# 708 – 👾 The Roaring Kitty effect – The Average Joe

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    # 708 – 👾 The Roaring Kitty effect

    victorlei

    June 4, 2024

    Good morning. Dr. Pepper ($KDP) can finally tell Pepsi ($PEP) to fizz off. After nearly 30 years in America’s number two spot for carbonated soft drinks, Dr. Pepper has overtaken Pepsi.

    • Pepsi’s market share has steadily dropped from 15% in 1995 to 8.3% in 2023, while Dr. Pepper’s has climbed.

    • Clever marketing campaigns and TikTokers’ willingness to mix anything with the soda, including dill pickles or hot peppers, have helped Dr. Pepper to surge.

    Still, Coke’s ($KO) market share is more than double that of any other carbonated soft drink. And when it comes to marketing, nothing beats Coke vs. Pepsi’s iconic no-filter commercials.


    AI

    AI Was Once Thought To Be The Disruptive, Transformative Technology Of Our Time, Now Investors Are Skeptical

    CEO Jensen Huang may be the god of delivering shareholder value for Nvidia ($NVDA) — but whether he can do that for his customers is still up for debate. Billions are being funneled into pursuing artificial general intelligence (AGI), promising a new era for humanity. Yet, this grand vision clashes with an industry bogged down by costly infrastructure — all while customers remain wary of AGI’s potential.

    Betting on the future: In 2023, Nvidia sold over $50B worth of AI chips. However, Sequoia estimates only $3B of this revenue came from outside of the chip industry. Unsurprisingly, Nvidia aims to sell even more chips. On Sunday, Huang announced plans to upgrade AI accelerators annually, faster than the previous two-year cycle. This means the tech industry will have to pony up — and while that could eventually pay off, analysts are now questioning if AI will be as transformative as once thought.

    • The break-neck pace of AI growth has slowed — with companies like OpenAI facing stagnant user growth, while Google ($GOOG) has grappled with technical issues.

    • New studies reveal that while businesses slowly adopt AI products despite limited use cases, Americans remain skeptical about AI’s benefits.

    The Other Slowdown

    Running AI infrastructure is expensive — and for now, it remains more costly and less capable than employees, per Wharton’s Professor of Management Peter Cappelli. Compounding those problems, the progress on building AI models is slowing.

    • AI companies are running out of data to train and improve their models — experts warn that within two years, these models could exhaust available text data.

    • Existing semiconductor products are also hitting physical limits, with chip sizes shrinking and compute speeds decelerating.

    GDP hallucinations: A recent MIT study led by famous economist Daron Acemoglu found that AI could boost GDP by a modest 0.93% to 1.16% within the next ten years, far below Goldman Sachs’ forecast of 7%. While Acemoglu acknowledges AI’s potential to significantly enhance productivity, he also warns of its darker side, including “deepfakes, misleading digital advertisements, addictive social media, or AI-powered malicious computer attacks.”


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    LARGECAP RECAP

    ↩️ Google Rolls Back AI Summaries In Search Engine, Another AI Trip-Up

    Google ($GOOG) wants to be in the artificial intelligence arena, but despite the company’s best efforts, its AI products have been remarkable for all the wrong reasons. Employees labeled its first AI model as “worse than useless,” and its follow-up, Gemini, has been steeped in controversy since launch. True to form, Google’s latest AI product continues this trend of issues and controversy.

    If only it was a joke… The AI summaries went viral for their absurd — and sometimes dangerous — advice. Despite dozens of “technical improvements” and company defenses, Google has now taken AI summaries offline to fix the issues. Clearly, Google doesn’t think its latest AI blunder is a laughing matter.

    🎲 GameStop Shares Surge as Meme Stock Legend "Roaring Kitty" Unveils $116M Stake

    Just when the market thought it was game over, Roaring Kitty (a.k.a. Keith Gill) added a new level to GameStop’s stock journey. On Sunday, the famous trader behind GameStop’s ($GME) 2022 surge posted on Reddit’s r/Superstonk, revealing a massive 5M share position in the struggling video game retailer. Along with 120K call options, this stake is worth over $170M.

    • Thanks to the post, $GME rallied more than 21% yesterday, flanked by other meme stocks — AMC Entertainment ($AMC) and Reddit ($RDDT) — up 11% and 2.8%, respectively.

    • eToro’s Ben Laidler believes “Keith Gill is putting his money where his tweets are, and some investors are clearly following his lead and rekindling interest in meme stocks.”

    Watch what happens… live: In recent weeks, AMC has used its boosted price to issue new shares and raise money, diluting existing shareholders. It’s likely that GameStop, now worth over $9B, could do the same — something that previously helped it raise over $900M. Analysts offer caution on GameStop and other meme stocks; Wedbush Securities’ Michael Pachter warns that GameStop’s valuation is overly inflated and driven by hype rather than the company’s financial health. With E*Trade contemplating banning Roaring Kitty over market manipulation concerns, GameStop may encounter challenges in leveling up.



    JOE’S MARKET PULSE

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    Markets & Economy

    Americans hate the economy but love their finances: A Federal Reserve study found that only 22% of Americans rated the national economy as “good” or “excellent,” while 72% said their own finances were at least “okay.” [Read]

    Paramount ($PARA) and Skydance to merge: After months of negotiations, the two entertainment companies are set to announce a deal this week, valuing Skydance at $8B. Existing Class B shareholders will be bought out at a 30% premium. [Read]

    Fed inflation pressures continue to rise: The personal consumption expenditures (PCE) price index rose 2.7% year-over-year (YoY) with no change month-over-month. As US growth slows, new measures may be needed to combat inflation. [Read]

    Business & Wealth

    Hot summer, hotter snacks: Food and beverage giants like Coca-Cola and Starbucks ($SBUX) are embracing “bolder, spicier, more fiery flavors” this summer, with dollar sales for “spicy” products increasing 9% YoY. [Read]

    Spotify ($SPOT) to raise US prices again: Amid controversy over unpaid royalties and new bundling rules, the streaming giant is hiking prices on its plans for the second time in a year, affecting its 400M+ users. [Read]

    AMD ($AMD) announces next-gen chips: After a two-year hiatus, the semiconductor titan is launching its Zen 5 CPUs and APUs, with the Ryzen 9 9950X touted as “the most powerful desktop consumer processor.” [Read]

    *Thanks to our sponsors for keeping the newsletter free.


    CHART


    DIGIT OF THE DAY

    Turkey’s Inflation Surges Past 75%, But Economists Believe The Peak Is Near

    Feeling the heat? Turkey’s economy certainly is, thanks to its hot inflation data. As of May 2024, the inflation rate has soared to 75.45% — the fastest pace since Nov. 2022. This record inflation, now in its third year, stems from political interference in financial policies. President Recep Erdogan’s previous decision to lower interest rates devalued the country’s currency, reversing decades of robust economic growth.

    • Education experienced the highest annual price rise at 104.8%, followed by housing at 93.2%, and hotels, cafes, and restaurants increasing by 92.9%.

    • Even with significant interest rate hikes, Turkish consumers kept spending high — resulting in a 7.3% jump in household consumption and a 5.7% economic growth in Q1.

    The road ahead: After President Erdogan’s re-election, he dropped his opposition to interest rate hikes to combat soaring inflation. Turkey’s central bank plans to keep interest rates high into Q3 2024, aiming to reduce inflation to about 38% by year-end — a goal some experts find ambitious. Despite the challenging economic conditions, policymakers anticipate potential rate cuts in Q4 based on inflation trends. Finance Minister Mehmet Şimşek remains optimistic, stating that the disinflation process will begin in June. He declared, “The worst is over!”


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