AI will eat the world

Weekend Market Update:

Bitcoin: $68,535.50 (📉-0.47%)

Solana: $196.24 (📈+7.11%)

Dogwifhat: $2.95 (📈+5.35%)

*48hr price change; as of 16:11 pm EST

Today’s big headlines:

• AI will eat the world

• Adobe earnings carnage

• Are OpenAI actually SkyNet?

• Ulta Beauty an Ulta Disaster?

AI will eat the world🤖

What’s happening? Cognition-labs have just unveiled the world’s first “fully autonomous AI Software Engineer“, which is capable of coding, debugging, and even developing apps and websites.

Will this replace humans? No! fear not humans, for Devin has been designed to work alongside humans, enhancing productivity rather than replacing jobs.

Some stand-out features? Among Devin's touted features are its ability to continuously expand its skills over time by learning new technologies and then proceeding to utilize these new skills to solve problems. It also retains key context about projects it works on, allowing it to maintain consistency.

How can we profit from this? If this becomes widely adopted technology, its likely that the vast majority of businesses will see productivity improvements, however, from an investment standpoint, we need to identify publicly traded companies creating products such as this.

Do these companies exist? The unveiling of Devin adds to the intensifying arms race among tech companies to develop powerful artificial intelligence that can automate complex cognitive tasks. How readily the technology is embraced, and its broader economic impacts, remain to be seen. In our view the only company currently generating significant revenues as a result of an AI-based product is Microsoft, whom are currently touted as the leader in the AI revolution, having integrated AI deeply into products like Azure, Bing and Copilot. However, as AI-as-a-service offerings grow, other cloud providers may emerge as potential beneficiaries.

Adobe earnings carnage😨

What happened? Adobe's stock price took a nosedive on Friday, plunging nearly (📉-14%) during regular trading hours after the software company reported its latest quarterly earnings. The selloff continued after hours, with Adobe shares suffering their steepest single-day decline since September 15th 2022 when they tumbled (📉-16.8%).

What did they report? While Adobe beat Wall Street's revenue and earnings estimates for the first quarter of 2024, the company's forward guidance fell short of analyst expectations. However, the massive stock slide appears driven by two other major factors revealed during the earnings call.

Why did the stock crash?

• First, Adobe announced a $25 billion share buyback program funded largely by the money originally allocated for its failed $20 billion acquisition of design startup Figma. The collapsed deal also requires Adobe to pay Figma a $1 billion termination fee.

  • We view this proposed buyback plan as a suboptimal use of capital given Adobe's current valuation. It marks the second instance of questionable capital allocation decisions by management, following the costly pursual of Figma, a company which at the time, was significantly overvalued.

• Secondly, shareholders were rattled by Adobe's apparent lack of progress in developing robust artificial intelligence capabilities to counter potential disruption to its core business model. Executives provided little reassurance about Firefly, the company's flagship AI product offering.

In the wake of the earnings call, analysts at Bank of America and Barclays both slashed their price targets for Adobe stock by 10%, reflecting dimmed confidence in the tech giant's trajectory.

The market reaction underscores growing investor concerns about Adobe's ability to fend off emerging AI-driven threats and properly allocate resources amid rapid technological shifts rocking the software industry.

Are OpenAI actually SkyNet?🦾

What’s happening? In a stunning tech demonstration, robotics startup Figure recently unveiled a new humanoid robot called "Figure 01" that showcased remarkable real-world perception and language abilities, thanks to a collaboration with artificial intelligence company OpenAI.

What makes this special? During the presentation, the robot effortlessly identified objects on a table in front of it.

• "I see a red apple on a plate in the center of the table, a drying rack with cups and a plate, and you standing nearby with your hand on the table."

Figure 01 also conversed in fluid dialogue with the presenter in an almost human-like manner.

• "Can I have something to eat?" the nearby human tester asked it.

• "Sure thing," it responded, handing over the red apple with ease.

• "So I gave you the apple because it’s the only, uh, edible item I could provide you with from the table," Explaining its reasoning with uncanny human-like cadence, complete with a conversational "uh" interjection.

The seamless integration of vision, dialogue, and dexterous movement left observers stunned at the robot's advanced capabilities, which appear to leapfrog recent robotics milestones like Tesla's Optimus prototype.

While Figure has yet to announce a viable commercial product, the convincing demo offered a tantalizing glimpse into a future where humanoid robot assistants could one day become ubiquitous household companions, bringing to life scenarios once confined to sci-fi cartoons like "The Jetsons" 😎.

Ulta Beauty or Ulta Disaster?💄

What happened? Ulta Beauty's stock took a hit on Friday, falling over (📉-5%) after the cosmetics retailer reported its fourth-quarter and full-year 2023 earnings results. Despite posting revenue growth of (📈+9%) year-over-year, a (📈+3.9%) increase in net income, and earnings per share that exceeded analyst estimates.

Why did the stock selloff? The selloff came as Ulta forecast full-year profit margins in the range of just 14% to 14.3%, citing rising cost pressures and the need for increased promotional activity amid mounting competition in the beauty market. This outlook fell short of Wall Street expectations.

Management also highlighted the increase in competition within the beauty market, "We're operating in an increasingly competitive landscape that is weighing on margins," said Ulta CEO Dave Kimbell.

Are there any positives? Ulta announced it is doubling its share buyback program to $2 billion for 2024, suggesting confidence in the company's long-term trajectory. Executives also teased plans for international expansion, including a new joint venture with Axo to enter the Mexican market next year.

What’s our take? Ulta has been an exceptional wealth compounder over the past decade, but we could be facing a period of slower growth and lower returns ahead. At the right price, it could be a buy, but the current valuation looks stretched given the new realities the company is facing.

Our Selections Performance👾

Last week Monday, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500.

Here’s how the two stocks have performed since then:

• Evolution AB: 1,370.40 SEK (📈+3.27%)

• Hims & Hers Health: $14.63 (📈+1.53%)

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