Cover:
-The US government has proposed remedies to break Google's hold on search, causing Alphabet's stock to fall 4.7% to $167.63. This comes amid concerns about the rise of generative artificial intelligence (AI), which can answer complex questions in plain language. This has created an opening for competitors like ChatGPT, Perplexity, and Microsoft, which could siphon users away from Google and potentially damage its advertising business. Without search and ad dollars, Alphabet's stock would collapse. However, Alphabet is more than up to defending itself, having navigated the internet's shifting terrain since going public in 2004. As generative AI continues to grow, it has the potential to add revenue as Gemini, Google's AI tool, becomes more powerful. The government's attempt to break Alphabet apart could be an overhang, but it appears to be reflected in the stock, which is the cheapest of the Magnificent Seven and even cheaper than the S&P 500 index. Despite the future, Google's search business remains dominant and cash-generating, and this is unlikely to change as people find information.
Interview:
-US economic growth has exceeded expectations this year, despite cooling inflation and a softening labor market. The outlook for 2025 is for more growth, but the incoming Trump administration's fiscal policies could potentially lead to inflation, posing challenges for the Federal Reserve. John Williams, president and CEO of the Federal Reserve Bank of New York, is an expert in the neutral rate of interest, a theoretical rate that neither stimulates nor restricts economic growth. Williams' insights will be particularly valuable as the Fed moves to bring interest rates to a level that balances the US economy. He recently spoke with Barron's about his economic and inflation outlook, the Fed's goals, and the global implications of China's struggle to maintain growth.
Tech Trader:
-Nvidia's AI growth story is not over, as the company's new Blackwell graphics processing unit has seen limitless demand, boosting its stock price. The company reported a 94% year-over-year growth in sales to $35 billion for the three months ending in October, with the data-center business growing 112%. Net profit doubled to $20 billion over the prior year, and the company provided a robust outlook for the current quarter, slightly exceeding Wall Street expectations. Nvidia shares fell in after-hours trading following the report, but investors should focus on the big picture and not overlook the unprecedented magnitude of Nvidia's performance. The main question is whether Nvidia can produce another big growth year in 2025, satisfying Wall Street's forecast for 54% revenue growth. Nvidia's executives suggest the answer is yes, with Chief Financial Officer Colette Kress stating that Blackwell demand is staggering and the company is racing to scale supply to meet the incredible demand. CEO Jensen Huang said that Blackwell revenue for the current quarter would exceed the company's prior guidance of "several billion dollars."
The Trader:
-Pinterest, a website that provides ideas for recipes and clothes, has experienced a 15% drop in shares to $29 following its third-quarter earnings report. The company's guidance for fourth-quarter sales was criticized for a 16% increase, a touch slower than the 18% growth expected in the previous quarter. This raised concerns about the business's ability to maintain profitability and potential decrease in profit margins. However, management has often underpromised and overdelivered on sales, with better third-quarter growth than its earlier 17% midpoint guidance. The company has surpassed sales estimates in 18 out of the past 20 quarters, according to FactSet. Pinterest could be setting expectations low to deliver a pleasant surprise when it reports its fourth-quarter numbers in February.
-Anti-obesity drugmakers Eli Lilly, Novo Nordisk, and Amgen have experienced a drop in stock prices due to concerns over the potential impact of a Robert F. Kennedy Jr.-run Department of Health and Human Services. The market has been tumultuous, with the selling starting as profit-taking and picking up steam after the Federal Reserve cut interest rates and the election approached. When President-elect Donald Trump appointed RFK Jr. to lead the agency, panic selling set in. Kennedy is not fond of Novo Nordisk's weight-loss treatment Ozempic, which costs the government too much to insure. Investors are concerned that he may push for less insurance coverage or lower GLP-1 prices. Amgen stock has dropped 9% in November, while Lilly has fallen 17% and Novo Nordisk has declined 10%. However, the agency doesn't have unilateral power to change drug coverage and pricing, and it would require an act of Congress to allow Medicare to pay for anti-obesity drugs.
Features:
-Chinese businesses are preparing for the potential trade protectionist policies that could come from the second Trump administration, as exports grew at the fastest pace in over two years in October. Most of that growth was due to factories rushing inventories to major markets in anticipation of further tariffs from the US and the European Union, as the threat of renewed trade wars grows. Chills are being felt from upstream shippers all the way down to the sales segment, including firms that sell domestically. China's exports to the US are dominated by electronic equipment, machinery, vehicles, plastics, irons and steel, furniture, apparel, and toys and games. Export-dependent business owners are preparing for the worst, as they are preparing for the worst.
-Pam Bondi, the former Florida attorney general and President-elect Donald Trump's new nominee for US Attorney General, faces potential questions about her investment in Trump Media & Technology Group, the publicly traded owner of Truth Social. Bondi owns 106,250 shares of DJT, which went public in March following a merger with Digital World Acquisition Corp., a blank check special purpose acquisition company. At current prices, that stake is worth nearly $3.3M. Bondi also owns 31,250 warrants to purchase DJT common stock. Bondi, now a partner in the Washington, DC, office of lobbying firm Ballard Partners, will undoubtedly face questions about her investment in DJT. Bondi's brother Brad Bondi, a lawyer at Paul Hastings, also worked on the deal to bring Trump Media public but isn't listed as owning any DJT shares.
Europe:
-The growing tensions between Russia and the US over the Ukraine war are posing significant risks to global security and the US nuclear power plants. On November 14, Russia halted the export license for a company that sends enriched uranium to the US for use in nuclear reactors. As a result, all shipments of enriched Russian uranium, which accounts for 40% of the global supply, are stalled. Uranium prices and stocks of uranium miners have spiked, with shares of US miner Uranium Energy up 14% and Canadian miner Cameco 11%. Centrus Energy, which imports Russian uranium for US utilities, initially fell but has since rebounded. A shortage of certain types of enriched Russian uranium could pose significant risks for the ramp up of small modular reactors in the US. Although America's 94 existing nuclear reactors have supplies of enriched uranium stored up, the future of US nuclear plants could be in jeopardy if imports from Russia are banned indefinitely and the US cannot develop a domestic uranium supply chain. Centrus Energy, based in Bethesda, Maryland, has received notice from Russian uranium exporter Tenex that the latter's license to export uranium to the US has been revoked by the Russian government.
Emerging Markets:
-No update
Commodities:
-President-elect Donald Trump is considering restarting the Keystone XL oil pipeline from Canada to the US, according to three unnamed sources who spoke to Politico. Trump wants to greenlight the pipeline on his first day in office. Chris Wright, Trump's pick for Secretary of Energy, believes restarting the pipeline is one of the most important things the government can do to boost energy supplies. Restoring the pipeline would be a monumental task, as the pipeline has been abandoned and parts are being sold off. Water company Cadiz recently bought 180 miles of steel that had originally been purchased for use in the pipeline, which Cadiz plans to use to transport water through the Mojave Desert. Rob Thummel, senior portfolio manager at Tortoise Capital Advisors and an expert in pipelines, told Barron's that the chances of Keystone XL being revived are very low and probably zero.
-Gold has experienced a significant surge this year, surging more than 28% to nearly $2,650 an ounce, thanks to central bank buying and other factors. This has made gold historically expensive compared to other assets, including commodities like oil and base metals. However, US stocks are enjoying their own historic rally, with the S&P 500 at its highest level since the dot-com bubble. North American gold exchange-traded funds hold about 1,640 tonnes of gold today, down from a 2020 peak of over 2,000 tonnes. Analyst Mike McGlone argues that sentiment could shift at any moment due to the high prices of U.S. stocks.
Streetwise:
-Cristiano Amon, the CEO of Qualcomm, has been tasked with expanding the company's revenue into new areas to boost its stock price. The company's growth in the artificial-intelligence market is largely due to Nvidia, the artificial-intelligence world beater, which has seen a 185% increase in just one year. The PHLX Semiconductor index, which tracks Nvidia and other chip-making companies, is trailing the S&P 500 index. Intel, the worst performer, is losing market share in data centers and personal computers. Qualcomm, on the other hand, has seen a 10% increase this year and a 17% increase since Amon took over. The majority of Qualcomm's revenues come from mobile devices, which contributes to its slow growth. This is why Qualcomm trades at less than 15 times projected earnings compared to Nvidia's more than 50 times. Additionally, some handset makers like Apple and Samsung Electronics have the financial and manufacturing resources to produce more components in-house. Apple plans to drop Qualcomm for 5G chips in two new iPhone models next year.