Weekly Update 03/06/2024
BITCOIN IS BACK!
BTC HITS ALL TIME HIGH OF $69K!
Elon Sues OpenAI
TESLA STOCK CRASHES!
Coinbase up 80% this month, Microstrategy up 111%
Trump Trounces Haley in Super-Tuesday Primaries
Weekly Meetings:
INVESTMENT CLUB THURSDAYS 6 PM (BPC188)
INVESTMENT FUND THURSDAYS 7 PM (BPC188)
—Market Madness—
This Week’s Market: Nasdaq leads stock slide, Bitcoin Rockets
US stocks closed in a sea of red on Tuesday, pulling further away from record highs as uncertainty over interest rate cuts and a shakeup in “Magnificent Seven” stocks brought a note of wariness to the market.
Contracts on the tech-heavy Nasdaq Composite (^IXIC) led the day’s declines, sinking about 1.7% as a retreat in Apple (AAPL) and Tesla (TSLA) continued to drag on stocks more widely. Both the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) closed down more than 1%.
Apple came under pressure after a report that iPhone sales fell 24% in China, adding to Monday’s loss in the wake of a $2 billion EU antitrust fine. Tesla continued to slump as a shutdown at its Berlin Gigafactory added to concerns over a shipment slump and a Chinese price war.
Bitcoin (BTC-USD) reached a fresh all-time high, briefly surpassing its previous record of $68,789 from November 2021. However, the cryptocurrency experienced a sizable drop shortly after, plummeting 10% to trade just around $62,000 a coin.
The debate now is whether the tech gains behind the recent record-setting stock rally have reached their peak, as downbeat news saps the “FOMO” — fear of missing out — seen as keeping investors engaged.
At the same time, faith in coming easing by the Federal Reserve took a knock after comments by policymaker Raphael Bostic. The Atlanta Fed president said he sees just one rate cut this year, penciled in for the third quarter.
Investors are now even more focused on Fed Chair Jerome Powell’s testimony to Congress on Wednesday. His words will be closely watched for any change in the mantra that policymakers need to be convinced inflation is conquered before any move.
In corporates, Target (TGT) earnings beat Wall Street forecasts, helping shares pop more than 10%.
CrowdStrike rallies on strong guidance
Shares of CrowdStrike jumped 17% after the cybersecurity firm reported quarterly earnings that beat on both the top and bottom lines and issued stronger-than-expected guidance for the current quarter.
CrowdStrike projected first quarter adjusted earnings between $0.89 and $0.90 a share, ahead of the $0.82 estimate analysts had expected. The company’s sales forecast of $902.2 to $905.8 million also topped estimates of $898.8 million.
“CrowdStrike delivered an exceptionally strong and record fourth quarter with net new annually recurring revenue (ARR) growth accelerating to 27% year-over-year, reaching a new high of $282 million and ending ARR growing 34% year-over-year to reach $3.44 billion,” George Kurtz, CrowdStrike’s president, chief executive officer, and co-founder said in the earnings release.
Shares have surged nearly 40% since the start of the year.
Tech sell-off leads stock declines
US stocks closed lower on Tuesday, led by the tech-heavy Nasdaq Composite (^IXIC).
Contracts on the Nasdaq sank about 1.7% as a retreat in Apple (AAPL) and Tesla (TSLA) continued to drag on stocks more widely. Both the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) closed down more than 1%.
Bitcoin (BTC-USD), which briefly touched a fresh all-time high, tumbled about 10% to trade around $62,000 a coin.
Goldman Sachs isn’t seeing ‘widespread euphoria’ in markets
The stock market bubble debate has gripped markets over the past week as an AI-driven surge in stocks has sent the major indexes to record levels.
But the equity strategy team at Goldman Sachs told Yahoo Finance the underlying dynamics of the current rally don’t indicate the market has reached levels of euphoria on par with past bubbles.
Using an enterprise value-to-sales ratio, Goldman Sachs analyzed the percentage of US stocks that have what the firm considers to be high valuations. The results showed highly valued stocks currently account for 24% of the US equity market, lower than 28% seen in 2021 and the 35% during the late 90s tech bubble.
Notably, there are also far fewer overvalued companies contributing to this recent run.
“If we look at the number of companies that are trading at very elevated multiples, that looks even less extreme relative to history,” Goldman Sachs equity analyst Ben Snider told Yahoo Finance. “So effectively, as we all know, there are a small number today of very large companies trading at elevated multiples, rather than what we saw in 2021, just a couple years ago, where there seemed to be widespread euphoria priced across the market.”
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Elon Musk Sues OpenAI, Sam Altman, Saying They Abandoned Founding Mission
Billionaire entrepreneur Elon Musk has sued ChatGPT-maker OpenAI and its CEO, Sam Altman, saying they abandoned the startup’s original mission to develop artificial intelligence for the benefit of humanity and not for profit.
The lawsuit filed late on Thursday in California Superior Court in San Francisco is a culmination of Musk’s long-simmering opposition to the startup he co-founded. OpenAI has since become the face of generative AI, partly due to billions of dollars in funding from Microsoft (MSFT.O), opens new tab. Musk went on to found his own artificial intelligence startup, xAI, launched last July.
Musk’s lawsuit alleges a breach of contract, saying Altman and co-founder Greg Brockman originally approached him to make an open source, non-profit company, but the startup established in 2015 is now focused on making money.
Musk said OpenAI’s three founders originally agreed to work on artificial general intelligence (AGI), a concept that machines could handle tasks like a human, but in a way that would “benefit humanity,” according to the lawsuit.
OpenAI would also work in opposition to Alphabet Inc’s (GOOGL.O), opens new tab Google, which Musk said he believed was developing AGI for profit and would pose grave risks.
Instead, OpenAI “set the founding agreement aflame” in 2023 when it released its most powerful language model GPT-4 as essentially a Microsoft product, the lawsuit alleged.
Musk has sought a court ruling that would compel OpenAI to make its research and technology available to the public and prevent the startup from using its assets, including GPT-4, for financial gains of Microsoft or any individual.
OpenAI’s top executives rejected several claims that Musk made in his lawsuit, Axios reported on Friday, citing a memo.
“It was never going to be a cakewalk,” Altman said in his note, also seen by Axios. “The attacks will keep coming.”
OpenAI, Microsoft and Musk did not respond to Reuters requests for comment on the lawsuit.
Musk is also seeking a ruling that GPT-4 and a new and more advanced technology called Q* would be considered AGI and therefore outside of Microsoft’s license to OpenAI.
Tesla’s 2-day slump has stock hitting lowest since May 2023
Tesla (TSLA) shares slipped for a second straight day, with the stock hitting lows not seen since May 2023 as another spate of bad news hit the EV maker.
Early Tuesday morning Tesla’s Giga Berlin factory halted production and suffered a power outage following an arson attack at a power substation near the plant. According to Reuters, firefighters extinguished the fire, which did not spread to the factory. A Tesla spokesperson confirmed to Reuters that production had stopped and the site was evacuated.
Tesla closed down 3.9% on Tuesday, its lowest close since May 19, 2023. Tesla stock is down over 11% to start the week, and has fallen a steep 27.3% year to date.
A left-wing activist group claimed responsibility for the attack on Giga Berlin. “Stopping production of electric vehicles, rather than fossil fuel vehicles, ist extrem dumm,” Tesla CEO Elon Musk said on X, using the German term for “extremely dumb.” The attack on Tesla’s Giga Berlin comes after expansion plans for the factory came under heavy criticism, with the plan eventually being voted down.
Tesla’s Giga Berlin was producing around 6,000 vehicles a week at peak output, but will now likely shut down for a few days as power is restored to the plant.
Tuesday’s latest setback follows worries in one of Tesla’s biggest markets, China. On Monday, Tesla shares slipped over 7% as lackluster China shipments and new price cuts on the mainland hinted at more demand issues.
Tesla reported 60,365 vehicle shipments from its Giga Shanghai factory in February, according to preliminary data from China’s PCA (Passenger Car Association) via Bloomberg. The February shipments represent a 16% drop from a month ago, a 19% drop from a year ago, and the lowest shipment total since December 2022.
Tesla’s lowest shipment total in over a year is a concern for the company, which sees China as a huge growth market. Even China’s BYD, which surpassed Tesla in overall EV sales in Q4 and generally dominates the Chinese EV market, saw its February sales tumble to 122,311 units from 193,655, a 37% drop.
Goldman analyst Mark Delaney cut his 2023 and 2024 profit outlook for Tesla today, citing sinking margins due to price cuts, which he sees continuing over the next two years. Delaney wrote margin headwinds would likely be “offset by our positive view of Tesla’s leadership position in the industry and long-term growth potential.” Delaney has a $275 price target and Neutral rating on the stock.
Bitcoin Hits Record High Above $69,000; MicroStrategy To Raise Bitcoin Bet By $600 Million
Bitcoin early Tuesday rallied to a new all-time high to surpass its previous record levels from November 2021. Cryptocurrency prices and spot bitcoin ETFs followed bitcoin higher. Elsewhere, MicroStrategy announced plans to raise its bitcoin bet.
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Bitcoin Tuesday morning leapt as high as $69,208 —surpassing its November 2021 all-time high of $68,990. BTC slid back to $67,000 but was still up about 2% over the prior 24 hours, CoinDesk data showed. The world’s top cryptocurrency is now up 62% so far this year, powered by an influx of institutional participation and speculation ahead of the upcoming halving event in April.
Ethereum early Tuesday traded near $3,812, shy of its morning high of $3,826 and at January 2022 highs. The No. 2 crypto has rallied 66% so far in 2024.
Bitcoin ETF Flows
Shares of the new spot bitcoin ETFs eased slightly early Tuesday after collectively jumping around 7.3% Monday.
BlackRock’s iShares Bitcoin Trust (IBIT) has been the clear leader in fund inflows since the spot bitcoin ETFs launched Jan. 11 with roughly $8.38 billion in inflows as of end of day March 4, according to BitMEX Research data. The Fidelity Wise Origin Bitcoin Fund (FBTC) ranks second at $5.22 billion in inflows. The ARK 21Shares Bitcoin ETF (ARKB) ranks third at $1.67 billion, followed by the Bitwise Bitcoin ETF (BITB) with about $1.27 billion in inflows.
Grayscale Bitcoin Trust (GBTC) has recorded $9.27 billion in outflows as of March 4, a large chunk of the outflows are due to remaining impacts from the crypto winter in 2022.
FTX at the end of January liquidated its GBTC position and sold about $1 billion worth of shares as part of its bankruptcy proceedings, CoinDesk previously reported. Elsewhere, a U.S. District Court for the Southern District of New York on Feb. 14 approved bankrupt crypto lender Genesis to sell $1.6 billion in GBTC shares in an effort to repay creditors, Reuters reported.
The Grayscale team anticipated GBTC’s diverse shareholder base would engage in profit-taking and deploy investment strategies that would impact the Trust’s flows, and we are pleased that outflows have continued to stabilize — especially against forced selling from estate bankruptcies,” said Jennifer Rosenthal, vice president of communications at Grayscale. “With market-leading liquidity, strong trading volume, and an unparalleled track record, we expect GBTC will continue to be a primary capital markets risk transfer tool for bitcoin.”
Still, Grayscale remains the leader in terms of assets, with $28.12 billion in assets under management, followed by iShares Bitcoin Trust at $11.53 billion.
Despite GBTC’s outflows, the new ETFs have recorded $7.92 billion in inflows since launch, according to BitMEX Research.
MicroStrategy To Buy More Bitcoin
MicroStrategy (MSTR) late Monday announced plans to raise $600 million in a private offering in order to buy additional bitcoin, and for general corporate purposes, according to the release. Michal Saylor’s software company is the largest publicly-traded holder of bitcoin and added another 3,000 BTC to its coffers during the week ended Feb. 25, Saylor announced on Feb. 26 via a post on X. MicroStrategy now holds 193,000 bitcoin with an average purchase price of $31,544 per coin.
MSTR fell nearly 10% early Tuesday. Shares on Monday rocketed 23.6% to mark six consecutive daily gains. MSTR stock bolted 111.2% in 2024.
Crypto Stocks
Cryptocurrency exchange Coinbase (COIN) was little changed in early trade Tuesday after spiking 11.4% Monday. COIN stock is extended above a buy zone following a breakout last week and trading at its highest level since January 2022. Shares rallied 31.8% in 2024 through Monday’s close.
Bitcoin miner Marathon Digital (MARA) fell 7.5% early Tuesday, after Monday’s 4.8% decline. MARA stock rose 9.5% so far this year despite retreating on the company’s Q4 earnings report last week. Fellow bitcoin miner CleanSpark (CLSK) tumbled 7.8% Tuesday morning and dropped 7.8% Monday. CLSK stock soared 49.3% so far this year.