Macro Events & News
The November Consumer Price Index (CPI) rose 2.7% year-over-year, matching expectations but marking an increase from October, signaling persistent inflation. Additionally, the Producer Price Index (PPI) surprised to the upside at 0.4% month-over-month versus the 0.2% forecast, further stoking inflation concerns. These readings contributed to rising bond yields throughout the week, reflecting heightened market unease about inflationary pressures.
Technology stocks maintained relative out-performance early in the week, but Friday saw a broad sell-off, especially within the semiconductor sector, which had been rallying prior after strong earnings and guidance from Broadcom (NASDAQ:AVGO). The downturn lacked a definitive catalyst, though it could be concerns about next week’s rate decision as the inflation data received this week was not favorable. Analyst upgrades and downgrades also shaped individual stock movements, there did not seem to be a dominant narrative.
The 10-Year Treasury yield rose to 4.4%, and the VIX also climbed to 13.81.
For the week, the major indexes were mixed: the DOW down < 1.8%, the S&P 500 down < 1%, and the NASDAQ up < 1%.
Watchlist News
Apple (NYSE:AAPL) 2.5% ▲
Apple continued its ascent to new all-time highs, briefly surpassing $250 before closing the week at around $248. Several catalysts drove this momentum, including exciting updates about the Apple Watch Ultra and AI enhancements in iOS 18.2. Analysts from Baird and CICC issued upgrades, boosting investor confidence. The most interesting development was news of Apple collaborating with Broadcom on a new AI chip, signaling a deeper push into artificial intelligence innovation.
Apple has historically taken a measured approach to innovation, and these recent developments appear consistent with that strategy. The slow rollout of its AI initiatives, coupled with the muted reception, could be a sign that Apple Intelligence has yet to resonate significantly with consumers or drive noticeable product demand. While reaching new all-time highs reflects investor enthusiasm, it may be driven more by speculation or hopium about Apple’s future potential rather than clear evidence of accelerating sales or market share gains. As such, the current valuation might reflect expectations that could be tested if the company doesn’t deliver meaningful growth or innovation.
august bear notes
Advanced Micro Devices (NASDAQ:AMD) 6.5% ▼
It was a challenging week for AMD as Bank of America (BoA) Securities downgraded the stock, reducing its price target to $155. The analyst highlighted that AMD is losing preference among key customers, with companies like Marvell Technology and Google favoring custom solutions over AMD offerings, even aside from NVIDIA’s dominance. CEO Lisa Su received the notable recognition of being named Time Magazine’s CEO of the Year, though this honor was not mirrored in the stock’s performance. While AMD showed signs of recovery earlier in the week, it faced a 3% drop on Friday, closing out a tough stretch.
The concerns raised in the BoA analyst report are valid; AMD remains a strong competitor to NVIDIA but faces challenges as major customers increasingly turn to custom solutions tailored for their specific AI needs. Despite this, AMD has significant opportunities ahead in the expanding AI and computing markets.
Lisa Su’s leadership should provide investors confidence they can navigate these challenges. And with strong support at the current price levels and a forward P/E of 26, AMD offers a compelling entry or accumulation point.
august bear notes
GameStop reported earnings this week but notably did not hold a conference call. Revenue missed expectations by 3%, reflecting a 20% YoY decline, but the company surprised with a profit, posting EPS of $0.06 against an expected $0.03 loss. The company’s significant cash and cash equivalents, totaling approximately $4.5 billion, remain undeployed. Despite its history as the original meme stock, the market reaction was muted, with shares trading within a small range following the report.
Once again, GameStop skipped the earnings call, leaving key questions unanswered and not helping it to shed its meme stock reputation. While the results indicate some stabilization in the core business, the YoY revenue decline indicates its a dying industry. The company’s future hinges on the strategic use of its substantial $4.5 billion cash reserve. CEO Ryan Cohen must take decisive action or at least share a clear vision for these funds. Without tangible steps or communication, the retail investor base that has supported the stock could lose patience and shift focus to other speculative opportunities promising outsized returns. A risky name but one that could provide outsized returns.
august bear notes
Tesla continues to reach new all-time highs, bolstered by analyst upgrades from Goldman Sachs and Daiwa, both raising their price targets. Noted key catalysts driving the upgrades include advancements in Full Self Driving (FSD), the expansion of robotaxi services, and the prospects of increased penetration into the Chinese market, particularly with FSD and the Cybertruck. The narrative was further supported this week when General Motors announced it would discontinue its Cruise autonomous vehicle division, eliminating a significant competitor in the robotaxi space. Additionally, the Trump administration signaled potential changes to the National Highway Traffic Safety Administration (NHTSA) rules, particularly easing reporting requirements for vehicles with autonomous features, which could benefit Tesla which were the most frequent violators. Investors also likely appreciated the price increase in the Model S which will help boost margins.
Tesla’s recent surge, with a 70% increase since the November elections, seems driven more by euphoria than solid fundamentals. While access to the White House and a potential government role for CEO Elon Musk may provide some business advantages, the actual impact remains uncertain. Sales are improving on a year-over-year basis, but the bar was set low due to weak sales last year. Tesla is also losing market share in the crucial Chinese market, and while Full Self Driving (FSD) progress has been touted, tangible results remain lacking. The fantastical promises made by Tesla in the past, particularly regarding autonomous driving, still need to be realized or at least making real progress. Although the current stock run-up could continue, a forward Price-to-Earnings ratio of 125 is concerning, and any correction could be sharp. The involvement of the U.S. government, especially with President elect Donald Trump seemingly in the back pocket of Elon Musk, adds a layer of complexity, but does not change the fundamental risks. Amazing opportunity but tread carefully.
august bear notes
