Tag: NVIDIA Corp

Tuesday’s big stock stories: What’s likely to move the market in the next trading session

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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., September 9, 2024. 

Brendan Mcdermid | Reuters

Stocks @ Night is a daily newsletter delivered after hours, giving you a first look at tomorrow and last look at today. Sign up for free to receive it directly in your inbox.

Here’s what CNBC TV’s producers were watching as stocks rallied Monday and what’s on the radar for the next session.

Apple’s big iPhone launch

  • Apple unveiled its latest slate of iPhones, Apple Watches and AirPods at its much-watched “Glowtime” event Monday, but investors didn’t seem impressed. The stock fell as the event kicked off, but staged a late-day rally to close in the green.
  • Shares hit an all-time high in mid-July, and they are almost 7% from those levels.
  • Still, Apple has been the second-best performing “Magnificent Seven” stock over the last three months.
  • The group has been led to the downside by Google-parent Alphabet, which is down almost 15% in three months, and Nvidia, down nearly 12%.
  • Apple, meanwhile is up more than 12% in the past three months. It’s trailing only Tesla, which is up 22% in that period.
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Apple’s performance in the past month

Oracle earnings

Tall order

  • Monday marked Brian Niccol’s first day as CEO of Starbucks. Shares were up a little over 1%.
  • Niccol takes over from embattled former chief Laxman Narasimhan, who became CEO in March of last year. Under Narasimhan, SBUX shares were down 7.6%. Shares are down 14% from their 52-week high hit last November.
  • Niccol had previously been CEO of Chipotle, a role he took in March 2018. Under his tenure, CMG shares were up nearly 750%.
  • Chipotle shares hit an all-time high in June, just before a 50-for-1 stock split went into effect. The stock is down 21% from that high.
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Starbucks’ 2024 performance

Cancer drug results

  • Shares of Summit Therapeutics soared 56% on very heavy volume after its lung cancer drug showed significantly better results than Merck’s Keytruda in Phase 3 trials.
  • It was the stock’s best day since just May, when it jumped more than 270%.
  • Shares are trading at an all-time high, up more than 630% this year.
  • Merck, meanwhile, was down 2% Monday.
  • Summit was the best performing stock in both the SPDR S&P Biotech ETF (XBI) and iShares Biotechnology ETF (IBB).
  • The second best biotech stock on Monday was Relay Therapeutics, which was up 52% on positive results for its breast cancer drug.

Taking off

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JETS ETF performance in the past month

 New S&P companies

—Kavitha Shastry

CNBC will interview several big market-moving CEOs Tuesday

  • AT&T’s John Stankey is on in the 10 a.m. hour, Eastern time. The stock shot up 2.5% Monday, hitting a new 52-week high. It is up 8% in a week. The dividend on AT&T is 5.2%.
  • Michael Arougheti of Ares Management is also in the 10 a.m. hour. The stock is 10% from the July 31 high.
  • Larry Culp of GE Aerospace is live in the 1 p.m. hour. The stock is 7% from a 52-week high. It jumped 2.5% Monday, but it’s down 5.3% so far in September.
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GE Aerospace’s performance in 2024

Apple’s suppliers

GameStop reports after the bell Tuesday

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GameStop’s one-month performance

Basel III

Boeing August orders and deliveries

—Jason Gewirtz

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#Tuesdays #big #stock #stories #Whats #move #market #trading #session

China’s electric car race is becoming more about chip prowess as companies focus on tech

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Shaoqing Ren, vice president, autonomous driving development, at Nio speaks about the electric company’s 5nm chip at its tech day in Shanghai on July 27, 2024.

CNBC | Evelyn Cheng

BEIJING — Chinese electric car companies that are already engaged in an intense price war are turning up the heat on another front: Chip-powered tech features such as the driver-assist function.

Nio and Xpeng have announced that their in-house designed auto chips are ready for production. So far, many of the major Chinese electric car makers have relied on Nvidia chips, with the company’s automotive chips business over the past few years bringing in more than $300 million in revenue a quarter.

“It’s hard to point to your product being superior when your competitors use the exact same silicon to power their infotainment and intelligent driving systems,” said Tu Le, founder of consulting firm Sino Auto Insights, explaining why EV makers are turning to in-house chips.

Le said he expected Tesla and Chinese electric car startups to compete on designing their own chips, while traditional automakers will likely still rely on Nvidia and Qualcomm “for the foreseeable future.”

Nvidia reported a 37% year-on-year increase in automotive segment revenue to $346 million in the latest quarter.

“Automotive was a key growth driver for the quarter as every auto maker developing autonomous vehicle technology is using NVIDIA in their Data Centers,” company management said on an earnings call, according to a FactSet transcript.

“I think the main reason why Chinese [automakers] pay attention [to] self-development system-on-chip is the success of Tesla in full-self driving,” said Alvin Liu, a Shanghai-based senior analyst for Canalys.

In 2019, Tesla reportedly shifted from Nvidia to its own chip for advanced driver-assist functions.

By designing their own chips, Chinese automakers can customize features, as well as reduce supply chain risk from geopolitical tensions, Liu said.

Liu does not expect significant impact to Nvidia in the short-term, however, as Chinese automakers will likely test new tech in small batches in the higher-end of the market.

Leveraging latest tech

Nio in late July said it had finished designing an automotive-grade chip, the NX9031, that uses a highly advanced 5 nanometer production technology.

“It is the first time that the five-nanometer process technology has been used in the Chinese automotive industry,” said Florence Zhang, consulting director at China Insights Consultancy, according to a CNBC translation of her Mandarin-language remarks. “It has broken through the bottleneck of domestic intelligent driving chip research and development.”

Nio, which had teased the chip in December, plans to use it in the high-end ET9 sedan, set for delivery in 2025.

The 5 nanometers technology is the most advanced one for autos because the 3 nanometer tech is mostly used for smartphone, personal computer and artificial intelligence-related applications, CLSA analyst Jason Tsang, said following the Nio chip announcement.

Xpeng at its event on Tuesday did not disclose the nanometer technology it was using for its Turing chip. The company‘s driver-assist technology is widely considered one of the best currently available in China. 

While Xpeng revealed its chip on Tuesday, Brian Gu, Xpeng president, emphasized in a CNBC interview the day before that his company will primarily partner with Nvidia for chips.

The two companies have a close relationship, and Xpeng’s former head of autonomous driving joined Nvidia last year.

Giants in China’s electric car industry are also recognizing the importance of chips for autos.

If batteries were the foundation for the first phase of electric car development, semiconductors are the basis for the industry’s second phase, as it focuses on smart connected vehicles, BYD‘s founder, Wang Chuanfu, said in April at a press conference held by Chinese driver-assist chip company Horizon Robotics.

Wang said more than 1 million BYD vehicles use Horizon Robotics chips.

BYD on Tuesday announced its Fang Cheng Bao off-road vehicle brand would use Huawei’s driver-assist system.

U.S. restrictions on Nvidia chip sales to China haven’t directly affected automakers since the cars haven’t required the most advanced semiconductor technology so far.

But with increasing focus on driver-assist tech, which relies more on artificial intelligence — a segment at the center of U.S.-China tech competition — Chinese automakers are turning to in-house tech.

Looking ahead to the next decade, Xpeng Founder He Xiaopeng said Tuesday the company plans to become a global artificial intelligence car company.

When asked about the availability of computing power for training driver-assist tech, Xpeng’s Gu told reporters Monday that prior to the U.S. restrictions the company had been working with Alibaba Cloud. He claimed that access now probably gives Xpeng the largest cloud computing capacity among all car manufacturers in China.

Creating new tech and standards

Government incentives, from subsidies to support for building out a battery charging network, have helped electric cars take off in China, the world’s largest auto market.

In July, penetration of new energy vehicles, which includes battery-only and hybrid-powered cars, exceeded 50% of new passenger cars sold in China for the first time, according to industry data.

That scale means that companies involved in the country’s electric car development are also contributing to new standards on tech for cars, such as removing the need for a physical key to unlock the door. Instead, drivers can use a smartphone app.

How that app or device securely connects drivers to their cars is part of the forthcoming set of standards that the California-based Car Connectivity Consortium is working on, according to president Alysia Johnson.

A quarter of the organization’s members are based in China, including Nio, BYD, Zeekr and Huawei. Apple, Google and Samsung are also members, Johnson revealed.

She said the organization is looking to enable a driver of a Nio car that uses a Huawei phone to securely send the car “key” to a partner who uses an Apple phone and drives a Zeekr car, for example.

“Digital key tech is becoming a lot more accessible than people would think,” she said.

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#Chinas #electric #car #race #chip #prowess #companies #focus #tech

Tech companies want nuclear power. Some utilities are throwing up roadblocks

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A cooling tower at the Constellation Nine Mile Point Nuclear Station in Scriba, New York, US, on Tuesday, May 9, 2023. 

Lauren Petracca | Bloomberg | Getty Images

Tech companies are increasingly looking to directly connect data centers to nuclear plants as they race to secure clean energy to power artificial intelligence, sparking resistance from some utilities over the potential impact on the electric grid.

Data centers, the computer warehouses that run the Internet, in some cases now require a gigawatt or more of power, comparable to the average capacity of a nuclear reactor in the U.S.

The data centers are essential to U.S. economic competitiveness and national security as the country competes with adversaries such as China for supremacy in the race to develop AI, said Joe Dominguez, the CEO of Constellation Energy, which operates the largest nuclear fleet in the U.S.

“When you’re talking about large [demand] load that also wants to use zero-emission energy, you’re going to bring it very close to nuclear power plants,” Dominguez said on Constellation’s second-quarter earnings call Tuesday. Constellation, headquartered in Baltimore, operates 21 of the 93 reactors in the U.S.

Constellation’s shares have surged 62% this year, the sixth-best stock in the S&P 500, as investors attach a higher value to the company’s nuclear power capacity to meet the growth in data centers. Shares of Vistra Corp., based outside Dallas and owner of six reactors, have doubled this year, the second-best performing stock in the S&P after AI chipmaker Nvidia.

Tech companies are building out data centers just as power supply is increasingly constrained due to the retirement of coal plants and as demand is climbing from the expansion of domestic manufacturing and the electrification of vehicles.

The largest grid operator in the U.S., PJM Interconnection, warned in late July that power supply and demand is tightening as construction of new generation lags demand. PJM covers 13 states primarily in the Mid-Atlantic region, including the world’s largest data center hub in northern Virginia.

Constellation’s Dominguez argued that connecting data centers directly to nuclear plants, called co-location by the industry, is the fastest and most cost-effective way to support the buildout of data centers, without burdening consumers with the costs of building new transmission lines.

“The notion that you could accumulate enough power somewhere on the grid to power a gigawatt data center is frankly laughable to me — that you could do that in anywhere that doesn’t start with decades of time,” Dominguez said. “This is an enormous amount of power to go out and try to concentrate.”

Amazon’s nuclear agreement

But co-locating data centers next to nuclear plants already faces controversy.

In March, Amazon Web Services bought a data center powered by the 41-year-old Susquehanna nuclear plant in Pennsylvania from Talen Energy for $650 million . But the agreement to directly sell power to the AWS data center from the nuclear plant already faces opposition from utilities American Electric Power and Exelon, who have filed complaints at the Federal Energy Regulatory Commission (FERC).

AEP and Exelon argue that the deal between Amazon and Talen sets a precedent that will result in less available power in the PJM grid area as resources “flee to serve load that uses and benefits from — but does not pay for — the transmission system”

“This will harm existing customers,” the utilities told FERC in a filing in June. Talen Energy has dismissed the objections as “demonstrably false,” accusing the utilities of stifling innovation.

“The rapid emergence of artificial intelligence and data centers has fundamentally changed the demand for power and leads to an inflection point for the power industry,” Talen said in a June statement. “Talen’s co-location arrangement with AWS brings one solution to this new demand, on a timeline that serves the customer quickly.”

FERC has requested more information on the service agreement between Talen and AWS. The regulator is holding a conference in the fall to discuss issues associated with connecting large electricity loads directly to power plants.

“It really is a great opportunity for there to be interaction between stakeholders and the commissioners in an informal setting like a conference, as opposed to doing so in litigation,” Kathleen Barrón, chief strategy officer at Constellation, said on the power company’s recent earnings call, referring to the fall FERC meeting.

Shopping for nuclear power

Constellation and Vistra have backed the AWS-Talen agreement in filings to FERC, with each of their CEOs saying on their earnings calls this week that co-location and traditional grid connection will be needed to meet demand.

Barrón told CNBC that Constellation has “seen interest from many” tech companies in potentially co-locating a data center at one of its sites.

Vistra is having numerous conversations with customers about co-location and is “in due diligence for a number of sites,” CEO Jim Burke said Thursday. With the dispute in the PJM region over co-location, data center developers may take a closer look at Texas, which operates its own grid called ERCOT, Burke said.

“We’re seeing some interest in Comanche Peak,” Burke told analysts on the company’s second-quarter earnings call, referring to one of Vistra’s nuclear plants. Comanche Peak, about 50 miles outside Fort Worth, Texas, has two reactors with 2.4 gigawatts of capacity, enough to power 1.2 million homes in typical conditions and 480,000 homes in peak periods, according to Vistra.

And Dominion Energy has indicated it is open to connecting a data center to the Millstone nuclear plant in Connecticut. The Dominion service region includes northern Virginia, the epicenter of the data center boom.

“We continue to explore that option,” CEO Robert Blue said on Dominion’s second-quarter earnings call. “We do clearly realize any co-location option is going to have to make sense for us, our potential counterparty and stakeholders in Connecticut.”

Kelly Trice, president of Holtec International, a privately held nuclear company headquartered in Florida, said the U.S. needs to start thinking more about balancing the power needs of data centers with those of all consumers. Holtec is working to restart the Palisades nuclear plant in Michigan and has also had conversations with tech companies about nuclear energy.

“Essentially, the hyperscalers and the data centers can take all the power and the consumer not get any of that if we’re not careful,” Trice told CNBC. “So the balance there, where the consumers actually get what is rightfully theirs too, is a factor.”

“The United States hasn’t really started wrestling [with] that yet,” Trice said. “But I think we’re getting close.”

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#Tech #companies #nuclear #power #utilities #throwing #roadblocks

February was a great month for Wall Street. These were our 5 best-performing stocks

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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 23, 2024. 

Brendan McDermid | Reuters

February was a strong month for stocks and the Club’s portfolio.

The advance came as investors parsed through fourth-quarter earnings results and fresh economic data, searching for clues about when the Federal Reserve will finally cut interest rates. The Nasdaq Composite led the march higher in February, gaining 6.1% and finishing the month at its first record close since November 2021. Meanwhile, the Dow Jones Industrial Average and S&P 500 both hit a series of all-time highs throughout the month, climbing 2.2% and 5.2%, respectively.

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#February #great #month #Wall #Street #bestperforming #stocks

Nvidia and AI changed landscape of the chip industry, as rivals play catch-up

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This year’s artificial-intelligence boom turned the landscape of the semiconductor industry on its head, elevating Nvidia Corp. as the new king of U.S. chip companies — and putting more pressure on the newly crowned company for the year ahead.

Intel Corp.
INTC,
+2.12%,
which had long been the No. 1 chip maker in the U.S., first lost its global crown as biggest chip manufacturer to TSMC
2330,

several years ago. Now, Wall Street analysts estimate that Nvidia’s
NVDA,
-0.94%
annual revenue for its current calendar year will outpace Intel’s for the first time, making it No. 1 in the U.S. Intel is projected to see 2023 revenue of $53.9 billion, while Nvidia’s projected revenue for calendar 2023 is $56.2 billion, according to FactSet.

Even more spectacular are the projections for Nvidia’s calendar 2024: Analysts forecast revenue of $89.2 billion, a surge of 59% from 2023, and about three times higher than 2022. In contrast, Intel’s 2024 revenue is forecast to grow 13.3% to $61.1 billion. (Nvidia’s fiscal year ends at the end of January. FactSet’s data includes pro-forma estimates for calendar years.)

“It has coalesced into primarily an Nvidia-controlled market,” said Karl Freund, principal analyst at Cambrian AI Research. “Because Nvidia is capturing market share that didn’t even exist two years ago, before ChatGPT and large language models….They doubled their share of the data-center market. In 40 years, I have never seen such a dynamic in the marketplace.”

Nvidia has become the king of a sector that is adjacent to the core-processor arena dominated by Intel. Nvidia’s graphics chips, used to accelerate AI applications, reignited the data-center market with a new dynamic for Wall Street to watch.

Intel has long dominated the overall server market with its Xeon central processor unit (CPU) family, which are the heart of computer servers, just as CPUs are also the brain chips of personal computers. Five years ago, Advanced Micro Devices Inc.
AMD,
+0.90%,
Intel’s rival in PC chips, re-entered the lucrative server market after a multi-year absence, and AMD has since carved out a 23% share of the server market, according to Mercury Research, though Intel still dominates with a 76.7% share.

Graphics chips in the data center

Nowadays, however, the data-center story is all about graphics processing units (GPUs), and Nvidia’s have become favored for AI applications. GPU sales are growing at a far faster pace than the core server CPU chips.

Also read: Nvidia’s stock dubbed top pick for 2024 after monster 2023, ‘no need to overthink this.’

Nvidia was basically the entire data-center market in the third quarter, selling about $11.1 billion in chips, accompanying cards and other related hardware, according to Mercury Research, which has tracked the GPU market since 2019. The company had a stunning 99.7% share of GPU systems in the data center, excluding any devices for networking, according to Dean McCarron, Mercury’s president. The remaining 0.3% was split between Intel and AMD.

Put another way: “It’s Nvidia and everyone else,” said Stacy Rasgon, a Bernstein Research analyst.

Intel is fighting back now, seeking to reinvigorate growth in data centers and PCs, which have both been in decline after a huge boom in spending on information technology and PCs during the pandemic. This month, Intel unveiled new families of chips for both servers and PCs, designed to accelerate AI locally on the devices themselves, which could also take some of the AI compute load out of the data center.

“We are driving it into every aspect of the applications, but also every device, in the data center, the cloud, the edge of the PC as well,” Intel CEO Pat Gelsinger said at the company’s New York event earlier this month.

While AI and high-performance chips are coming together to create the next generation of computing, Gelsinger said it’s also important to consider the power consumption of these technologies. “When we think about this, we also have to do it in a sustainable way. Are we going to dedicate a third, a half of all the Earth’s energy to these computing technologies? No, they must be sustainable.”

Meanwhile, AMD is directly going after both the hot GPU market and the PC market. It, too, had a big product launch this month, unveiling a new family of GPUs that were well-received on Wall Street, along with new processors for the data center and PCs. It forecast it will sell at least $2 billion in AI GPUs in their first year on the market, in a big challenge to Nvidia.

Also see: AMD’s new products represent first real threat to Nvidia’s AI dominance.

That forecast “is fine for AMD,” according to Rasgon, but it would amount to “a rounding error for Nvidia.”

“If Nvidia does $50 billion, it will be disappointing,” he added.

But AMD CEO Lisa Su might have taken a conservative approach with her forecast for the new MI300X chip family, according to Daniel Newman, principal analyst and founding partner at Futurum Research.

“That is probably a fraction of what she has seen out there,” he said. “She is starting to see a robust market for GPUs that are not Nvidia…We need competition, we need supply.” He noted that it is early days and the window is still open for new developments in building AI ecosystems.

Cambrian’s Freund noted that it took AMD about four to five years to gain 20% of the data-center CPU market, making Nvidia’s stunning growth in GPUs for the data center even more remarkable.

“AI, and in particularly data-center GPU-based AI, has resulted in the largest and most rapid changes in the history of the GPU market,” said McCarron of Mercury, in an email. “[AI] is clearly impacting conventional server CPUs as well, though the long-term impacts on CPUs still remain to be seen, given how new the recent increase in AI activity is.”

The ARMs race

Another development that will further shape the computing hardware landscape is the rise of a competitive architecture to x86, known as reduced instruction set computing (RISC). In the past, RISC has mostly made inroads in the computing landscape in mobile phones, tablets and embedded systems dedicated to a single task, through the chip designs of ARM Holdings Plc
ARM,
+0.81%
and Qualcomm Inc.
QCOM,
+1.12%.

Nvidia tried to buy ARM for $40 billion last year, but the deal did not win regulatory approval. Instead, ARM went public earlier this year, and it has been promoting its architecture as a low-power-consuming option for AI applications. Nvidia has worked for years with ARM. Its ARM-based CPU called Grace, which is paired with its Hopper GPU in the “Grace-Hopper” AI accelerator, is used in high-performance servers and supercomputers. But these chips are still often paired with x86 CPUs from Intel or AMD in systems, noted Kevin Krewell, an analyst at Tirias Research.

“The ARM architecture has power-efficiency advantages over x86 due to a more modern instruction set, simpler CPU core designs and less legacy overhead,” Krewell said in an email. “The x86 processors can close the gap between ARM in power and core counts. That said, there’s no limit to running applications on the ARM architecture other than x86 legacy software.”

Until recently, ARM RISC-based systems have only had a fractional share of the server market. But now an open-source version of RISC, albeit about 10 years old, called RISC-V, is capturing the attention of both big internet and social-media companies, as well as startups. Power consumption has become a major issue in data centers, and AI accelerators use incredible amounts of energy, so companies are looking for alternatives to save on power usage.

Estimates for ARM’s share of the data center vary slightly, ranging from about 8%, according to Mercury Research, to about 10% according to IDC. ARM’s growing presence “is not necessarily trivial anymore,” Rasgon said.

“ARM CPUs are gaining share rapidly, but most of these are in-house CPUs (e.g. Amazon’s Graviton) rather than products sold on the open market,” McCarron said. Amazon’s
AMZN,
-0.18%
 Graviton processor family, first offered in 2018, is optimized to run cloud workloads at Amazon’s Web Services business. Alphabet Inc.
GOOG,
+0.66%

GOOGL,
+0.63%
also is developing its own custom ARM-based CPUs, codenamed Maple and Cypress, for use in its Google Cloud business according to a report earlier this year by the Information.

“Google has an ARM CPU, Microsoft has an ARM CPU, everyone has an ARM CPU,” said Freund. “In three years, I think everyone will also have a RISC-V CPU….It it is much more flexible than an ARM.”

In addition, some AI chip and system startups are designing around RISC-V, such as Tenstorrent Inc., a startup co-founded by well-regarded chip designer Jim Keller, who has also worked at AMD, Apple Inc.
AAPL,
+0.54%,
Tesla Inc.
TSLA,
+2.04%
and Intel.

See: These chip startups hope to challenge Nvidia but it will take some time.

Opportunity for the AI PC

Like Intel, Qualcomm has also launched an entire product line around the personal computer, a brand-new endeavor for the company best known for its mobile processors. It cited the opportunity and need to bring AI processing to local devices, or the so-called edge.

In October, it said it is entering the PC business, dominated by Intel’s x86 architecture, with its own version of the ARM architecture called Snapdragon X Elite platform. It has designed its new processors specifically for the PC market, where it said its lower power consumption and far faster processing are going to be a huge hit with business users and consumers, especially those doing AI applications.

“We have had a legacy of coming in from a point where power is super important,” said Kedar Kondap, Qualcomm’s senior vice president and general manager of compute and gaming, in a recent interview. “We feel like we can leverage that legacy and bring it into PCs. PCs haven’t seen innovation for a while.”

Software could be an issue, but Qualcomm has also partnered with Microsoft for emulation software, and it trotted out many PC vendors, with plans for its PCs to be ready to tackle computing and AI challenges in the second half of 2024.

“When you run stuff on a device, it is secure, faster, cheaper, because every search today is faster. Where the future of AI is headed, it will be on the device,” Kondap said. Indeed, at its chip launch earlier in this month, Intel quoted Boston Consulting Group, which forecast that by 2028, AI-capable PCs will comprise 80% of the PC market..

All these different changes in products will bring new challenges to leaders like Nvidia and Intel in their respective arenas. Investors are also slightly nervous about Nvidia’s ability to keep up its current growth pace, but last quarter Nvidia talked about new and expanding markets, including countries and governments with complex regulatory requirements.

“It’s a fun market,” Freund said.

And investors should be prepared for more technology shifts in the year ahead, with more competition and new entrants poised to take some share — even if it starts out small — away from the leaders.

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#Nvidia #changed #landscape #chip #industry #rivals #play #catchup

Friday’s S&P 500 and Nasdaq-100 rebalance may reflect concerns over concentration risk

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It’s arguably the biggest stock story of 2023: a small number of giant technology companies now make up a very large part of big indexes like the S&P 500 and the Nasdaq-100. 

Five companies (Apple, Microsoft, Amazon, Nvidia and Alphabet) make up about 25% of the S&P 500. Six companies (Apple, Microsoft, Amazon, Nvidia, Alphabet and Broadcom) make up about 40% of the Nasdaq-100. 

The S&P 500 and the Nasdaq are rebalancing their respective indexes this Friday. While this is a routine event, some of the changes may reflect the concerns over concentration risk. 

A ton of money is pegged to a few indexes 

Now that the CPI and the Fed meeting are out of the way, these rebalances are the last major “liquidity events” of the year, corresponding with another notable trading event: triple witching, or the quarterly expiration of stock options, index options and index futures. 

This is an opportunity for the trading community to move large blocks of stock for the last gasps of tax loss harvesting or to position for the new year. Trading volume will typically drop 30%-40% in the final two weeks of the year after triple witching, with only the final trading day showing significant volume.

All of this might appear of only academic interest, but the big move to passive index investing in the past 20 years has made these events more important to investors. 

When these indexes are adjusted, either because of additions or deletions, or because share counts change, or because the weightings are changed to reduce the influence of the largest companies, it means a lot of money moves in and out of mutual funds and ETFs that are directly or indirectly tied to the indexes. 

Standard & Poor’s estimates that nearly $13 trillion is directly or indirectly indexed to the S&P 500. The three largest ETFs (SPDR S&P 500 ETF Trust, iShares Core S&P 500 ETF, and Vanguard S&P 500 ETF) are all directly indexed to the S&P 500 and collectively have nearly $1.2 trillion in assets under management. 

Linked to the Nasdaq-100 — the 100 largest nonfinancial companies listed on Nasdaq — the Invesco QQQ Trust (QQQ) is the fifth-largest ETF, with roughly $220 billion in assets under management. 

S&P 500: Apple and others will be for sale. Uber going in 

For the S&P 500, Standard & Poor’s will adjust the weighting of each stock to account for changes in share count. Share counts typically change because many companies have large buyback programs that reduce share count. 

This quarter, Apple, Alphabet, Comcast, Exxon Mobil, Visa and Marathon Petroleum will all see their share counts reduced, so funds indexed to the S&P will have to reduce their weighting. 

S&P 500: Companies with share count reduction

(% of share count reduction)

  • Apple        0.5%
  • Alphabet   1.3%
  • Comcast    2.4%
  • Exxon Mobil  1.0%
  • Visa                0.8%
  • Marathon Petroleum  2.6%

Source: S&P Global

Other companies (Nasdaq, EQT, and Amazon among them) will see their share counts increased, so funds indexed to the S&P 500 will have to increase their weighting. 

In addition, three companies are being added to the S&P 500: Uber, Jabil, and Builders FirstSource.  I wrote about the effect that being added to the S&P was having on Uber‘s stock price last week.  

Three other companies are being deleted and will go from the S&P 500 to the S&P SmallCap 600 index: Sealed Air, Alaska Air and SolarEdge Technologies. 

Nasdaq-100 changes: DoorDash, MongoDB, Splunk are in 

The Nasdaq-100 is rebalanced four times a year; however, the annual reconstitution, where stocks are added or deleted, happens only in December. 

Last Friday, Nasdaq announced that six companies would be added to the Nasdaq-100: CDW Corporation (CDW), Coca-Cola Europacific Partners (CCEP), DoorDash (DASH), MongoDB (MDB), Roper Technologies (ROP), and Splunk (SPLK). 

Six others will be deleted: Align Technology (ALGN), eBay (EBAY), Enphase Energy (ENPH), JD.com (JD), Lucid Group (LCID), and Zoom Video Communications (ZM).

Concentration risk: The rules

Under federal law, a diversified investment fund (mutual funds, exchange-traded funds), even if it just mimics an index like the S&P 500, has to satisfy certain diversification requirements. This includes requirements that: 1) no single issuer can account for more than 25% of the total assets of the portfolio, and 2) securities that represent more than 5% of the total assets cannot exceed 50% of the total portfolio. 

Most of the major indexes have similar requirements in their rules. 

For example, there are 11 S&P sector indexes that are the underlying indexes for widely traded ETFs such as the Technology Select SPDR ETF (XLK). The rules for these sector indexes are similar to the rules on diversification requirements for investment funds discussed above. For example, the S&P sector indexes say that a single stock cannot exceed 24% of the float-adjusted market capitalization of that sector index and that the sum of the companies with weights greater than 4.8% cannot exceed 50% of the total index weight. 

At the end of last week, three companies had weights greater than 4.8% in the Technology Select Sector (Microsoft at 23.5%, Apple at 22.8%, and Broadcom at 4.9%) and their combined market weight was 51.2%, so if those same prices hold at the close on Friday, there should be a small reduction in Apple and Microsoft in that index. 

S&P will announce if there are changes in the sector indexes after the close on Friday. 

The Nasdaq-100 also uses a “modified” market-capitalization weighting scheme, which can constrain the size of the weighting for any given stock to address overconcentration risk. This rebalancing may reduce the weighting in some of the largest stocks, including Apple, Microsoft, Amazon, Nvidia and Alphabet. 

The move up in these large tech stocks was so rapid in the first half of the year that Nasdaq took the unusual step of initiating a special rebalance in the Nasdaq-100 in July to address the overconcentration of the biggest names. As a result, Microsoft, Apple, Nvidia, Amazon and Tesla all saw their weightings reduced. 

Market concentration is nothing new

Whether the rules around market concentration should be tightened is open for debate, but the issue has been around for decades.

For example, Phil Mackintosh and Robert Jankiewicz from Nasdaq recently noted that the weight of the five largest companies in the S&P 500 was also around 25% back in the 1970s.

Disclosure: Comcast is the corporate parent of NBCUniversal and CNBC.

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Top Wall Street analysts remain optimistic about these five stocks

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The Netflix logo is seen on a TV remote controller in this illustration taken Jan. 20, 2022.

Dado Ruvic | Reuters

As the earnings season rolls on, investors are getting a glimpse into how companies are handling an array of macro pressures.

Analysts can pick apart these quarterly reports and help investors identify companies that can withstand near-term challenges and deliver attractive returns in the long term.

To that end, here are five stocks favored by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.

Netflix

Streaming giant Netflix (NFLX) recently delivered a beat on third-quarter earnings per share, with its crackdown on password sharing helping to add more subscribers to its platform.

Evercore analyst Mark Mahaney said that there were several key positives in the company’s third-quarter print, including 8.76 million subscriber additions, stronger-than-anticipated Q4 2023 subscriber addition guidance, and share buybacks of $2.5 billion. He also noted an increase in the 2023 free cash flow outlook to about $6.5 billion, from the previous guidance of at least $5 billion and a price hike for the basic and premium plans.

“We continue to believe that NFLX’s ad-supported offering and password-sharing initiatives constitute major Growth Curve Initiatives [GCI] – catalysts that will drive a material reacceleration in revenue and EPS growth,” said Mahaney.    

The analyst thinks that the company is pursuing these GCI catalysts from a position of strength, given that it is a global streaming leader based on several metrics, including revenue, subscriber base and viewing hours.

Mahaney reiterated a buy rating on NFLX stock with a price target of $500. Interestingly, Mahaney ranks No. 48 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 55% of the time, with each delivering a return of 25.4%, on average. (See Netflix Technical Analysis on TipRanks)

Nvidia

Next up is semiconductor giant Nvidia (NVDA). The stock has witnessed a stellar run this year, thanks to demand for NVDA’s chips in building generative artificial intelligence (AI) models and applications.

In a recently updated investor presentation, the company revealed roadmaps for its data center graphics processing units, central processing units and networking chipsets.

JPMorgan analyst Harlan Sur, who holds the 88th position out of more than 8,500 analysts on TipRanks, noted that NVDA’s product roadmaps indicate two major shifts. First, Nvidia has accelerated its product launch timing from a 2-year cycle to a 1-year cycle, which is expected to help the company keep pace with the growing complexity of large language compute workloads.

Regarding the second major shift, Sur said that the roadmaps indicated “more market segmentation (cloud/hyperscale/enterprise) by expanding the number of product SKUs [stock keeping units] that are optimized for a broad spectrum of AI workloads (training/inference).”

The analyst thinks that with these notable developments, the company is taking a multi-pronged approach to strengthen its data center market and technology. He reaffirmed a buy rating on the stock with a price target of $600, noting the growing demand for NVDA’s accelerated compute and networking silicon platforms and software solutions in the development of generative AI and large language models.

Sur’s ratings have been successful 64% of the time, with each rating delivering an average return of 18.2%. (See Nvidia Insider Trading Activity on TipRanks).

Instacart

Grocery delivery platform Instacart (CART) made its much-awaited stock market debut in September. Baird analyst Colin Sebastian recently initiated a buy rating on CART stock with a price target of $31.

Explaining his bullish stance, Sebastian said, “Despite a range of well-financed online and legacy retail competitors, Instacart enjoys an enviable combination of scale, retail integrations, vertical expertise, and proprietary technology.”

The analyst highlighted that the essence of Instacart’s business model is an asset-light partnership strategy. He also thinks that Instacart’s data and technology sophistication are its key competitive advantages. He believes that most food retailers might not be able to build similar internal e-commerce capabilities.

Most importantly, Sebastian views Instacart’s advertising business as one of the most successful launches of retail media, second only to e-commerce behemoth Amazon (AMZN). He pointed out that consumer packaged goods advertisers are promoting their products by leveraging Instacart’s performance ad formats that help in reaching target customers with relevant product ideas.   

Sebastian holds the 340th position among more than 8,500 analysts on TipRanks. His ratings have been successful 52% of the time, with each rating delivering an average return of 10.7%. (See Instacart Options Activity on TipRanks).

SLB

Oilfield services company SLB (SLB), formerly Schlumberger, recently reported better-than-expected third-quarter adjusted earnings. SLB stated that the oil and gas industry continues to gain from a multi-year growth cycle that has shifted to international and offshore markets, where the company claims to enjoy a dominant position.       

Goldman Sachs analyst Neil Mehta contends that while there are no clear near-term catalysts for SLB stock, the long-term growth story remains intact due to resilient customer spending. The analyst highlighted that Saudi Aramco is expected to spend about $245 billion through 2030, reflecting about 5% to 6% annual growth. Further, additional spending (at a modest growth rate) is anticipated from the United Arab Emirates’ ADNOC, Qatar and other players in the region.

Given that 80% of SLB’s revenue is from international and offshore markets, Mehta is confident that the company is well-positioned to leverage the long-term momentum in the Middle East. 

“SLB remains the preferred way to gain exposure to the international and offshore theme, with additional growth drivers in the expansion of its digital footprint with customers, which is margin accretive at ~40-45%, in our view,” said Mehta. 

Calling SLB a structural winner, particularly during pullbacks, Mehta reiterated a buy rating on the stock with a price target of $65. He ranks No. 155 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 65% of the time, with each delivering an average return of 12.5%. (See SLB’s Stock Charts on TipRanks) 

Tesla

Our final name this week is electric vehicle maker Tesla (TSLA). The company missed earnings and revenue guidance for the third quarter, with macro pressures, a highly competitive EV market and aggressive price cuts affecting its performance.

Mizuho analyst Vijay Rakesh noted that despite the sequential decline in the company’s Q3 gross and operating margin due to lower pricing and Cybertruck R&D expenses, they remain at the high end of the margins of legacy automakers and way above rival EV makers’ margins.

The analyst lowered his price target for TSLA stock to $310 from $330 to reflect near-term headwinds like margin pressure, macro weakness and Cybertruck ramp challenges. Nevertheless, he reiterated a buy rating, noting that the stock still trades at a discount to disruptors such as Nvidia, while also generating profitability at scale.

“We believe TSLA is prioritizing market share, technology, and cost leadership and is better positioned than peers to weather any turbulence to the broader Auto market,” said Rakesh.

Rakesh ranks No. 82 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 57% of the time, with each delivering a return of 18.6%, on average. (See Tesla Financial Statements on TipRanks)

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Top Wall Street analysts are bullish on these dividend stocks

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Michael Wirth, CEO of Chevron.

Adam Jeffery | CNBC

Dividend-paying stocks can help enhance portfolio returns, but investors will need to perform their due diligence as they sift through the names.

Investors should carefully assess these companies by paying attention to various factors, including the dividend growth rate and the ability to consistently generate sufficient cash flows to support payments.

Bearing that in mind, here are five attractive dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on their past performance.

Public Service Enterprise Group

First on this week’s dividend list is Public Service Enterprise Group (PEG), one of the leading electric and gas companies in the U.S. Last month, PEG reaffirmed its full-year earnings guidance, as the company expects growth in regulated operations, the realization of higher average hedged prices and its cost control efforts to offset the impact of higher interest rates and lower pension income.

Earlier this year, PEG increased its quarterly dividend by 5.6% to 57 cents per share (annualized dividend of $2.28), marking the 19th annual increase for the company. PEG’s dividend yield is 3.8%.

RBC Capital analyst Shelby Tucker highlighted that PEG’s subsidiary Public Service Electric and Gas (PSE&G), which is a franchised public utility in New Jersey, enjoys solid cash flows from the nuclear assets in its power generation business.

While the company faces cost and pension expense headwinds this year, the analyst expects a 6% EPS compound annual growth rate through 2027 and 5.5% annual dividend growth.

“We believe the primary attraction to PEG is a strong pipeline of electric and gas investments in New Jersey with low equity dilution risk,” said Tucker.

Tucker reiterated a buy rating on PEG while slightly lowering the price target to $69 from $70. He ranks No. 305 among more than 8,500 analysts tracked by TipRanks. Tucker’s ratings have been profitable 63% of the time, with each rating delivering a return of 9%, on average. (See PEG’s Insider Trading Activity on TipRanks)

Southern Company

Tucker is also bullish on Southern Company (SO), a gas and electric utility giant. Earlier this month, the analyst called SO a “quality utility operating in constructive regulatory environments.” He reiterated a buy rating on the stock and increased the price target to $80 from $78.

With the company’s much-delayed Vogtle nuclear project’s commercial operation date on the horizon, the analyst thinks that investors are finally hopeful of better times ahead. The company expects its Vogtle Unit 4 to be placed in service during late fourth quarter of 2023 or the first quarter of 2024.

The analyst sees the possibility of SO commanding a premium compared to its peers as the year progresses and heads into 2024. Post-Vogtle, Tucker expects the company to accelerate its EPS growth and use the higher cash flows to boost dividends.

Note that in April, Southern announced a 2.9% increase in its quarterly dividend to $0.70. This is the 22nd consecutive year in which SO has raised its dividend. SO offers a dividend yield of 4%.  

“We note that SO’s utilities mostly operate in strong economic environments, which should support investment opportunities throughout the decade,” said Tucker. (See Southern Company Stock Chart on TipRanks)

Chevron

Next up is dividend aristocrat Chevron (CVX). In January, the oil and gas giant increased its quarterly dividend by about 6% to $1.51 per share, making 2023 the 36th straight year with a higher dividend payment. CVX’s dividend yield stands at 3.6%.

On Sept. 13, Goldman Sachs hosted roundtable discussions with Chevron’s senior management. Analyst Neil Mehta said that the firm remains bullish on CVX due to its peer-leading capital returns profile, inflecting upstream operations expected in 2025 supported by higher Tengiz/Permian volumes and relative valuation.

The analyst contends that near-term pressures like risks around the Tengiz project are largely reflected in CVX’s valuation. He highlighted management’s constructive view on the upstream business, reaffirming nearly 3% CAGR forecast for production over the next five years.

“The company reiterated its commitment to competitive shareholder returns, which we believe is a core differentiating factor for CVX over the next few years,” added Mehta, who ranks No. 181 among more than 8,500 analysts on TipRanks. 

The analyst currently expects about a 9% capital return yield in 2024/2025, higher than the U.S. energy majors peer average of about 7%. Overall, Mehta reiterated a buy rating on Chevron with a price target of $187.

Mehta’s ratings have been successful 67% of the time, with each rating delivering an average return of 13%. (See Chevron Hedge Fund Trading Activity on TipRanks)

Broadcom

Semiconductor company Broadcom (AVGO) managed to beat the Street’s fiscal third-quarter estimates. However, investors seemed unsatisfied as the quarterly outlook was in line with the analysts’ expectations, unlike that of chip giant Nvidia (NVDA), which crushed estimates on artificial intelligence tailwinds.

Broadcom generated $4.6 billion in free cash flow in the fiscal third quarter of 2023. It paid a cash dividend worth $1.9 billion in the quarter and repurchased 2.4 million shares.

Earlier, AVGO increased its quarterly dividend for fiscal 2023 by 12% to $4.60 per share (annualized $18.40). This hike reflected the company’s twelfth consecutive increase in annual dividends since it initiated dividends in fiscal 2011. It offers a dividend yield of 2.2%

Baird analyst Tristan Gerra recently reiterated a buy rating on AVGO stock while boosting the price target to $1,000 from $900 to reflect solid growth opportunities, mainly in the company’s custom application-specific integrated circuit (ASIC) business for AI applications. Gerra also noted that the company’s free cash flow remains strong.

The analyst said that recent channel checks revealed a surge in Broadcom’s custom ASIC business to over 2 million units for next year, which was more than 2.5 times his unit base expectation for 2023. He added that generative AI investments are accounting for nearly all the growth in Broadcom’s semiconductor business, with AI-related revenue now exceeding $1 billion.

Gerra holds the 514th position among more than 8,500 analysts tracked on TipRanks. Moreover, 54% of his ratings have been profitable, with each generating an average return of 8.7%. (See Broadcom’s Financial Statements on TipRanks)

Bristol-Myers Squibb

We end this week’s list with biopharmaceutical company Bristol-Myers Squibb (BMY). The company repurchased 17 million shares for $1.2 billion and made dividend payments of $2.4 billion in the first six months, ended June 30.

The quarterly dividend of $0.57 per share for 2023 indicates a 5.6% year-over-year increase, marking the 14th consecutive year of dividend hikes. BMY’s dividend yield stands at 3.9%.

Following the company’s Research and Development (R&D) Day held in New York on Sept. 14, Goldman Sachs analyst Chris Shibutani reaffirmed a buy rating on BMY stock with a price target of $81.

At the event, management highlighted how new product launches and the acceleration of research and development productivity would drive future revenue growth, addressing concerns about the Inflation Reduction Act and loss of exclusivity of key drugs.

Shibutani noted that management expressed continued confidence in the 2030 new product launch revenue goal of more than $25 billion (non-risk adjusted), based on currently visible late-stage and already commercializing opportunities.

Commenting on BMY’s capital allocation program, Shibutani said that management’s priority remains business development (BD). “Beyond BD, the company remains committed to growing its dividend and will continue to be opportunistic with share buybacks,” the analyst added.

Shibutani holds the 271th position among more than 8,500 analysts tracked on TipRanks. In all, 44% of his ratings have been profitable, with each generating an average return of 20.5%. (See BMY Options Activity on TipRanks)

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Jim Cramer’s top 10 things to watch in the stock market Thursday

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My top 10 things to watch Thursday, Sept. 14

1. U.S. equities edge up in premarket trading, with investors largely betting the Federal Reserve won’t raise interest rates further when the central bank convenes next week. The S&P 500 is up 0.33%, while the Nasdaq Composite is 0.24% higher. U.S. government bond yields tick up, with that of the 10-year Treasury hovering just below 4.3%.

2. Oil prices continue to climb higher, with West Texas Intermediate crude, the U.S. oil benchmark, climbing above $90 a barrel for the first time since last November. Club oil holdings Coterra Energy (CTRA) and Pioneer Natural Resources (PXD) are up 1.48% and 0.88%, respectively, in early trading. Here’s the Club’s take on oil’s 10-month highs.

3. U.S. wholesale inflation climbs more than expected in August, according to the Labor Department’s monthly producer price index. At the same time, U.S. retail sales come in higher than predicted for last month, the Commerce Department reports, though the gains are largely driven by higher gasoline prices.

4. The European Central Bank raises interest rates by a quarter percentage point, bringing its deposit rate to a record-high 4%. The increase is the ECB’s 10th-conesecutive rate hike.

5. British chip designer Arm Holdings, owned by SoftBank Group (SFTBF), sets its highly anticipated initial public offering at $51 a share, valuing the company at over $54 billion. At this price, there’s not a lot of room for error. The firm will start trading Thursday on the Nasdaq under the stock symbol ARM.

6. The European Union launches an “anti-subsidy” investigation into China’s electric-vehicle companies, with Beijing calling the move “blatant protectionism.” Will Europe go 27.5% tariffs on Chinese cars? This could be a real issue for China.

7. China’s central bank is cutting the reserve requirement ratio for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points from Sept. 15, in the government’s latest effort to prop up its faltering economy.

8. Jim Farley, the CEO of Club holding Ford Motor (F), rejects allegations by United Auto Workers President Shawn Fain that the automaker is not taking bargaining seriously ahead of a Thursday night strike deadline. Here’s the Club’s take on how a union strike could impact Ford.

9. KeyBank raises its price target on Chip designer Cadence Design Systems (CDNS) to $290 a share, up from $270, while reiterating an overweight rating on the stock. The firm’s call comes after KeyBank analysts met with early users of the company’s new AI-enabled EDA design portfolio. Cadence is a partner of AI chipmaker and Club holding Nvidia (NVDA).

10. Wolfe Research upgrades ecommerce firm Etsy Inc. (ETSY) to outperform, from peer perform, with a $100-per-share price target. The firm cites “many paths” for Etsy shares to outperform over the next 12-18 months.

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Oil prices are at 10-month highs. Here’s what Cramer thinks it means for two energy stocks

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An oil pump jack in Great Plains, southeastern Wyoming.

Marli Miller | Universal Images Group | Getty Images

Oil prices are hovering around 10-month highs, as a stout summer rally extends into the fall and delivers additional gains for the Club’s energy stocks, Pioneer Natural Resources (PXD) and Coterra Energy (CTRA). And Jim Cramer believes it’s not too late to buy either of them.

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