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    February 16, 2024

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    Good Morning. There’s a global stock market rally happening, and the S&P 500 decided to get in on the fun, having closed above 5K for the first time ever last Friday. (…and to think it was at 3.5K in just Oct. 2022.)

    If you thought the last few years were bad, try being an ‘80s Japanese investor. Last week, the Japanese market index, the Nikkei, finally broke new highs after peaking in 1989 and spent over 30 years trying to recover.

    So, if you need some motivation to get outta bed this Monday, try taking a peek at your 401(k).


    $ASML Is the Past, Present, and Future of Semiconductor Manufacturing — Here’s Why

    Without us, there is no AI. That’s the pitch from semiconductor supplier ASML (NASDAQ:ASML). If you haven’t heard of this Dutch company, that’s probably because it builds machines that print microchips onto silicon wafers using ultraviolet light. (We don’t blame you if you didn’t understand that.)

    ASML supplies hardware to major chipmakers like TSMC, Intel, and Samsung — who manufacture chips designed by Nvidia, Apple, and AMD. Shockingly, the Dutch firm has virtually no competition. Its ubiquity has sent its stock up over 400% in the past five years as chipmaking giants race to upgrade facilities to capitalize on the surging demand from tech companies.

    The only game in town: To accommodate the rapid growth of artificial intelligence (AI), ASML has created a cutting-edge $380M, 165-ton machine designed to manufacture higher-performance chips — which its CEO said will be necessary to meet the “massive amounts of computing power and data storage” required to power AI. And without ASML, it’s “not going to happen” (WSJ).

    • The new tool can fit 3x more transistors on chips up to 1.7x smaller than its predecessors.

    • Last quarter, ASML experienced record orders of $10B as customers lined up to acquire its state-of-the-art technology.

    2024 could be mid. Instead, look forward to 2025.

    ASML’s machines have become a hot topic in the tenuous relationship between the US and China. Since 2019, US officials have pressured ASML to cancel shipments to China, citing concerns about China’s ambitions to develop its semiconductor industry. These tensions escalated when the Netherlands pulled ASML’s license to export high-end equipment to China.

    • Despite these challenges, ASML saw a surge in sales to China as Chinese companies rushed to secure its products before any potential export bans.

    • This led to a significant increase in ASML’s sales from China, from 8% in the first quarter of 2023 to 39% by the fourth quarter (BBG).

    Back to normal: Curtailing its Chinese exports will have a 10-15% impact on the company’s sales this year, contributing to flat growth in 2024. However, the company forecasts a chip boom in 2025 — boosted by an economic recovery, an upgrade cycle among chipmakers, and an increase in its own production output.


    Execs From Google, Amazon and Meta Can’t Hide Their Excitement For This AI Startup

    If you get the likes of execs at Google, Amazon, Meta investing in your company – you must be doing something right. Not to mention being backed by the Adobe Fund for Design with major customers like Skechers, Sweetgreen, and MGM all point to something big.

    For this AI startup, it’s not a hallucination, it’s reality. RAD AI is disrupting the $633B marketing technology and data analytics industry — solving one of the biggest problems for marketers.

    • Brands spend billions trying to figure out what marketing campaigns work. And most of the time, it doesn’t work.

    • That was before. Today, RAD AI helps brands analyze their content across platforms using AI to figure out what works.

    They’ve already raised $27M from over 6K investors and have grown their revenue by ~3x in 2023. And now you can finally join them too.

    LargeCap Recap

    💸 Cash, out. Bonds and growth stocks, in.

    For the last two years, the Fed’s interest rate hikes helped make cash-rich Americans even wealthier as interest rates eclipsed 5%. But with rates expected to begin falling this year, some $7T sitting in money-market funds could move towards riskier investments. Blair duQuesnay of Ritholtz Wealth Management told Barron’s, “There’s a huge opportunity cost to not investing in markets and just sitting in cash.”

    • After breaking record highs, analysts are beginning to diverge over the outlooks for Big Tech — while investors are looking at bonds to outperform as interest rates decline.

    • Comerica Wealth Management’s CIO, John Lynch, favors the underperforming healthcare sector, represented by the Health Care Select Sector SDPR (NYSE:XLV) — anticipating a 17-18% earnings increase within the industry this year.

    Market timing is difficult: Hopefully, by now, you know that already. Those who don’t may have learned a hard lesson, especially those who panic-sold near the market’s bottom in Oct. 2022, with the market surging ~40% since then. Instead, if you held the S&P 500 through the recent downturn, you’d already be back in the green.

    😨 WeWork comparisons spook Soho House investors

    You never want to be compared to a company that recently went bankrupt. Just ask Soho House (NYSE:SHCO); the members-only club saw its shares plummet 19% in a single day last week after GlassHouse Research said its ballooning debt and lack of profit are “eerily similar” to the embattled coworking business.

    • Since its 2021 IPO, Soho House’s shares are down 60%. Some shareholders want to take the company private, forming an internal committee late last year to discuss potential deals.

    • Soho House pushed back on the GlassHouse report, saying growth is strong, and 2023 earnings should track with guidance issued last fall, which projected an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $130M-$135M.

    Storm clouds ahead? Soho House has worked to stay exclusive while still growing — so they announced they’re not taking new members at some locations after complaints of overcrowding at clubs. Instead, they want to upsell existing members on food and drink at their pools, though that’s at the whims of summer weather conditions. Soho House blames a dip in revenue during Q3 of the previous year on the unusually wet summer weather despite achieving a 20.8% year-over-year growth in membership.


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    Markets & Economy

    Are we in for a dividend-investing renaissance? The post-2008 rush of zero interest rates and high-growth tech stocks has made dividend investing seem quaint. But now that Meta (NASDAQ:META) is offering a dividend, some analysts feel the pendulum might be swinging the other way. [Read]

    23andMe (NASDAQ:ME) may split company to save stock price: The genetic testing company reported brutal earnings — a $278M net loss in the fiscal third quarter, dwarfing the $92M they lost in the year-ago quarter. Now, they might slice up their consumer and therapeutics businesses to attract more investors. [Read]

    December inflation numbers revised: The CPI increased 0.2%, not 0.3%. Economist Paul Ashworth calls the revision a “damp squib” (whatever that means) but thinks the revision could possibly help the chances of an earlier May rate cut. [Read]

    Business & Wealth

    China-US relations could intensify, says Palantir (NYSE:PLTR) CEO: The two countries are on very different economic paths at the moment — as China’s GDP slows and the US picks up. Could China’s belief that the US will be “stronger tomorrow than they are today” drive them to act? [Read]

    Delta (NYSE:DAL) plans new “premium” airport lounges: They’ll be, uh, premium-er than their existing Sky Club lounges, which are often overcrowded. One will open at JFK in June and feature a restaurant and wellness area. Boston and LA will then get premium Delta lounges of their own after that. [Read]

    Big pharma CEOs defend drug prices in front of Senate: The Biden admin wants to cut costs, so CEOs from Merck (NYSE:MRK), J&J (NYSE:JNJ), and Bristol-Myers-Squibb (NYSE:BMY) testified saying they… don’t want to cut prices but they welcome cheaper copycats entering the market once patents on their drugs expire. [Read]



    Sam Altman Wants To Raise an Eye-Popping $7T To Beat Nvidia at Its Own Game

    Shoot for the stars; aim for the galaxy. OpenAI’s CEO has set his sights high, aiming to secure a staggering $7T from investors like the UAE government and SoftBank’s CEO Masayoshi Son, to increase global chip-building capacity. That’s “trillion,” not “billion.” It’s ambitious, wild, and a massive amount of money — almost 7% of the world’s GDP, surpassing the combined $6T value of Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT).

    • Altman proposes a partnership between investors and OpenAI, which could become a key customer for the new chip factories.

    • It’s also a defensive move against Nvidia (NASDAQ:NVDA), which controls over 80% of the AI chip market — potentially giving OpenAI a significant advantage.

    Vision, mission, success: Looking at OpenAI’s recent performance, the company achieved an annualized revenue of $2B, a figure Altman anticipates doubling by 2025. Notably, Altman mentions that 92% of Fortune 500 companies now use OpenAI’s products. However, the biggest hurdle hindering further growth is the lack of AI chips. Last week, Arm (NASDAQ:ARM) jumped nearly 60% thanks to the tremendous demand for its AI chips, and we’ve all already seen how that’s playing out for Nvidia. Altman believes “The world needs more AI infrastructure … than people are currently planning to build.” So, he’s taking matters into his own hands.


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