# 684 – 😰 Intel needs a win-tel – The Average Joe

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    # 684 – 😰 Intel needs a win-tel

    victorlei

    April 30, 2024

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    Good morning. Poppies are disappearing — and while this might not sound like something that affects your day-to-day life, it has rippling effects around the globe:

    • Poppies drive the opium trade — but as fentanyl becomes the opioid of choice among Mexican cartels, prices are plummeting.

    • Cartels are now making fentanyl from chemicals imported from China — it’s quicker and cheaper than growing poppies.

    • Now poppy farmers in Guatemala are losing their chief source of income — and many are migrating to the US.

    It’s a reminder that major global forces — like the opioid epidemic, immigration, and US-China trade — can all connect back to a single plant.


    SEMICONDUCTORS

    Intel’s Multi-Billion Dollar US Foundry Expansion Is Killing Its Stock, But It Could Also Save Its Future

    What stings more than seeing one rival’s stock rise 200% in a year? Watching another’s climb 700%. That’s the situation Intel ($INTC) has found itself in. Once a proud pillar of American tech, Intel has slipped behind competitors Nvidia ($NVDA) and Super Micro ($SMCI), leaving its stock trailing. But Intel has a turnaround plan: it’s diving into making chips for its competitors — a costly but necessary move to remain relevant in the fast-paced semiconductor industry.

    Not so chippy: In its first quarter report, Intel’s revenue jumped 9% — but it also posted a $400M loss. For the first time, Intel made money from its chip-making arm, Intel Foundry, bringing in $4.4B in revenue (about a third of its total). But those billions came with a landslide $2.5B operating loss in the unit — turning an otherwise positive quarter into a dumpster fire.

    • These losses add to the $7B Intel Foundry lost in 2023, totaling a massive $9.5B setback for Intel’s domestic chip venture so far.

    • That’s more than the $8.5B in grants Intel is set to receive under the CHIPS Act.

    Waiting for the payoff

    With losses fast-outstripping its revenue growth, Intel’s stock has plunged over 34% year-to-date, making it the second-worst-performing S&P 500 stock. But there’s no turning back now — and investors might have to wait a while for Intel’s multi-billion dollar expansion bet to start paying dividends.

    • In 2026, Intel plans to open its first new US fab in four decades, with plans for at least six more, each costing ~$30B — three times more than initially projected.

    • These fabs will make Intel the world’s second-largest foundry, trailing only Taiwan Semiconductor ($TSM) and surpassing Samsung.

    But until then… Intel will lean on TSMC, one of its biggest rivals, to manufacture its new Gaudi 3 AI chip — touted 50% faster and 40% more power-efficient than Nvidia’s H100 chip, the industry standard for GenAI models. At least Intel’s new chip will be available in the coming weeks… unlike the multi-billion dollar fabs it desperately needs to outshine its competitors.


    PARTNERED WITH RYSE

    Invest in AI Applications that Make Smart Living Simple

    We can add Real Estate to the long list of industries AI is disrupting, with the market worth a staggering $163 billion in 2022.

    Companies that leverage AI to slash energy costs and make living simple have been acquired for billions of dollars. Yet one company in this industry has flown under the radar, until now.

    You’ve heard us talk about RYSE, but did you know that they're prepping for a brand-new product launch that’s already attracted attention from renowned real estate developers and big-box retail?

    Their new SmartCurtain puts them a step closer to becoming the dominant brand in automated shades powered by AI and you can still reap the early rewards.

    The window to invest is closing – learn more here.


    LARGECAP RECAP

    🇯🇵 Japanese yen drops to its lowest against the dollar since 1990

    Back in 1990, the world was buzzing: West and East Germany were coming together, the Soviet Union was crumbling, and the Hubble Space Telescope took its first peek into the universe. That same year marks the last time the US Dollar held this much sway over Japan’s currency. On Sunday morning, the Japanese yen briefly hit 160 against the dollar — a result of the US flexing its muscles and uncertainties surrounding rate cuts.

    • Despite Japan’s stock market reaching heights not seen since 1989 and its first interest rate hike in 17 years, the yen’s value against the dollar continues to slide.

    • Following a slight rebound on Monday, the yen was down 10% year-to-date — while Japan’s central bank remains tight-lipped about potential interventions.

    Why does this matter? A weaker yen could help push up exports and tourism, but it also means Japanese folks have less purchasing power against the dollar — which is nibbling away at the country’s impressive stock market gains. However, once the Fed starts cutting rates, the mighty dollar might come back down to Earth. Until then, its strength could continue causing ripples across the globe.

    📈 The digital ad market is heating up in 2024

    After a brutal 2022, the digital ad market is showing signs of a rebound. Last week, Meta ($META), Alphabet ($GOOG), and Snap ($SNAP) all surpassed expectations in earnings thanks to strong ad sales — indicating that brands are more willing to spend on ads, driving up demand for each company’s ad platform.

    • Meta’s ad revenue surged by 27% in the first quarter, marking its fastest growth rate since 2021.

    • Alphabet’s total ad revenue rose by 13%, boosted by a 21% increase in YouTube ad revenue compared to the same period last year.

    • Even Snap, which has struggled with single-digit growth for years, saw revenue rise 21% due to higher demand for its ad platform.

    What’s behind this surge? Each company has poured resources into improving their ad platforms — with Meta revamping theirs with new AI features over the past two years and Snap attributing the boost to “progress” in their ad solutions. Analysts at Bernstein also point to “strength in online commerce, gaming, entertainment and media,” along with continued ad splurges from Chinese brands. Plus, election years are always hot for advertising, too, with an estimated ~$15.9B in political ad revenue expected this tense November.

    Read: Discover how social media giants are navigating the ad market rebound amid global tensions


    JOE’S MARKET PULSE

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    Markets & Economy

    California restaurant prices are rising: A new minimum wage of $20/hour for large fast food chains has consumers feeling sticker shock — as Chick-Fil-A, Chipotle ($CMG), Starbucks ($SBUX), and Shake Shack ($SHAK) have all raised prices by 5%-10% since February. [Read]

    US Department of Homeland Security forms AI special counsel: CEOs from the likes of OpenAI, Alphabet ($GOOG), and Nvidia ($NVDA) will advise the government on “practical solutions” for preventing AI-related disruptions in key infrastructure like transportation and internet service. [Read]

    Boeing ($BA) looks to sell ~$8B in bonds as cash dries up: They’re committed to “prudent” management of their balance sheet and are assuring investors they have “significant market access” for additional cash if needed — while Moody’s downgrades the manufacturer’s credit rating to a step above junk. [Read]

    Business & Wealth

    Alaska Airlines ($ALK) emerges as WalletHub’s new #1 airline: Unseating two-time reigning champ Delta ($DAL), Alaska’s reliability, comfort, and affordability helped it win out — though rankings like these have been accused of being just glorified paid ads, so your mileage may vary. [Read]

    Southwest ($LUV) revamps boarding process: Fresh off a first-quarter loss, the airline’s CEO floated some possible changes to its one-class, open-seating system while cutting some nonstop routes and withdrawing from certain airports amid the Boeing fallout. [Read]

    Tornado season is here: And it’s ripping through Nebraska, Iowa, and Oklahoma — with 72 tornadoes already forming between April 26-28 and more severe weather expected this week. Scientists link the increase in storms to climate change affecting atmospheric conditions. [Read]

    *Thanks to our sponsors for keeping the newsletter free.


    CHART


    DIGIT OF THE DAY

    Ethereum’s Q1 2024 Earnings Triple Thanks To $1.2B Surge in Transaction Fees

    Ethereum ($ETH) is fee-ling the earnings boost. Unlike bitcoin, which serves as digital gold, Ethereum’s network collects and burns transaction fees with each transaction, operating similarly to payment giants like Visa ($V) or Mastercard ($MA), but decentralized. If it were a business, it would rank among the most profitable software companies — boasting a 45% profit margin, according to venture capitalist Tomasz Tungus.

    • Closing out Q1 2024, Ethereum raked in an impressive $1.17B in fees — leading to a surge in net profits of ~$370M.

    • With a current market cap of nearly $350B, Ethereum stands as large as Salesforce ($CRM) and seven times larger than Snowflake ($SNOW).

    The Robin to Batman: Over the past year, bitcoin has risen nearly 115% while Ethereum trails at a 66% increase. Bitcoin’s growth is attributed to its halving and the introduction of spot bitcoin ETFs, which have witnessed $13.6B in inflows as of April. But Robin may soon be getting its own spin-off — that is, if US regulators will allow it. The Securities and Exchange Commission has until May 23 to approve a batch of spot Ether ETFs — but few in the industry are expecting the green light. CoinFund’s President, Christopher Perkins, told Blockworks — “I’m 100% sure that it gets approved; I’m not 100% sure when.”


    EXTRA JOE

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