Podcast Summary
Social media influence on stock market: Social media can significantly impact stock prices through individuals' disclosures and promotions, leading to volatility and potential manipulation. Roaring Kitty's actions towards Chewy and other highly-shorted stocks serve as examples.
Social media influence, specifically from individuals like Roaring Kitty, can significantly impact the stock market, leading to volatility and potential manipulation. Roaring Kitty's disclosure of a $245 million position in Chewy caused a rally in the online retailer's stock, while his past favorable comments on Chewy and his recent promotion of other highly-shorted stocks have added volatility to their markets as well. However, Roaring Kitty is currently facing securities fraud claims in a class action lawsuit over his role in the GameStop price swing earlier this year. The lawsuit alleges that he engaged in a pump and dump scheme, buying large volumes of call options before promoting the stock on social media and then selling them for a profit once the price had risen. This incident highlights the potential risks and consequences of using social media to influence stock prices. Other highly-shorted stocks to watch for potential volatility include Children's Place, Beyond Meat, True Panyon, Lemonade, Coles, Guess, Hurt's Global, and Virgin Galactic.
Manufacturing sector challenges: Despite new orders and growth in the EV market, the manufacturing sector is facing significant challenges including supply chain disruptions and rising treasury yields.
The manufacturing sector continues to struggle, with the ISM Manufacturing Index contracting for the third consecutive month and the PMI Manufacturing Index falling short of expectations. This contraction comes despite an increase in new orders and deliveries for Chinese EV makers like NEO, X-Pang, and The Auto, which have seen significant growth in their respective markets. However, supply chain disruptions, such as the ongoing attacks on the Suez Canal, are causing expensive and time-consuming rerouting, adding to the challenges faced by manufacturers. Despite these challenges, the supply chain disruptions are currently more of an annoyance than a massive disruption. Treasury yields are also rising, with the 10-year yield nearing 4.5% despite some disappointing manufacturing data. Overall, the manufacturing sector is facing significant challenges, but there are signs of growth in certain areas, particularly in the EV market.
Nuclear power for AI data centers: Tech companies are exploring nuclear power deals to meet electricity demands for AI data centers, potentially impacting emissions reduction targets and electricity prices for others
The tech industry is turning to nuclear power to meet the surging demand for electricity to power AI data centers. Companies like Amazon Web Services and Viista are in talks with nuclear power plant owners for direct power supply deals. This renewed interest in nuclear power could benefit the industry, but it could also lead to higher electricity prices for other customers and potential impacts on emissions reduction targets. Meanwhile, sales growth for major AI-related tech stocks like NVIDIA, Microsoft, Meta, Alphabet, and Amazon is expected to slow down significantly in the second half of 2023. Despite this expected deceleration, the valuations of these stocks remain high. These developments underscore the complex and evolving nature of the tech industry and its impact on various sectors and the broader economy.
Mega Cap Earnings Growth: Investors may need to reconsider paying premium valuations for mega caps if their earnings growth isn't as superior as it once was due to narrowing EPS growth differential between mega caps and the rest of the market in H2 2024 and all of 2025.
The upcoming reporting period for TQ could be a significant test for investors, as consensus estimates suggest the EPS growth differential between mega caps and the rest of the market is forecasted to narrow significantly in the second half of 2024 and all of 2025. This means that investors may need to reconsider whether they're willing to pay the same valuation premiums for the mega caps if their earnings growth isn't as superior as it once was. This trend could have broader implications for the market as a whole. Stay tuned for more insights on this topic and others on Wall Street Lunch, and be sure to check out the show notes for links to related stories. And for comprehensive news, analysis, ratings, and data on stocks and ETFs, visit SeekingAlpha.com and consider upgrading to a subscription for even more valuable tools and resources.