Cover:
-In August 2023, Barron's convened a Tech Roundtable, where generative artificial intelligence was in its honeymoon phase. The Magnificent Seven and ChatGPT were less than a year old, and Nvidia had a third of its current $3T market value. Despite these early predictions, AI has upended corporate strategy and spending plans, opening the door to an age of rapid problem-solving, enhanced productivity, and machine-driven creativity. The AI hype cycle has entered a new phase, with investors looking for a payoff. As some of the early enthusiasm fades, tech stocks have entered a correction. Four veteran stockpickers focused on tech, Felise Agranoff, Gavin Baker, Tony Kim, and Denny Fish, provide insights on where to go from this phase of the AI hype cycle.
Interview:
-BP CEO Murray Auchincloss is focusing on the Gulf of Mexico to regain investor confidence and counter Elliott Management's activist influence. The Gulf has a history of producing wells and has been the site of the Deepwater Horizon disaster in 2010. BP has invested $7B in the Gulf from 2022 to 2025, including the Kaskida project to create its sixth hub. The company's production is expected to reach 400,000 barrels of oil equivalent a day, and the increased production should supercharge free cash flow, which can be converted into dividends and buybacks. This could help fend off Elliott, which has built a 5% stake in the company.
Tech Trader:
-no update
The Trader:
-Core PCE price inflation, the Fed's preferred measure, was higher than expected, despite the impact of tariffs not yet being measured. The University Of Michigan Consumer Sentiment survey also showed inflation expectations rising, leading to a 2% tumble in the S&P 500. The stock market drop resulted in major indexes finishing the week lower, with the S&P 500 falling 1.5%, the Dow Jones Industrial Average declining 1%, and the Nasdaq Composite dropping 2.67%. The Fed's two mandates are promoting price stability and maximum employment, and while core inflation remains sticky, an economic slowdown might be a bigger concern. Recent job reports have shown weaker job growth, and the uncertainty about the economy due to Trump tariffs could change when March's payrolls are released on April 4. Lower rates would put Powell and the administration on the same page, as Bessent and Trump are more focused on the 10-year Treasury than short-term lending rates the Fed controls. The 10-year Treasury yield is currently hovering below 4.3%, down from a 2025 peak of just under 4.8% from mid-January.
-The tech industry is experiencing a downturn, with big tech companies like Nvidia and Tesla struggling. However, China's Terrific 10, including Alibaba, Tencent, Meituan, Xiaomi, JD.com, NetEase, Baidu, BYD, Geely, and SMIC, are not. This raises the question of whether it is time to focus on their Chinese counterparts instead. According to YT Boon, Neuberger Berman’s head of thematic for Asia, the rise of cheaper artificial-intelligence technology developed by Chinese company DeepSeek may have kicked off a new wave of AI investment in China, benefiting leading Chinese companies. Boon argues that the rise of DeepSeek will lead to a significant change in how China’s government treats its big technology firms following a crackdown and increased regulations starting in 2020. Despite a massive rally this year, many of the leading Chinese growth stocks still look fairly cheap. Baidu is trading at just 10 times earnings estimates for this year, compared to a price/earnings ratio of 19 for Google owner Alphabet. Alibaba’s P/E is only 15 while Amazon trades at 31.5 times. WeChat owner Tencent trades for about 18 times, while Facebook and Instagram parent Meta Platforms is valued at 24 times. Electric-car maker BYD sports a multiple of 20—well below Tesla’s P/E of nearly 100.
Features:
-President Donald Trump's recent announcement of 25% tariffs on cars made outside the US has caused a surge in consumer and business sentiment, as well as a decrease in US trading partners' patience. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all fell in response, with auto stocks like General Motors and Ford Motor underperforming the broader market. The potential impact of tariffs on the economy and consumers is becoming increasingly concerning, as they could disrupt supply chains, deter investments, and raise consumer prices. The tariffs may also ignite trade disputes with Europe, Japan, and South Korea. Consumer and investment sentiment remains at the same levels as in the fall of 2022, with data points like the spike in February durable goods orders indicating a sense of uncertainty surrounding tariff policies. The recent stock market losses have made even wealthy investors less likely to spend, indicating a growing sense of uncertainty surrounding tariff policies.
-Carrier Global's stock has seen a 1.5% increase since February 19, after a 17% drop since October. The company's German heat-pump business, Viessmann, is expected to perform better than current forecasts, while onshoring and data center buildouts could spur growth and stock gains. However, risks remain, including the potential negative economic consequences of tariffs, which could reduce US software companies' AI investments, potentially impacting sales for Carrier and its peers Trane Technologies and Lennox International. Carrier has also seen lower sales from Viessmann, which it bought last January. Management forecasted flat revenue this year due to uncertainty about Germany's political election, which has implications for heat-pump subsidies. Analysts have reduced Carrier's 2025 sales estimates, which topped $26B a year ago, to $100 M below management's guidance midpoint of $22.75B.
Europe:
-President Trump is preparing for trade war with the European Union over its moves to tax and regulate US tech giants. A White House memorandum directed cabinet departments to defend American companies and innovators from overseas extortion, with Europe's digital services taxes as Exhibit A. There are concerns about America weaponizing digital infrastructure, according to Dimitar Lilkov, senior research officer at the Wilfried Martens Centre for European Studies. The EuroStack concept, a "bold vision for digital sovereignty" issued by the Centre for European Policy Studies, aims to achieve digital independence for Old Europe. However, the US accounts for 71% of global research-and-development spending on software and internet technologies and 70% of foundational AI models. European catch-up would cost EUR 300B ($323B), while the continent is already scrambling to find large sums for a defense upgrade.
Emerging Markets:
-No update
Commodities:
-US Steel, a materials producer whose takeover by Japanese rival Nippon Steel was blocked by former President Joe Biden, is surging after a report suggests the $14B deal could still be saved. The two companies are in talks with President Donald Trump, with Nippon offering to double investment in US facilities to $7B from $2.7B. Unions have opposed the deal, and Trump has stated in the past that he doesn't want it to go through. Trump has also raised tariffs on steel and aluminum imports since taking office, which has pushed up steel prices. US Steel was up 6.7% in premarket trading at $45.87, while Nippon Steel closed 2.1% lower in Japan.
-Copper prices, a reliable indicator of the economy, have seen a surge due to Donald Trump's tariffs. Futures for March delivery settled at a record $5.18 a pound, surpassing the previous all-time high set last May. However, analysts believe the surge is due to Trump's trade policies, rather than rising demand for wires and pipes. The President has threatened 25% tariffs on copper, prompting traders to stockpile the metal ahead of "Liberation Day," the April 2 deadline when many of the White House's levies are expected to take effect. Analysts don't expect the surge to last long, as the price effect can be expected to reverse at a later stage. Copper mining stocks have surged this year, with Freeport-McMoRan up 13% in 2025, Southern Copper Corporation up 12%, Rio Tinto American depositary receipts up 6.8%, and BHP Group ADRs climbing 2.4%. The spike in copper prices comes at a time when investors are concerned that tariffs could cause inflation and drag down growth. US consumer confidence plummeted to its lowest level in more than four years this month.
Streetwise:
-Consumers are increasingly turning to challenger brands, with food insurgents generating 27% of industry growth using brands that collectively hold less than 1% market share. Big Food is struggling due to obesity drugs and stretched consumer budgets, while private label goods are taking market share in 61% of food categories. Small brands are also taking market share in 67% of categories. Big publicly traded food companies have been losing share for two years, and the pace is accelerating. Small brands like Tony's, Tillamook County Creamery Association, and Black Rifle Coffee are taking market share in 67% of categories. Small brands are taking a larger share in coffee pods, while giants like Nestlé and Keurig Dr Pepper are still well behind. In clothing, California-based yogawear brand Alo, founded in 2007, is nine years younger than Canada's Lululemon. The brand is experiencing rapid revenue growth, with a town banning Alo clothes due to confusion between children and their mothers. Lululemon reported mixed fourth quarter financial results and guided below earnings estimates.