Barron’s Weekend Summary: Over the past two months, Wall Street has become preoccupied with ChatGPT
Cover Story:
-Over the past two months, Wall Street has become preoccupied with ChatGPT, the now very popular chatbot from start-up OpenAI. ChatGPT launched on Nov. 30 as a free service, and the world has been dazzled by its ability to answer questions and create original materials, generating everything from letters and resumes to computer code and Shakespearean-style sonnets. ChatGPT reached more than 100 million users in January, hitting that milestone even faster than TikTok.
Interview:
-This week Barron’s talks to Burton G. Malkiel, who is fond of saying that, as a boy growing up in Boston, he knew the price of General Motors’ stock as well as he knew Ted Williams’ batting average. The Princeton University economist was just 10 when he started thumbing through the newspaper to reach the stock tables. “I was fascinated with the numbers that appeared on the stock pages from day to day,” says Malkiel, now 90. “I was curious about how the share prices had changed, why they had changed, and whether there were any interesting patterns in the numbers.”
Tech Trader:
-In a recent presentation, SoftBank Group noted that sales of AI-related chips are projected to grow at an annual rate of 35% through 2030. That’s no idle observation: It’s directly tied to the outlook for SoftBank’s most important holding, UK-based chip-design firm Arm Holdings. SoftBank bought Arm for $32B in 2016. In 2020, it agreed to sell the company to Nvidia for $40B in cash and stock, but the transaction was eventually scuttled in the face of fierce opposition from regulators and global chip makers, who are Arm’s customers.
The Trader:
-Even the most optimistic investors will admit that January’s blistering pace—which lingered into the first trading days of February—couldn’t continue indefinitely, not after the NASDAQ Composite in 2001. In that sense, the fact that the Dow Jones Industrial Average dipped 0.2%, the S&P 500 index fell 1.1%, and the NASDAQ dropped 2.4% this past week isn’t too troubling. Yet bullish investors should feel uneasy. Markets seem convinced that the US will pull off a soft landing, and the early economic data, which featured a slowing inflation rate and a still-strong job market, only seemed to support the case. The past week, however, lacked any meaningful data, and no news, in this case, was bad news.
-A quick look at Pepsi’s recent fourth-quarter numbers shows there was a lot to like. Organic growth—a particularly important metric for consumer-goods companies because it reflects internal improvements—jumped nearly 15% from the year-ago period, easily surpassing analyst estimates. Pepsi’s better-than-expected results reflected strong global demand and robust revenue that showed only minimal pullback from consumers in the face of higher pricing. Like many companies, Pepsi and its staples peers have been raising prices in recent quarters to offset the impact of inflation, but the beverage and snack industries in particular have largely seen consumers accept these increases.
Features:
-A sale of Meta stock by a Meta executive may have bullish implications. Chief Business Officer Marne Levine sold $4.45M worth of Meta shares Tuesday, according to a Thursday afternoon filing with the Securities and Exchange Commission. It was the first substantial sale by a Meta executive this year. The sale was related to a Rule 10b5-1 trading plan, which triggers sales at a certain price or time depending on the conditions. Sales enacted through these plans can still be “very meaningful” data points, according to Max Magee, a senior analyst at VerityData, which tracks buyback patterns and insider activity.
While it’s not clear from the SEC filing why the sale went off Feb. 7, Magee sees reason to believe it could be due to price. “This may suggest that we have reached a threshold where Meta shares have come back to a price at which their executives are more broadly willing to sell,” Magee told MarketWatch.
- ChatGPT can write poetry, stories, and song lyrics. Eager experimenters have asked the chatbot to pass professional exams and create market-beating stock funds. But in each case, the details tell an equally important story: Artificial intelligence still can’t match human intelligence in terms of accuracy, creativity, or originality. Even OpenAI CEO Sam Altman has tried to tamp down some of the enthusiasm. Technologies like ChatGPT are “impressive but not robust,” he said at a StrictlyVC event last month. At first when you use them, they seem “incredible,” he says, but after you “use them 100 times, you see the weaknesses.”
European Trader:
-Spain’s Repsol looks well placed to benefit from the tailwinds caused by Russia’s invasion of Ukraine and its knock-on effect for fuel imports. Repsol is the product of the privatization of the former Spanish state assets in the energy sector, giving it a dominant position in the country’s refining industry. It is Repsol’s refining operations that could see it outperform energy peers this year. The European Union’s ban on Russian fuel imports from Feb. 5 is expected to support high refining margins, even as oil-and-gas prices normalize. Repsol makes around 30% of its profit from refining, according to Bank of America, one of the highest levels of all European energy companies.
Emerging Markets:
-The Adani Group, which has seven listed companies including flagship Adani Enterprises, is beginning to recoup some of the $100B-plus loss in market value it suffered after US-based short selling firm Hindenburg Research in late January made allegations of widespread fraud. The Adani Group responded with its own 413-page rebuttal calling the charges baseless, and described the allegations as a “calculated attack” on India’s growth story and ambition. The energy and infrastructure conglomerate’s story has been intertwined with India’s growth, and the close relationship its chairman built with Prime Minister Narendra Modi over decades has added an extra element to the turmoil, which has shaved about 4% off the MSCI India index since late January. But money managers don’t see the crisis derailing the longer term prospects for India, the world’s fifth largest economy, and one which appeals to many market strategists and geopolitical analysts. The long-term economic promise of India, with its young population, and efforts by Modi to upgrade infrastructure and woo manufacturers to remake India as an alternative for those looking to diversify away from China, still holds.
Commodities:
-The West slapped new sanctions on Russian oil products this past Sunday that many thought would spike diesel prices. On Monday, fuel prices barely budged. “I think right now the market is kind of in show-me mode,” says RBC Capital Markets analyst Helima Croft. Similar predictions were made in December before Russian crude was sanctioned, and prices didn’t move much then, either. In fact, Russia exported more oil than it did before sanctions were imposed; S&P Global says Russian seaborne crude hit a six-month high in the first half of January.
Streetwise:
-This week Jack Hough wonders what you would do If you had to choose between, say, apple pie and being splashed head-to-toe by a roadside slush puddle. Are you the kind of person who’d take the pie? If you answered no to any of these questions, the standard bank sweep might be a good fit. It recently paid 0.48%. Others should probably consider what Charles Schwab calls “purchased money funds.” An ordinary one of those recently paid 4.47%. On a $50,000 balance, that’s an extra $2,000 a year. A Schwab rep says its sweep accounts aren’t intended for investment cash, and that its rates are “up to 45 times higher” than what some banks pay on checking accounts. Indeed, JPMorgan Chase and Bank of America still offer accounts that pay 0.01%. If anything, the rep understated the case. Schwab offers a debit card with unlimited rebates of ATM fees and no foreign transaction fees—a solid value for traveling cash-flashers.jpm