You're not California dreamin'. There's no one in that car.
Last year, completely driverless vehicles traversed 3.3 million miles across the Golden State — a five-fold increase from 2022 levels, according to recently released state data. Making up the bulk of the robot-cruising were GM's Cruise cars, responsible for 63% of the miles autonomously driven, and Google's Waymo, which accounted for 36%. That could make crossing the street a walk on the wild side.
BIG TECH
Earnings Season May Have Split Up the 'Magnificent Seven'
Let's be clear about it. Meta, Microsoft, Alphabet, Amazon, Apple, Nvidia, and Tesla got together and declared themselves a bloc.
But after powering a rollicking S&P 500 rally in 2023, the tech group that Wall Street dubs the "Magnificent Seven'' have taken divergent paths this earnings season as investors look for tangible results from all the AI excitement.
Return of the Zuck
A billion dollars is cool, but you know what's way cooler? $197 billion. And that's how much Meta added to its market cap on Friday, a day after beating analysts' revenue expectations and reporting that its profit tripled to $14 billion — the biggest single-session rise ever in any company's market value (the cost, at least in part, was massive amounts of layoffs and cost-cutting last year). That makes CEO Mark Zuckerberg & Co. the virtual MVP of the M-7 cohort just two years after a $251 billion market wipeout, still the biggest stock skid ever. The company also just announced its first-ever dividend.
Microsoft, Amazon, and Nvidia, meanwhile, continue to outperform the entire market — with Nvidia still riding AI hype to a roughly 37% rise so far this year. That leaves Apple and Tesla as the Magnificent Seven outliers:
Tesla, after a revenue miss and warning of slowing growth amid increasing competition, especially in China, has seen its stock slide nearly 25% this year, making it one of the two biggest drags on the index.
The other laggard, Apple, has remained tightlipped about its AI plans compared to its Big Tech brethren. Meanwhile, its first major product launch in years, the $3,499 Apple Vision Pro headset, has made an impact that looks more like a raindrop than an iPhone-sized asteroid.
The Magnificent Seven "is not trading as a bloc any more," Jim Tierney, a growth-focused portfolio manager at AllianceBernstein, told the Financial Times. "Last year everybody got the AI halo . . . [now] the market is starting to zero in on what are the individual prospects of each of the Magnificent Seven as opposed to treating them as one security."
Fresh Blood: Tesla and Apple's woes have left room for a new crop of competitors to crack the index's top spots. Tesla, in particular, is now teetering on the ledge of exiting the S&P 500's top 10, with Eli Lilly and Berkshire Hathaway surpassing it in market cap. Meanwhile, the top seven stocks have so far this year accounted for 80% of market gains, up from last year's 60%. Mostly, we're just wondering what's going on with the not-so-magnificent remaining 490 companies.
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Western Brands Still Have High Hopes for a Chinese Rebound
Despite the constant talk of "decoupling," many big-name Western brands aren't looking to break up with China anytime soon. Plenty of US businesses have seen weaker demand there over the past year, but most are banking on a temporary slowdown in consumer spending.
It's Just a Hiccup
Apple and Tesla, which have substantial footprints in China, had a rough 2023. Apple's fourth quarter was mostly solid, but with the iPhone facing heavy competition from China-based Huawei, its collective sales in mainland China, Hong Kong, and Taiwan fell by 13% year-over-year to roughly $21 billion, below Wall Street expectations. Tesla managed to beat analyst estimates, selling 485,000 cars in China in the fourth quarter, but that total was notably 42,000 units below Chinese automaker BYD.
A consumer slowdown isn't China's only economic tribulation. Its slow reversal of zero-COVID policies had the nation lagging behind countries that had been open for business for months. And its hurting housing market just saw the liquidation of Evergrande — one of China's largest developers. Meanwhile, cities and provinces across the country are drowning in debt. Foreign investors have taken a powder, with one telling the FT this weekend that the country was "uninvestable."
But for the glass-half-full crowd, the only way to go is up:
Beijing is taking steps to reinvigorate its economy and financial markets by cutting red tape and slashing interest rates in the housing market, pumping cash into the banking sector, and having state-linked investors buy exchange-traded funds to support the country's ailing stock market. Western brands are betting that the stimulus gives consumer spending a boost, The Wall Street Journal reported.
Apple CEO Tim Cook has said he remains optimistic about China for the long term, and Procter & Gamble CEO Jon Moeller told the WSJ that China's growing middle class gives him hope for the future. And General Motors CEO Mary Barra said China remains a "place to play" despite seeing 2023 sales there drop 9% from a year ago.
Don't Know What You Don't Know: The tough thing about a Chinese rebound is being able to trust the data. The International Monetary Fund — which recently predicted China's economy would grow 4.6% this year — said there are "significant" gaps in the nation's quarterly GDP data, and many financial institutions were flabbergasted when China suspended official youth unemployment data for six months. Like the best mystery writers, Beijing has taken the "always keep 'em guessing" approach.
Written by Griffin Kelly
CONSUMER
Europe's Budget Airlines Are Set for Another Summer Surge
This is beyond revenge travel. Even amid high ticket prices and economic turbulence, flights on Europe's top budget airlines are expected to hit new records this summer, the Financial Timesreported.
Up, Up, and Away
After the pandemic canceled several years of flights, vacation plans, and business trips, 2023 served as one heck of a rebound. Global traffic increased 37% from 2022, and equaled roughly 95% of the total traffic for 2019. Even with the cost of living weighing heavily on many, Europeans were still hungry for travel — and airlines were able to hike ticket prices to offset rising fuel costs. This year looks like it's shaping up to be even bigger.
Budget airlines expect another strong summer. EasyJet said it's sometimes filling two planes a minute. Ryanair reported that bookings are up 5% compared to last year. And Wizz Air has also indicated strong fares so far this year.
European airlines as a whole will have nearly 820 million seats available between April and October, the highest number on record, according to OAG data reported by the FT.
Tickets, Please: Here in the US, the cost of flying is expected to hold relatively steady compared to last year. International fares will go up a little, while domestic flight prices will decrease slightly, Hayley Berg at booking service Hopper told The New York Times. So if you got Paris out of your system last year, something along the lines of Tampa, Phoenix, or Las Vegas could make more economic sense.
Written by Griffin Kelly
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Fresh Blood: Tesla and Apple's woes have left room for a new crop of competitors to crack the index's top spots. Tesla, in particular, is now teetering on the ledge of exiting the S&P 500's top 10, with Eli Lilly and Berkshire Hathaway surpassing it in market cap. Meanwhile, the top seven stocks have so far this year accounted for 80% of market gains, up from last year's 60%. Mostly, we're just wondering what's going on with the not-so-magnificent remaining 490 companies.
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