia Holdings Corp. in slashing production plans as chip prices tumble. 

The silver lining for investors is that the eventual pullback in supply may ultimately prove beneficial for profits -- and stock prices. Hynix shares, which have lost 28% this year, were up as much as 2.1%. Samsung Electronics Co. climbed 3%, while Taiwan Semiconductor Manufacturing Co. added 1.4%.

“Inventory will decrease accordingly and demand will rise again,” said Greg Roh, head of technology research at HMC Investment & Securities.



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GM Rides Full-Size Pickups, Luxury SUVs to Big Earnings Beat

This article from Bloomberg may be of interest to subscribers. Here is a section:

“We’re delivering on our commitments and affirming our full-year guidance despite a challenging environment because demand continues to be strong for GM products and we are actively managing the headwinds we face,” GM Chief Executive Officer Mary Barra said in a letter to shareholders.

Shares of the carmaker rose 2% to $36.45 as of 9:35 a.m. in New York. The stock is down about 38% this year. 

GM reported adjusted profit of $2.25 a share on Tuesday, surpassing analysts’ projection for $1.89 a share. It also maintained guidance for full-year adjusted earnings before interest and taxes of $13 billion to $15 billion, or $6.50 to $7.50 a share. 

“GM yet again affirmed the strong and until now mostly disbelieved full-year total company EBIT outlook it has maintained since introduction in February,” J.P. Morgan analyst Ryan Brinkman said in a research note. “GM is now well on the path to achieving its full year goals, despite the tougher consumer and cost backdrop.”



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Stocks Pare Gains Amid Hawkish Fedspeak, Earnings

This article from Bloomberg may be of interest. Here is a section:

A rally in the S&P 500 faded after Philadelphia Fed President Patrick Harker said officials are likely to raise interest rates to “well above” 4% this year and hold them at restrictive levels to combat inflation, while leaving the door open to doing more if needed.

Traders also sifted through a mixed bag of corporate earnings, with Tesla Inc.’s sales disappointing and International Business Machines Corp. surging on a bullish forecast. Several market observers remarked that the bar has been lowered quite a bit ahead of the current earnings season, boosting the odds of upside surprises. It’s also worth pointing out that there’s been no shortage of warning signals about the economy when it comes to corporate outlooks.

Alcoa Corp. -- which is a dependable barometer of US economic health across industries including construction, automotive, aerospace and consumer packaging -- said demand for the world’s heavy industries is falling. Union Pacific Corp., the largest US freight railroad, cut its forecast for volume growth to reflect a “challenging year.”

As traders wade through corporate results, “with an extra eye on guidance, expect volatility to remain elevated,” said Mike Loewengart at Morgan Stanley Global Investment Office



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Intel Slashes Mobileye IPO Valuation Again to $16 Billion

This article from Bloomberg may be of interest to subscribers. Here is a section:

Despite the drop in valuation, the listing is set to be one of the year’s biggest IPOs. Amid heightened volatility and disappointing debut performances of last year’s listings, IPO volume in the US has plummeted to $22.3 billion this year, compared with $277 billion at this point in 2021, according to data compiled by Bloomberg. Instacart Inc., another highly anticipated IPO, last week cut its valuation for the third time, to $13 billion, and is waiting for the markets to settle before going ahead with a listing. Another deterrent for new listings is the fact that many companies that went public in 2020 and 2021 are trading below their IPO prices.

But some analysts said it was reasonable for Intel to go through with the listing despite the poor market timing. Analysts at Bernstein said Intel likely needs the money it will receive from the deal, “given the way their own business is currently trending.” And Vital Knowledge analysts wrote that the “headline is negative, but keep in mind the $50B valuation was floated back in December, so no one should be shocked that the number is now lower today.” Intel shares were up about 1.4% in early trading in New York. 



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Email of the day on name changes and courier services

It seems Royal Mail changed its name to International Distributions Services plc (IDS.L). I would be grateful if you would kindly share your views on the implications of this change to the price of the share and the health of the company. As always thanks for your great service.



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ECB's Wunsch Wouldn't Be Surprised If Rates Exceed 3%: CNBC

This note from Bloomberg may be of interest to subscribers.

European Central Bank Governing Council member Pierre Wunsch said interest rates may eventually have to top 3% to get record inflation under control. 

“My bet would be it’s going to be over 2%, and I would not be surprised if we have to go to above 3% at some point,” Wunsch told CNBC in an interview in Washington. 

Wunsch also said:

The ECB’s deposit rate, currently 0.75%, will “most probably” need to exceed 2% year-end

“Frankly on the basis of our base case, which is now more or less a technical recession in Europe, I think we are going to have to go real positive somewhere”

“We’ve been claiming that what happens in Europe is different from the U.K., from the U.S. But over the last six months basically the direction we’ve been taking was not that different”



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FOMC Minutes for September Meeting

This excerpt of commentary following the release of the Fed Minutes may be of interest. Here is a section:

It will take years to see inflation pressures completely recede, according to the minutes. That’s also apparent in the Fed forecasts, which don’t see headline inflation returning to 2% until 2025, and core still above that then.

Catarina Saraiva  Fed Reporter

10/12 19:26

Regarding QT, several officials said it would be “appropriate” to consider sales of agency MBS at some point so the Fed’s long-term portfolio can be composed primarily of Treasury securities.

Ian Lyngen at BMO Capital Markets comments:

“Not new information per se, but nonetheless reinforcing the idea that for the time being the status quo of QT will be maintained. Especially after the volatility experienced in the gilt market, and liquidity in both mortgages and Treasuries already becoming an issue, we don’t expect MBS sales from SOMA will be a near term issue.”

Ye Xie  Markets Reporter, New York

10/12 19:25

Here’s something to keep in mind when looking at tomorrow’s CPI report:

“Participants commented that they expected inflation pressures to persist in the near term.”

Catarina Saraiva  Fed Reporter

10/12 19:25

The median estimate of Fed officials’ projections in the September SEPs was for unemployment to climb to a high of 4.4% next year. Many economists have said this is wishful thinking, and that it will likely rise much higher if the Fed keeps raising rates. It sounds like some at the Fed are concerned about this as well.

“A few participants particularly stressed the high uncertainty associated with the expected future path of the unemployment rate and commented that the unemployment rate could rise by considerably more than in the staff forecast.”

The highest unemployment rate forecast among the 19 policymakers for 5% in 2023.



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Discovering novel algorithms with AlphaTensor

This article from deepmind.com may be of interest to subscribers. Here is a section:

Beyond this example, AlphaTensor’s algorithm improves on Strassen’s two-level algorithm in a finite field for the first time since its discovery 50 years ago. These algorithms for multiplying small matrices can be used as primitives to multiply much larger matrices of arbitrary size.

Moreover, AlphaTensor also discovers a diverse set of algorithms with state-of-the-art complexity – up to thousands of matrix multiplication algorithms for each size, showing that the space of matrix multiplication algorithms is richer than previously thought.

Algorithms in this rich space have different mathematical and practical properties. Leveraging this diversity, we adapted AlphaTensor to specifically find algorithms that are fast on a given hardware, such as Nvidia V100 GPU, and Google TPU v2. These algorithms multiply large matrices 10-20% faster than the commonly used algorithms on the same hardware, which showcases AlphaTensor’s flexibility in optimising arbitrary objectives.



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China Shows Off Drone That Drops Robodog With Huge Gun Anywhere

This article from The Byte may be of interest to subscribers. Here is a section:

A video has gone viral of a large drone dropping off a gun-wielding robot dog, a terrifying vision of what the future of warfare and policing could soon look like.

The footage shows a sizable octocopter drone dropping off its armed payload on a rooftop in an urban area. The robodog then springs to life and stretches its legs.

The robot appears to be carrying a modified, semiautomatic assault rifle, which has been the service rifle for the People's Liberation Army and paramilitary agencies in China since 1995.

The clip was shared by an account called Kestrel Defense Blood-Wing on Chinese social media. According to a rough Google translation of the account's description of the video, "war dogs" that "descend from the sky" can be "directly inserted into the weak links behind the enemy to carry out surprise attacks," be delivered "to the top of enemy buildings," or provide fire suppression.



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The Great Progression 2025-2050

This lengthy article by Peter Leyden for Wired’s bigthink.com may be of interest to subscribers. Here is a section:

We’re living through an extraordinary time in American history, and really in all human history. Once you take that big-picture historical perspective, once you look at the whole forest rather than the individual trees, the real story of our times starts to make more sense. We happen to have arrived at a juncture between two very different historical eras and that makes everything on the ground very confusing, and very traumatic.

One way to understand this is that for the last 40 years America and the world have been operating within a series of interconnected systems that add up to one mega-system. Our energy system was rooted in carbon, and our transportation system was based on the internal combustion engine. Our culture was dominated by the huge Baby Boom generation and our politics tended to be more conservative. Our economics was all about unleashing the private sector and maximizing shareholder capitalism. Work was done in physical places and production was primarily industrial. Our uber-challenge was terrorism, and our geopolitical focus was the Middle East, which made sense because we needed to keep the carbon energy flowing to keep the whole flywheel of this mega-system spinning.

That whole mega-system, and all the subsystems, arguably are now breaking down and often causing more problems than they are solving. This world that older people spent their entire careers and lives mastering is coming to an end. This world that younger people were taught is “just the way things are” increasingly does not make sense. This world that politicians proudly had policies for, and that the media confidently analyzed and explained, is soon going to be over.

Every one of those systems arguably is being superseded by new systems much better suited for the 21st century. Our uber-challenge is now climate change and so our energy system must shift to clean power and our transportation system to electric. Our culture now is dominated by the huge Millennial generation and our politics are becoming more progressive. Our economics is raising the role of the public sector and capitalism being pushed to include all stakeholders. Work is now taking place much more virtually, and production is on the cusp of becoming biological. And our geopolitics is recentering on Asia, and in particular on the new superpower, China.



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