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Microsoft throws down on AI

Nov 16, 2023

Good morning! 👋

It looks like we’re in for a bit of a breather as I suggested would be the case in yesterday’s 5 with Fitz.

The news outlets are trying hard to attribute this to weaker guidance from Cisco Systems and a gloomy forecast from Palo Alto Networks, but that’s not quite right.

Traders are simply taking short-term profits after an early hot streak this month.

Let ‘em.

If you are an investor, this is actually exactly what you want to see because this kind of volatility forms the basis for the much longer-term profit potential that we know is being created even as my bride types.

Here’s my playbook.

Walmart’s caution isn’t the half of it

This is the one I’ve been waiting for when it comes to retailers. (Read)

More than 230 million people shop at Walmart every single week here in the United States, which means, more than any other retailer out there, Walmart’s information reflects the overall state of the consumer. The key takeaway is that revenue jumped on the strength of Walmart’s grocery and online businesses, but management is concerned about weaker consumer spending.

I’m not surprised one bit, given what we’ve been talking about all week with regard to Home Depot, Target, and other retailers.

The next thing to watch is Walmart’s promotions… If the company gets even more aggressive with Thanksgiving and Christmas promotions, that’s going to be a canary in the coal mine.

Walmart touched an all-time high yesterday, up about 19% YTD. But, as OBAers know, I prefer another big boxer. Upgrade to Paid

Alibaba puts its cloud genie back in the bottle

This is particularly interesting to me and should be to you too, because management was unusually blunt and straight to the point when it announced that it’s binning the cloud spin-off. (Read)

Rather than hiding behind the usual Chinese PR spin, management said that US chip export restrictions are making it harder for Chinese companies to get critical chips from US suppliers.

Having spent 30-plus years in the Asian region, including a lot of time inside mainland China, there is a hidden message that most Westerners will miss.

This story is not about US chip restrictions or Alibaba itself.

What this really tells you is that China’s industrial espionage department (which is a state-sponsored undertaking) hasn’t yet acquired the knowledge needed to copy the latest US designs.

If I’m right—and I think I am—China will engage in a brief charm offensive with the Biden administration as a smoke screen to deceive the US into believing that it will play nice with regard to intellectual property.

Don’t believe it for a minute!

US chip makers, including the names we talk about frequently, are still the best game in town.

Microsoft throws down on AI

Team Nadella announced yesterday that the company will be introducing its first AI chip. This is a direct shot across the bow for Nvidia. Microsoft also plans to release a new Arm-based chip for more mundane computing. (Read)

MyPOV: At the risk of sounding like a broken record, AI may be the single-largest investing trend in recorded human history. Mark my words, if you do not prioritize this in your investing portfolio, you will get left behind. But choose your bets carefully; there is a lot of late-night schlock out there right now, and the click bait artists are in high gear.

Crisis averted (again)

In my capacity as an investment strategist, I don’t have the luxury of taking sides when it comes to politics. My job is to “do money.”

Still, I cannot help but be absolutely disgusted by the continual political brinkmanship being played inside the beltway with regard to funding our nation.

The Senate passed yet another stopgap funding bill last night and, in doing so, averted yet another potential government shut down. (Read)

That’s great, but… it’s also a global embarrassment.

Any private company that conducted itself in such a manner would have been out of business a long time ago, and the managers who contributed to such repeated nonsense would have been sent packing. Yet, the same shenanigans get played out over and over and over again.

If you are an investor, I cannot say it strongly enough… you must learn to look beyond the politics when it comes to building wealth. I know that sounds counterintuitive, but it’s extremely important, as I noted to the fabulous Stuart Varney earlier this week. (Watch)

Chicken in the sky!

Chik-fil-A is piloting (pun absolutely intended) a new service that will allow you to have food delivered by drone. (Read)

Apparently, this is a delivery service being offered at no additional cost and for a limited time at a single location in Florida, but my guess is that it’s a sign of things to come.

Trade idea: Assuming Chik-fil-A’s program is as successful as I think it will be, this sets up what could be a great pairs trade in which you want to be long stocks like McDonald’s, Burger King, and other fast-food stocks but simultaneously short Uber Eats and other food delivery services that are human-based.

I can’t put my finger on it just yet, but drones could also radically change the drive to unionization and the approach taken with regard to minimum wages and corporate insurance premiums.

There is no doubt we’ll be talking about this quite a bit in the next 12 months!