Tech stocks slip on AI disappointment

Good morning. Here's what happened overnight and what you need to know today.

1.

Broken AI dreams: Microsoft, Google-parent Alphabet and AMD have struggled to meet investors' expectations on AI, with the tech giants' shares slipping overnight after the release of Q4 earnings. Microsoft’s losses came despite revenue increasing at the fastest rate since 2022, with its Azure cloud-services unit reporting a revenue jump of 30%, and Alphabet also reported mostly good news in its earnings. AMD’s new AI chip had set expectations high, but the chipmaker’s forecast for Q1 fell short of most estimates. (Bloomberg)

2.

'Immaculate disinflation': The Federal Reserve will wrap up its two-day policy meeting with its first rate decision for the year this morning. Fed officials are expected to leave the benchmark overnight interest rate at 5.25%-5.5%, and will also summarise their views on the economy, potentially offering signals as to when cuts may be delivered later this year. Many economists are questioning whether the central bank will pull off ‘immaculate disinflation’, a scenario where inflation will cool without a spike in unemployment. (Reuters)

3.

Skinny business: Novo Nordisk became the second European company in history to pass USD500 billion ($757.7 billion) in market value after posting remarkable growth in 2023. The Danish drugmaker’s blockbuster weight-loss drug, Wegovy, powered a 36% rise in sales to USD33.7 billion in 2023, with profits growing to almost USD15 billion. While Novo is investing in new production facilities to meeting voracious demand, the company expects sales growth will ease to between 18% and 26% because of increased competition and ongoing production constraints. Shares in Novo Nordisk gained 60% over 2023. (Financial Times)(Bloomberg)

4.

Pro-tech-ting children: Tech CEOs have testified before the US Senate in Washington to defend their practices around safeguarding children online. Meta’s Mark Zuckerberg, X’s Linda Yaccarino, and Shou Zi Chew of TikTok were among the social media leaders grilled by lawmakers. In his opening statement, Senator Lindsey Graham told the tech leaders “you have blood on your hands,” with reference to children who have died or suffered emotional damage as a result of social media. (The Verge)

5.

Bidding war: Bryon Allen’s Allen Media Group has made a USD14.3 billion offer to buy out Paramount Global’s remaining stock, after Warner Bros Discovery and Skydance Media also expressed interest. The offer is a 50% premium on recent trading, at $28.58 per each voting share of Paramount, and $21.53 for the non-voting shares, reported Bloomberg, citing unnamed sources. Including existing debt, the total value of the deal would rise to about $30 billion. Paramount is the owner of Australia's Network 10. (Bloomberg)

6.

Treasury auction: The US Treasury announced that it will conduct its largest debt auctions to date in order to fill a vast federal budget deficit. The Treasury said it will increase its two-year and five-year bond auctions by USD3 billion per month over the coming three months. Announced in its quarterly refunding update, the USD69 billion in two-year notes that will be sold in April would be the biggest-ever coupon auction. (Financial Times)

7.

Late delivery: Chinese automakers including Changan Auto and Chery Auto, have delayed delivery of their flagship models due to production issues at Huawei. The carmakers partnered with the tech giant to produce a computing unit called the MDC 810, which powers advanced driver assistance systems. There is currently a shortage of a component used in the unit, stalling the carmakers’ production timelines and adding pressure to Huawei’s efforts to become the dominant supplier of software and components for smart EVs. (Reuters)

8.

IPO TBC: Canva co-founder and chief product officer, Cameron Adams, has said the company is in no hurry to IPO, after its $2.3 billion secondary share sale beat expectations. Adams told The Australian that an IPO is somewhere in the future, as “it’s a natural path of evolution.” He added that the company does not want to add pressure by putting a date to a potential listing, saying that there are currently no plans in the works. Adams said Canva has been profitable for seven years now, and has maintained its $US26 billion valuation over the past six months at a time when others have fallen. (The Australian)