On Friday, April 19, 2024, Nvidia (NVDA.US), Microsoft (MSFT.US), Apple (AAPL.US), Google (GOOG.US), Tesla (TSLA.US), Amazon (AMZN.US), and Meta (META.US), known as the "seven sisters" of Wall Street, fell across the board.
Given that the market capitalization of the Seven Sisters is largely in the top 10 of the U.S. technology sector, the sharp drop in their share prices has had a significant impact on the overall market.
According to Finet's estimates, the market value of these seven major technology stocks fell by a total of $412.9 billion in one day, which is almost equivalent to Tesla's current market value, of which the biggest decline is Nvidia, which has risen the most in the past two years, falling as much as 10% in a single day, evaporating the market value of $211.8 billion, which is almost equivalent to the market value of an AMD (AMD.US).
Nvidia's stock price has shown strong growth over the past two years. Since October 2022, its stock price has climbed from less than $120 to successfully breaking through the $925 mark by the end of March this year, showing a significant exponential growth trend.
Pullbacks may be normal, not to mention that Nvidia's rivals AMD and Intel (INTC.US) are not idle.
AMD launched the MI300X last year, the AI PC chip last week, and Intel also launched the Gaudi 3 last week, calling Nvidia to compete with Nvidia.
The direct cause of Nvidia's collapse may be related to the earnings announcement of its closely tied server supplier Supermicro Computer (SMCI.US).
As one of Nvidia's foundries, Supermicro's previous surge is closely related to Nvidia's halo, in the past few quarters, Supermicro Computer has disclosed extremely good sales and profit figures in advance, but on April 19, the company uncharacteristically did not disclose a preliminary report, which caused the market to worry about its performance, which also extended to its close partner Nvidia, and led to the collapse of the technology sector.
The Seven Sisters are about to report their quarterly results for the quarter ending in March (or April for Nvidia) in the coming weeks, what exactly does the market expect from them?
Tesla: Have new energy vehicles reached a bottleneck?
Tesla has been in the news recently: the global layoff of 10% of its employees, effective immediately, including marketing personnel, and at the same time, the price reduction of all systems in North America and China, the price reduction of all domestic systems may reach 14,000 yuan.
The message has mixed implications.
The good thing is that Tesla has been adjusting production through gross margins, and layoffs may mean that Tesla has broken through physical boundaries and made progress in standardizing production processes to reduce costs, which can reduce labor costs.
The bad thing is that if the layoffs are due to an organizational restructure triggered by slower delivery growth, then Tesla's prospects are worrying.
It is impossible for an industry to expand indefinitely, this is true for real estate, new energy vehicles, and AI.
In the early stage of development, the demand is higher than the supply, and the supplier is in a more advantageous position, especially before the industry competitors have not entered the market, the supplier who monopolizes the market enjoys the market dividend, which is the case with the current NVIDIA.
Driven by profits, new competitors are constantly entering the market, and the supply of products in the market increases, which naturally leads to competition in products, services and prices. After Tesla's Shanghai Gigafactory was put into operation in 2019, the delivery of new energy vehicles increased significantly, and its revenue and profitability also soared, and its stock price performance was just like the current Nvidia, which soared exponentially in a year, which also triggered the entry of competitors, including China's "new car-making forces", traditional fuel vehicle rivals, and even upstream supplier BYD (01211. HK) has also completely abandoned gasoline vehicles and specialized in new energy vehicles.
As competitors increase, supply increases dramatically, and penetration increases (for example, the current penetration rate of new energy vehicles sold in China's auto retail sales may have exceeded 50%), but the growth space for demand has not expanded to the same extent, and the gap between supply and demand has narrowed, and the profit margins of suppliers have naturally shrunk.
On the whole, Tesla's operating philosophy is correct.
By standardizing to reduce production costs and improve profitability, Tesla is better positioned to win the long-term war by reducing production costs and improving profitability, and more importantly, by continuously optimizing costs, Tesla is better positioned to win the long-term war - sooner or later higher costs will eliminate less efficient competitors, and Tesla can secure its position by grabbing market share from competitors.
Therefore, although the growth of demand for new energy vehicles has begun to slow down, and competitors are becoming more and more urgent, Tesla should not yet reach the bottleneck, and the latest quarter of the performance should pay attention to the data is whether Tesla's gross profit margin of car sales has improved, and whether the proportion of service revenue has increased, these data will reflect the cost-effectiveness of Tesla's car production process, and the performance of its sustainable growth of high-profit business - service revenue.
In terms of products, it is important to note whether Tesla is still promoting the release of economy models, as well as the progress of RoboTaxi, as well as the production capacity of the Cybertruck.
Meta:AI社交的可行性
Meta has risen 36.10% this year, mainly due to its AI development, the recovery of advertising revenue growth, and the fact that its competitor TikTok has been "ripped off" in the United States, which may be beneficial to its competitive situation.
Currently, 99% of Meta's revenue comes from advertising, and through AI investment, Meta hopes to improve the user experience and increase the operational efficiency of advertisers.
Meta launched Reels, a short-form video app for TikTok, and Threads for X (formerly Twitter), and the market is expecting more new progress in the monetization of these apps.
In addition, Meta recently announced the launch of a new generation of large language model Llama 3, calling it the most powerful open-source large language model, comparable to GPT-3.5, Claude 3 Sonnet, Gemini Pro 1.5, etc., which may be the market's expectation for this social media platform.
Given the large amount of language data at its disposal, Meta should be uniquely positioned to train large language models. In addition, Meta is actively stockpiling Nvidia's H100 chips, apparently to seize the opportunity in the future AI competition.
Whether AI can improve the efficiency of Meta's social advertising revenue and whether it can generate new revenue for it will be the focus of the market.
Microsoft: AI and the cloud
Microsoft's stock price has slipped recently, and the market's expectations for its quarterly results are mainly focused on the progress in the field of AI. As the first company to invest heavily in OpenAI and lead the AIGC investment boom, Microsoft has significant advantages in the field of AI application development.
Since the launch of Copilot, Microsoft has begun to commercialize AI. Therefore, the market is generally concerned about how much substantial financial benefits Microsoft's AI business can bring to the company in the future.
In the field of cloud computing infrastructure, Microsoft Azure already has nearly a quarter of the market share, and has recently shown strong growth that exceeded expectations. However, whether this growth trend can be sustained remains the focus of the industry. In addition, Microsoft's recent merger with Activision Blizzard is currently in the business integration phase, and it will be interesting to see how its synergies will be realized.
In addition, the development of the personal computer market and artificial intelligence technology has also had a profound impact on Microsoft's core business, such as the Windows operating system. How Microsoft responds to these challenges, as well as its progress on dividend payouts and buybacks, will also be worth watching.
Google: Advertising & AI
Google's share price performance remains closely linked to the state of its advertising business. In the fourth quarter of 2023, Google achieved $65.517 billion in advertising revenue, a year-on-year increase of 10.97%, which surpassed the performance of the previous three quarters. The market is now watching closely to see if this growth momentum can be sustained in the first quarter of 2024. That's because advertising revenue accounts for more than three-quarters of Google's total revenue and is the main source of its profits. Given the relatively low base of ad revenue in the first quarter of 2023, the performance of this quarter is not expected to disappoint. In addition, how to combine AI technology to further enhance the profit value of advertising business is also the focus of the industry.
In addition, Google Cloud's revenue growth in the last quarter increased compared to the third quarter, but it was still insufficient compared to the second and first quarters. Therefore, pay attention to the performance of the business in the latest fiscal quarter to see if it will improve.
Google's investment in AI should not be underestimated, and the CEO of DeepMind has revealed that Google will invest more than 100 billion dollars in AI. Google has many years of experience in the search engine industry, a large library of technology and content, and a lot of computing power, which is its advantage over competitors such as Microsoft.
To sum up, the performance of advertising and AI may directly affect Google's stock price.
Amazon: Full-stack AI
E-commerce platform and cloud computing giant Amazon's stock price recently hit a record high, but recently retreated from its high.
In the past, consumer sentiment seemed to be an indicator of Amazon's performance, and the recent rise in consumer sentiment in the United States may also mean that Amazon's e-commerce business should remain standard.
However, the capital market is more concerned about Amazon's cloud computing business, as the world's leading cloud service provider, Amazon's cloud computing revenue scale and growth have been leading, but under a high base, its growth rate has also slowed down, see the figure below.
Therefore, the market is concerned about whether Amazon's cloud computing business can blossom again and continue to maintain growth, as well as Amazon's AI development.
Amazon has been quietly investing in AI.
In 2023, Amazon pledged to invest $4 billion in OpenAI's competitor Anthropic, completely revealing its ambitions to hunt in the AI market.
In fact, what Amazon is going to do is a full-stack generative AI operator.
At the bottom level, Amazon has built a customized AI training core, Trainium, and an inference core, Inferentia;
In the middle tier, there are Amazon Bedrock service customers who need to build generative AI, providing them with a full suite of solutions for building and scaling generative AI applications;
At the top application layer, Amazon creates a large number of generative AI applications for each enterprise customer, from the AI-powered shopping assistant Rufus to the smarter and more functional Alexa, to advertising functions, to customer and merchant service productivity applications, and so on.
Andy Jassy, CEO of Amazon, said that AWS services are available across all three layers of the stack and will empower all internal and external builders to deliver a differentiated customer experience. Therefore, for Amazon, in addition to the e-commerce business, the market pays more attention to the progress of its AI and AWS.
The Lost Apple?
Apple, which used to be the most valuable in the market, is now saddened behind Microsoft, an AI concept stock.
iPhone sales don't seem to be doing as well as they should, while the competition for Huawei's Pura 70 for the new iPhone has also sparked concerns about Apple's smartphones.
According to data from research firm IDC, global smartphone shipments increased by 7.8% year-on-year to 289.4 million units in the first quarter of 2024. Among them, Apple's mobile phone shipments fell 9.6% year-on-year to 50.1 million units, and its market share also shrank to 17.3% from 20.7% in the same period last year, ranking second.
Samsung, which ranked first, saw its mobile phone shipments edge down 0.7% year-on-year to 60.1 million units during the period, and its market share also fell 1.7 percentage points year-on-year to 20.8%. However, Chinese smartphone suppliers Xiaomi and Transsion have successfully counterattacked, with shipments in the first quarter of 2024 increasing by 33.8% and 84.9% year-on-year to 40.8 million and 28.5 million units, respectively, with market share increasing by 2.7 percentage points and 22.8 percentage points year-on-year, respectively.
The Pura 70, which is at the same price point as the iPhone and Samsung, did not disclose shipments, but the resurgence of Huawei's phones could pose competition for these top phone brands.
The next generation of mobile phones, or will be associated with the concept of AI, Apple is said to have stopped the car project, or will allocate resources to the development of AI, AI chips and large models will be the primary development area, Apple will use its self-developed A18 Pro chip to improve the AI function of the iPhone 16 Pro, mobile phone AI is only a matter of time, and it is said that Apple will apply its own AI chips in the next generation of Mac.
OPPO shared four core AI phone functions at Google Cloud Next'24, and said that it will cooperate with OnePlus to launch a series of advanced features supported by Google's Gemini AI model during 2024, allowing users to appreciate the attractiveness of AI phones.
Samsung's new smartphones also have a number of Galaxy AI features, including instant circle, instant search, instant display, instant translation during phone conversations, intelligent photo editing with AI technology, and more.
Therefore, Apple's AI function development and application will also attract much attention. Apple is working on a large language model (LLM) that runs on the device side rather than in the cloud, which could be the basis for its future generative AI capabilities.
The market is concerned about the chances of Apple's hardware products winning the next AI battle, and how AI functions will help its service revenue.
Nvidia: Targeted
Nvidia's market capitalization has doubled in both years, will it be able to sustain this performance in 2024?
Its H100 may occupy more than 80% of the market share of the AI chip market, and NVIDIA will undoubtedly benefit from the layout of AIGC business in the big guys.
However, Nvidia's inflated orders have not been immediately turned into deliverable products, coupled with expensive pricing, which may make customers switch to competitors such as AMD and Intel, not to mention that both of them have launched their own AI chips, hardening NVIDIA's AI cores and grasping the market gap that NVIDIA cannot meet.
In addition, AMD and Intel are also trying to establish their own ecological moats and break through NVIDIA's platform barriers, which may pose a certain threat to NVIDIA's future competitive advantage.
Therefore, the market will pay close attention to the supply of Nvidia's H100 (whether it can be delivered on time), the launch of new AI chips (performance and delivery time), and the situation of Nvidia's competitors, including AMD.
summary
2024 will still be the year of AI layout, and the prospect of the Wall Street Seven Sisters depends on their investment in AI in addition to how their existing businesses can maintain growth.
What is the start of the first quarter of 2024?
Author: Mao Ting