Dear valued client,
Markets showed resilience this week, finishing in positive territory despite twin pressures of lingering interest rates and heightened geopolitical tensions.
Big Tech kicked off its Q1 earnings season with mixed results. Tesla reported a notable downturn in revenue and profits compared to previous periods, with revenue dropping to $21.3 billion and profits hitting a six-year low. This decline is attributed to a decrease in car deliveries, down 8.5% from last year, and challenges meeting production targets, including issues with the Cybertruck’s accelerator pedal leading to a significant recall. Consequently, Tesla has implemented cost-cutting measures, including layoffs, and is focusing on innovative projects like developing a fully autonomous robotaxi. Despite these setbacks, Tesla’s stock rallied in after-hours trading, possibly due to promising plans to launch more affordable models and integrate ride-hailing technology into its app. Additionally, the company anticipates strong growth in its energy storage business, offering potential upside for investors.
Meta’s earnings report, on the other hand, revealed record Q1 revenue. Yet, investor sentiment was dampened by the company’s indulgent spending on AI development and the continued pursuit of the metaverse concept. Despite beating expectations, Meta’s stock took a hit in after-hours trading, dropping 15% as the company announced a $10 billion increase in spending to support AI initiatives. CEO Mark Zuckerberg acknowledged the volatility in Meta’s stock during this phase of their product strategy but urged investors to maintain confidence in their long-term vision.Alphabet and Miscosoft’s financial situations look promising following their quarterly earnings reports. Alphabet’s debut dividend issuance and authorization of $70 billion in stock buybacks, coupled with surpassing revenue expectations, elicited positive reactions from investors. Microsoft also outperformed revenue forecasts, propelled by robust cloud service performance. Despite concerns raised by Meta’s substantial AI expenditure, the solid performances of Microsoft and Alphabet in the tech sector support favorable valuations, particularly with the sustained corporate demand for their AI-driven cloud services.
President Biden has signed into law a significant bill that imposes a 269-day deadline for TikTok’s Chinese parent company, ByteDance, to sell the social media platform or face a ban in the U.S. TikTok has vowed to challenge the legislation through legal avenues, signaling a potentially prolonged battle in the courts. Legal experts anticipate arguments centered on free speech rights and the financial impact on creators, while the U.S. government asserts national security concerns and data privacy risks. Despite efforts to find a suitable buyer, challenges remain, including antitrust regulations and opposition from China. The future of TikTok in the U.S. hinges on the outcome of these legal and diplomatic maneuvers.
A month following the incident, Baltimore filed a lawsuit against the owner of the Dali container ship, describing the crew as “incompetent” for their actions leading to the destruction of the Francis Scott Key Bridge. The city alleges that despite a power supply alarm indicating the vessel’s unseaworthiness the crew chose to nonetheless leave the port. Baltimore further accuses Grace Ocean Private Ltd, the ship’s owner, of providing inadequate equipment and systems. The lawsuit seeks compensation for bridge replacement costs, as well as expenses related to cleanup efforts and transportation disruptions.
I’d like to leave you with two passages from “How to Think Like a Roman Emperor,” by Donald Robertson, a book I highly recommend;
“Our character is the only thing that ultimately matters and wisdom consists in learning to view everything else in life as utterly worthless by comparison. Mastering this attitude requires lifelong moral and psychological training in the voluntary endurance of hardship and renunciation of certain desires.”
“Fear of death does us more harm than death itself because it turns us into cowards, whereas death merely returns us to Nature. The wise and good enjoy life, without a doubt, but nevertheless are unafraid of dying. Surely we are never fully alive as long as we fear the end? Indeed, to learn how to die is to unlearn how to be a slave.”
Have a terrific weekend,
PW
