📈 Amazon's $75B AI Moonshot

OpenAi launches Google search competitor, Comcast may spin off networks, Chevron beats expectations, Intel shares jump, Amazon's massive AI spending

Author

Evelio Silvera
November 01, 2024

Good morning.

⚡ The Fast Five → OpenAi launches Google search competitor, Comcast may spin off networks, Chevron beats expectations, Intel shares jump, Amazon's massive AI spending

🔎 Market Trends → Wall St ends lower as Meta, Microsoft highlight AI costs, Futures rise on Amazon results boost ahead of jobs data

And now…

⏱️ Your 5-minute briefing for Friday, November 1, 2024:

MARKET BRIEF
Before the Open

As of market close 10/31/2024.

Pre-Market

  • Paycom Software was the top gainer on the S&P 500, up 21%.

  • Microsoft shares slid 6.1% Thursday, the steepest decline on the Dow and among the worst on the Nasdaq.

Fear & Greed

 

Markets in Review

Tech Giants' Cloud Concerns Cast Shadow, But Market Fundamentals Stay Resilient

Major indices retreated Thursday with the tech-heavy Nasdaq leading losses at -2.8%, while the S&P 500 shed 1.9% to close at 5,705.5.

The Big Picture

October marked a pivot point as both the Dow and S&P 500 snapped their impressive five-month winning streaks. But don't mistake this correction for catastrophe – underlying economic indicators remain remarkably robust.

Consumer spending – the economy's backbone – is showing surprising strength, while inflation appears to be cooling. Meanwhile, WTI crude surged 2.8% to $70.54, suggesting industrial demand remains healthy despite market jitters.

Go Deeper

  • Cloud Computing Reality Check: Microsoft (MSFT) tumbled 6.1% after projecting slower Azure growth, but let's put this in perspective: 31-32% growth in today's environment is hardly a disaster. This looks more like Wall Street's perfectionism than fundamental weakness.

  • Tale of Two Retailers: Estée Lauder (EL) plunged 21% on China concerns, while Paycom Software (PAYC) soared 21% after strong earnings. The contrast highlights a crucial lesson: company-specific execution matters more than ever in this market.

What They're Saying

"With headline inflation nearly back to target and employment costs moderating, a 25-basis-point move remains firmly on the table," notes BMO Capital Markets, suggesting the Fed might be closer to the finish line than bears believe.

WHAT WE’RE WATCHING
Events

  • Today: Bureau of Labor Statistics - Average Hourly Earnings, 8:30AM

  • Why You Should Care: It's a leading indicator of consumer inflation - when businesses pay more for labor the higher costs are usually passed on to the consumer.

Earnings Reports

  • Today: Berkshire Hathaway, Exxon Mobil, Chevron, Simon Property Group, Charter Communications

  • Monday: Vertex, Palantir, Constellation Energy, Marriott

MARKET BRIEF
Leading News

The Great AI Infrastructure Race: Amazon's $75B Big Push

Why it matters:

Amazon's massive AI investment surge signals a potential watershed moment for tech investors, as the e-commerce giant positions itself to dominate the next computing revolution.

The big picture:

Amazon (AMZN) is going all-in on AI, planning to drop $75 billion on infrastructure in 2024 — with even bigger spending expected in 2025. CEO Andy Jassy is drawing parallels to AWS's historic success, suggesting these investments could create similar returns.

The company's AI initiatives are already generating a "multi-billion-dollar revenue run rate" within AWS, growing 3x faster than AWS did in its early days.

Go deeper:

  • Follow the money: Capital expenditures surged 81% to $22.6B in Q3, primarily funding AI infrastructure — think data centers, specialized chips, and networking equipment.

  • Growth trajectory: AI services revenue is showing triple-digit YoY growth, suggesting early validation of Jassy's aggressive investment strategy.

  • Competitive moat: Amazon's vast resources and AWS customer base give it unique advantages in the AI arms race against Microsoft (MSFT) and Alphabet (GOOGL).

What they're saying:

"It is a really unusually large, maybe once-in-a-lifetime type of opportunity," says Jassy, comparing the AI revolution to the cloud computing transformation that made AWS a cash cow.

The bottom line:

For investors, Amazon's AI push represents a classic "spend money to make money" play that could reshape the tech landscape. While the massive capex might spook some shareholders short-term, history suggests betting against Amazon's big infrastructure investments rarely pays off.

Headlines

  • OpenAI launches ChatGPT-powered search engine, putting it in competition with Google (link)

  • Boeing’s striking machinists union will vote Monday on a new contract offer (link)

  • Chevron beats earnings expectations, returns more than $7 billion to shareholders (link)

  • Comcast considers spinning off cable networks (link)

  • Apple’s services unit is now a $100 billion a year juggernaut after ‘phenomenal’ growth (link)

  • Dropbox to shed another 500 staff, CEO takes 'full responsibility' (link)

  • Intel shares jump 7% on earnings beat, uplifting guidance (link)

CRYPTO
Fear & Greed

 

Headlines

  • Bitcoin Price Drop Leads to $250M Bullish Liquidations (link)

  • Tether registers $2.5 billion in net profit for Q3, bringing year-to-date total to $7.7 billion (link)

  • Florida's CFO says state holds about $800 million in crypto investments (link)

DAILY SHARE
On the Socials

*Hat-tip to litcapital