Cover:
-As cloud computing surged in 2011, venture capitalist Marc Andreessen asserted that "software is eating the world," predicting significant transformations in the tech landscape. Microsoft benefited immensely from this trend, transitioning from stagnation to substantial growth. However, with the rise of artificial intelligence (AI), there has been a notable shift in the tech sector’s focus, resulting in a decline in software stock values, including a 28% drop in Microsoft’s stock since July, losing $1 trillion in market value. Despite this, analysts believe Microsoft is well-positioned, with RBC's Rishi Jaluria suggesting the company is undervalued and likely to see substantial revenue and earnings growth. Microsoft’s broad suite of products remains central to its business, with its Productivity & Business Processes segment generating significant revenue, though AI poses a threat to this area. The ongoing narrative suggests that the impact of AI on software markets could signal a major disruption for companies like Microsoft.
Interview:
-Hilda Applbaum, co-manager of the $144B American Funds Income Fund of America, likens her investment strategy to nurturing her blueberry bushes. She focuses on undervalued companies with at least a 2.5% yield, investing for the long term until they can rebound. Her tenure has led to significant success, with the fund outperforming 98% of peers over 15 years, averaging 8.6% returns, as noted by Morningstar. Applbaum, recognized as one of Barron’s 100 Most Influential Women in US Finance, has a solid background in economics and investment analysis. In a recent conversation, she addressed concerns about the geopolitical situation in Iran and its potential impact on energy prices and technology firms, affirming her long-term investment approach and highlighting past successes with firms like Taiwan Semiconductor Manufacturing and Broadcom.
Tech Trader:
-As the war in Iran persists, the tech sector faces significant challenges due to disrupted raw material supplies, increased interest rates, and potential cyber conflicts. The ongoing conflict has already affected the global petroleum supply, crucial for energy sources used in chip manufacturing across East Asia, particularly in Taiwan and South Korea. Major semiconductor companies like Taiwan Semiconductor Manufacturing have seen their stocks drop by 10%, with South Korean giants SK Hynix and Samsung facing declines of 14% and 15%, respectively. The reliance on Middle Eastern resources, including helium and bromine, exacerbates the situation, leading to rising prices and potential shortages that may restrict chip production at a time when demand is surging due to AI advancements. An extended war could severely impact the AI infrastructure buildout by further complicating resource availability.
The Trader:
-Real estate investment trusts (REITs) are gaining popularity amid market instability due to concerns over Iran, rising oil prices, and declining AI trade, attracting investors for their tangible assets and reliable dividends. The State Street Real Estate Select Sector SPDR ETF has risen nearly 4.5% this year, contrasting with a more than 2% drop in the S&P 500. Senior portfolio manager Iman Brivanlou highlights that REITs are benefiting from inflation and potential interest rate cuts by the Federal Reserve, making their average yield of 3.3% appealing. He recommends infrastructure REITs like American Tower and SBA Communications, and suggests that REITs focused on senior living, such as Welltower, are promising due to demographic trends. The Westwood Enhanced Income Opportunity ETF also includes Prologis and Essex Property Trust, which are expected to perform well given the current housing market challenges.
-Alibaba Group Holding stock is preparing for its fiscal third-quarter earnings report, facing challenges primarily related to fears that advancements in artificial intelligence (AI) may impact its profitability. The tech giant's shares have declined over 7% this year amidst concerns regarding Chinese consumer spending and inflation. Currently, Alibaba's stock trades at 16X earnings estimates for the coming year, which is below its 10-year average of 19 and significantly less than Amazon's 26.5X. The company is expected to report earnings of $1.67/share, a 43% decrease from the previous year, with projected revenues of $42.1B, reflecting a 9% increase. Analysts, including Citigroup's Alicia Yap, point to ongoing management changes and executive turnover in Alibaba's Qwen chatbot unit as indicative of potential strategic disagreements regarding AI. However, demand for Qwen AI services has reportedly surged during the recent Chinese Lunar New Year, suggesting resilience.
Features:
-Concerns regarding the Iran war have affected financial markets, particularly raising fears that increased oil prices could trigger a global economic slowdown. This downturn has caused a decline in copper prices, which has also affected Freeport-McMoRan, the largest US copper miner, as its stock has fallen more than 10% from its peak over the past year. Despite this, Freeport's stock is still up approximately 20% for the year and more than 75% in the last 12 months, primarily driven by expected demand from data centers requiring copper wiring. Even though copper prices have dipped, they remain approximately 4.5% higher this year and over 25% since March 2025. Wall Street has set a consensus price target of $68.62 for Freeport shares, projecting a 10% increase from current levels, although this estimate may be conservative. Kevin Smith, Chief Investment Officer of Crescat Capital, believes that the current pullback is a temporary overreaction to the Iran situation and that there is significant potential for a long-lasting bull market in copper. He views the current dip as a buying opportunity for Freeport and other copper miners, suggesting that copper prices could rise an additional 20% to 25% from their present levels.
-Iran’s heavy artillery and navy have been quickly neutralized by the US and Israel, but regaining control over the Strait of Hormuz is proving to be a prolonged challenge. The strait, a critical passage for 20% of global oil and LNG, may remain blocked for weeks, impacting energy markets and potentially leading to global recession if oil prices reach $150. Iran's Supreme Leader has expressed intentions to keep the strait closed to exert pressure, further complicating efforts as attacks on tankers and mining activity increase. The US faces a complex task in reopening the strait, with reports suggesting a varying number of mines deployed by Iran. A straightforward military solution appears elusive, given the layered defense capabilities Iran possesses.
Europe:
-The US and Israel claim that Iran’s heavy artillery and navy have been quickly neutralized, but regaining control over the Strait of Hormuz is proving to be a prolonged challenge. The strait, a critical passage for 20% of global oil and LNG, may remain blocked for weeks, impacting energy markets and potentially leading to global recession if oil prices reach $150. Iran's Supreme Leader has expressed intentions to keep the strait closed to exert pressure, further complicating efforts as attacks on tankers and mining activity increase. The US faces a complex task in reopening the strait, with reports suggesting a varying number of mines deployed by Iran. A straightforward military solution appears elusive, given the layered defense capabilities Iran possesses.
Emerging Markets:
-Venezuela has made unexpected progress since U.S. forces captured President Nicolas Maduro on January 3. Vice President Delcy Rodriguez reformed the Hydrocarbons Law, transitioning to production-sharing arrangements, and an amnesty law released over 3,000 political prisoners. Public sentiment has shifted dramatically, with 80% of Venezuelans now optimistic about the future. Oil production is expected to increase from one million to 1.5M barrels per day, primarily driven by multinationals like Chevron, Eni, and Repsol. However, reaching the historical production levels of 3.5 million barrels will require significant structural changes and improvements in the rule of law. Maria Corina Machado, the opposition leader, plans to return to Venezuela to support a transition to democracy, but internal challenges remain, especially with Diosdado Cabello’s influence. The US holds Venezuelan oil revenues pending the establishment of a representative government, while the country grapples with over $130B in sovereign debt, making large-scale investments contingent on resolving these financial issues.
Commodities:
-Since the outbreak of war in Iran, the State Street SPDR S&P Metals & Mining ETF (XME) has fallen nearly 6% from February 27 to Friday, as reported by FactSet. This ETF provides exposure to both precious and industrial metals, as well as mining companies like Alcoa, Freeport-McMoRan, and Newmont, which have seen declines of 3.35% to 4.78%. BullionVault researcher Adrian Ash indicates that the rising energy costs due to oil prices nearing $100 per barrel significantly impact mining operations, as energy constitutes a large portion of mining costs. Additionally, he notes that industrial metal prices are declining amid fears of an economic slowdown, as reduced consumer buying diminishes input demand. Continuous copper contracts (HG00) have dropped 0.5% in the past five trading days while gold prices have also decreased since early March, after reaching a peak of $5,626.80 per ounce on January 29. Ash cites that gold often declines when equities fall as investors liquidate positions to cover losses, further complicating the outlook for mining stocks amid heightened market volatility driven by geopolitical tensions.
Streetwise:
-Nvidia's stock, despite a staggering 22,000% increase over the last decade, is currently facing skepticism on Wall Street due to a recent temporary trading dip. Investors are uncertain whether Nvidia can sustain its exceptional growth trajectory. The upcoming Nvidia GTC 2026, which centers around artificial intelligence developments, represents a crucial opportunity for the company to bolster investor confidence. Currently, Nvidia's stock saw an 8% decline earlier this year but has recently stabilized to a decrease of only 1%. Analysts predict a significant increase in free cash flow, projecting an 85% rise to over $178B in the fiscal year ending January 2027 - a marked acceleration compared to the previous year. However, there remains a substantial $98B variance in analysts' estimates, reflecting a high level of uncertainty. Nonetheless, recent consensus forecasts have improved following Nvidia's quarterly earnings report in late February. Notably, if Nvidia meets these predictions, it has the potential to become the most prosperous company in history, surpassing notable benchmarks like Saudi Aramco's record free cash flow, influenced by geopolitical developments affecting oil markets.