💿 Chip Stocks Pandemonium

MARKET UPDATE

Good Morning Investor! On Wednesday, shares of troubled plane maker Boeing ($BA) took off like a rocket, soaring 4% despite reporting that its services division - was the sole profit-maker this quarter. The unexpected climb was likely fueled by the announcement of Kelly Ortberg as the new pilot-in-chief.

Meanwhile, shares of Verisk Analytics ($VRSK) crashed and burned, plummeting close to 8% after reporting a beat on profits but a miss on revenue. It seems their crystal ball for predicting financial success might need a bit of polishing.

Lastly, dating apps Tinder & Hinge's parent company Match Group ($MTCH) swiped right on success, with shares surging a whopping 14.50%. This love affair with investors came after the company announced plans to give 6% of its approximately 2,600 strong global workforce the ultimate left swipe.

TODAY’S BIG HEADLINES

Chip Stocks Pandemonium

Meta’s “Black Hole” Has Been Exposed

Mastercard Rings the Bell on Consumer Spending

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SEMICONDUCTORS

Chip Stocks Pandemonium💿

Uncle Sam’s Adrenaline Shot: Wednesday morning saw a raging rally in semiconductor stocks, with giants like Nvidia ($NVDA), ASML ($ASML), and Samsung ($BC94) rising to the occasion, swelling by 11.90%, 5.50%, and 6% respectively. This unexpected surge came thanks to a potential policy shift from the US government. The market was already buzzing from some impressive performances earlier in the week, with chip makers ON Semiconductor ($ON) and Advanced Micro Devices ($AMD) showing they know how to satisfy their investors.

Golden Showers of Exemptions: Chip stocks had been feeling a bit flaccid lately, thanks to whispers that the US Government was about to implement some rather restrictive export policies for semiconductors to China - a region many of these companies consider critically important. But Wednesday morning, everything changed faster than you can say "Moore's Law." An exclusive Reuters report revealed that Uncle Sam might be willing to make some special exemptions for his allies, causing foreign-based companies like ASML and Samsung to experience a sudden and powerful surge.

• This export restriction rule is known as the “foreign direct product rule”, and as of right now, the excluded allies include Japan, the Netherlands and South Korea.

• Many of these firms have been penetrating the Chinese market deeply, and cutting off access entirely would leave them feeling unsatisfied and potentially impotent in terms of future sales. ASML, for instance, gets almost half its pleasure - I mean, revenue - from China.

The Awkward Third Wheel: One notable wallflower at this exemption party is Taiwan, home to the world's largest producer of semiconductors, Taiwan Semiconductor ($TSM). Yet, despite being left out in the cold, TSM managed to rise to the occasion, surging almost 6%. But how can American legislation get foreign companies all hot and bothered, you ask? Well, the foreign direct product legislation is like that friend who insists on being involved in everyone's business. It stipulates that any company producing semiconductor-related products using even a smidgen of American technology may not be able to export those goods to China. This U.S. rule can impact foreign companies harder than a night of heavy drinking, since they often rely on American technology to keep their operations up and running.

SOCIAL MEDIA & ADVERTISING

Meta’s “Black Hole” Has Been Exposed😲

Zuckerberg's Digital Peep Show: All eyes and virtual reality goggles were glued to social media giant Meta Platforms ($META) as they unveiled their second quarterly earnings strip tease on Wednesday night. Heading into this digital burlesque, investors were more jittery than ever, thanks to the mixed signals from the tech world. Google ($GOOG) managed to keep its search business growing like a teenager's search history, while Pinterest ($PINS) saw its shares collapse faster than a soufflé in an earthquake, leaving everyone wondering just where on the spectrum Meta will land.

Meta Hits a Home Run: Despite all the uncertainty swirling around like a tornado in a trailer park, Meta managed to knock it out of the park, beating both top and bottom lines. The share price shot up almost 5% in after-hours trading. Here's a rundown of their report, which reads like a love letter to capitalism:

• Revenue of $39.07 billion, up 22% year-over-year, just edging out the $38.2 billion expected by analysts polled by FactSet.

• Earnings per share (EPS) of $5.16, leaving analysts' expectations of $4.74 in the dust. That's a 73% increase year-over-year, making other tech companies look like they're still using dial-up.

• Meta's family of apps - Instagram, Facebook, and WhatsApp - saw daily active people (DAP) hit 3.27 billion in June 2024, an increase of 7% year-over-year, while Ad impressions delivered increased by 10% year-over-year. Additionally, the average price per ad increased by 10% year-over-year.

Trimming the Fat, Not Llama: The real showstopper was that Meta's AI spending "black hole" turned out to be more of a kiddie pool than the Mariana Trench investors feared. Meta spent a mere $8.4 billion, less than the expected $9.2 billion. It seems Zuckerberg has turned into a penny pincher.

• However, Meta did warn of "significant capital expenditures growth in 2025." Investors are now fearing that Zuck's planning to build a real-life Death Star.

The Metaverse's Expensive Identity Crisis: Meta's metaverse division - "Reality Labs" - continues to be the company's problem child, losing $4.48 billion. That's slightly less than the $4.54 billion loss expected, but still enough to make you wonder if they're just burning piles of cash for warmth. The division reported total sales of $353 million, missing the $376 million target.

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FINTECH & PAYMENTS PROCESSING

Mastercard Rings the Bell on Consumer Spending🔔

The Plastic Fantastic: After hearing fintech giant PayPal ($PYPL) boast about consumer spending being as resilient as a cockroach in a nuclear winter, expectations for Mastercard's earnings were higher than a giraffe's ears. Let's face it, when it comes to getting a read on consumer spending, no one does it better than the dynamic duo of Visa ($V) and Mastercard ($MA) - they're like the Sherlock and Watson of your wallet.

Swiping Around the World: Despite expectations already being inflated like a bouncy castle at a kid's party, the fintech whiz kid Mastercard beat on both the top and bottom lines. This sent its shares up over 3% on Wednesday. The strong performance was helped by robust growth in key international markets like Europe and Latin America, coupled with a healthy US consumer who's apparently determined to keep the economy afloat, one latte at a time.

• Revenue grew 13% year-over-year to $7 billion, , surpassing the analyst estimates of $6.85 billion.

• The firm’s profit was up 17% to $3.3 billion, or $3.50 per share, as revenue growth outpaced the increase in expenses, demonstrating the company’s increasing efficiency at scale.

• Importantly, when we exclude one-off costs, the company’s earnings were $3.59 per share, surpassing the estimated $3.51.

Mastercard's Got All the Tricks: While Mastercard's peers were crying about slower growth among low-income customers, Mastercard reported a 10% increase in transaction value and a 17% rise in cross-border volume. This indicates that travel demand is hotter than a sunburned tourist in Death Valley, a sentiment echoed by cruise line operator Norwegian Cruise ($NCLH), whose shares soared on Wednesday thanks to increasing profit guidance.

• Mastercard left its full-year guidance unchanged, with revenue and costs expected to grow at low double-digit rates. The company also returned $3.2bn to shareholders through a combination of share buybacks and dividends in the quarter.

MORE NEWS

Additional market-moving events🌎

Revenue-Sharing AI: AI Search Startup Perplexity AI starts ad-revenue sharing partnership after weeks of plagiarism allegations. The startup raised around $62 billion in a new funding round earlier in April pushing their valuation to more than $1 billion, twice more than from three months before. (TheHindu)

IPO Downsizing: Bill Ackman, billionaire hedge fund manager and chief executive of Pershing Square Capital Management, is seeking $2 billion to take the company’s investment fund public, a slashed target from the previous targets mentioned. (FT)

Meta Settles: Meta Platforms agreed to a $1.4 billion settlement with Texas over allegations of illegally collecting biometric data without user consent, marking the largest state settlement of its kind. (YF)

Budget to Premium: Bare-bones carrier Spirit rolls out a perk-filled tier to compete with premium airlines, including snacks, Wi-Fi and checked bags. (CNBC)

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “superperformers” stock pick which we believe will provide significant outperformance compared to the S&P 500. Then on the 14th of June we released our next stock selection.

Here’s how the stocks have performed since:

• Hims & Hers Health: $21.24 (📈+46.79%)

• PayPal: $65.94 (📈+8.77%)

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