🤖 Meta Crowned King of AI

MARKET UPDATE

Good Morning Investor! Shares of Unilever ($ULVR) are up over 6% after reporting rising profits and margins thanks to pricing power. Meanwhile, shares of Viking Therapeutics ($VKTX) jumped 28% after the drugmaker moved its weight loss injection into late-stage trial phase.

TODAY’S BIG HEADLINES

Meta Unleashes Its Most Powerful AI, Llama 3.1

The US Economy Enters the ‘Goldilocks’ Zone

Chipotle’s Brand Loyalty is a Beauty to Behold

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ARTIFICIAL INTELLIGENCE

Meta Unleashes Its Most Powerful AI, Llama 3.1🤖

Ground-Breaking & Open-Source: Earlier this week, Meta Platforms ($META) unleashed their latest Large Language Model (LLM) onto the world, dubbing it "Llama 3.1". This new model benchmarks well against competitors Claude 3.5 Sonnet and ChatGPT-4, According to Meta. This 405 billion parameter model is the biggest and best open-source AI model ever created. It's like they're compensating for something, isn't it?

• Zuckerberg argues that making it open source is essentially philanthropic. There's also the off chance, of course, that it's Meta's greatest economic opportunity ever.

The Linux of AI: By going the open-source route, Meta is explicitly trying to turn Llama into the Linux system of the AI age. It's like they're throwing a massive tech party and everyone's invited - even the nerds who usually get left out. Meta's dream is for everyone from its big tech rivals to startups to firms outside of tech to use and rely on Llama's open-source code to develop new tools and LLMs of their own. But just because it's free doesn't mean there's no financial upside to be had for Meta.

• By making Llama open source, Meta can potentially grab significant market share from its rivals who offer closed-source models at a premium. OpenAI, for example, is on track to cross $2 billion in revenue this year.

• It also opens the door for Meta to employ one of the tech industry's most time-tested business strategies: fostering a massive ecosystem of developers and users by offering a free product, and then layering in various paid-for products and services. Return on investment for the billions being spent may however, be years and years away.

MACROECONOMICS

The US Economy Enters the ‘Goldilocks’ Zone🦅

Uncle Sam's Economic Striptease: The US economy has received some very positive news this week, indicating that it's on the cusp of entering into the 'Goldilocks' zone - not too hot, not too cold, but just right. Meanwhile, Europe continues to lag behind, like a hungover partygoer still trying to find their shoes.

• The latest data from S&P Global's US Composite Purchasing Managers' Index (PMI), released Wednesday, shows business activity grew the fastest in over two years this month. It's like the US economy chugged an energy drink and decided to run a marathon. Meanwhile, the equivalent measure for the eurozone showed little growth, and a surprise slump in Germany.

• Additionally, the US' GDP figures for the second quarter came in significantly higher than expected, with Real GDP increasing at a 2.8% annualized pace, above the 2.1% forecast.

Cocktail of Optimism: The US composite PMI, which accounts for services and manufacturing activity, rose to 55 this month from 54.8 in June, while being expected to actually decline for the month. It's like the economy looked at the forecast, said "Hold my beer," and decided to overachieve. When combined with the slowing rate of increase for the prices of goods along with the strong GDP growth of the US, you've got a recipe for a successful "soft landing". It's economics' version of a perfect soufflé.

Europe’s Economic Walk of Shame: The eurozone PMI, meanwhile, isn't earning fairy-tale comparisons. Its July PMI composite index came in at 50.1, down from 50.8 in June. If this figure were to dip below the 50 mark, it would indicate contraction — something which we've already seen take place in France, one of Europe's largest economies, while Germany, the area’s biggest economy, unexpectedly contracted amid continuing manufacturing struggles, dropping to 48.7 from 50.4 in June. Germany, the area's biggest economy, unexpectedly contracted amid continuing manufacturing struggles, dropping to 48.7 from 50.4 in June. It's as if the German economic engine, usually purring like a well-oiled BMW, has suddenly started sputtering like a rusty Trabant.

FAST-FOOD RESTAURANTS

Chipotle’s Brand Loyalty is a Beauty to Behold 🌯

Wraps and Profits: The burrito king Chipotle ($CMG) reported quarterly earnings on Wednesday in after-market hours, causing the stock to surge over 15%. Despite the restaurant industry at large struggling massively, with competitors McDonald's ($MCD), Starbucks ($SBUX), and many others suffering a lack of growth like a wilted piece of lettuce, Chipotle seems to be the exception to this rule, as it continues devouring expectations like a hungry customer tackles a overstuffed burrito.

• Revenue jumped 18.2% year over year to $2.97 billion, versus expectations of $2.94 billion.

• Adjusted earnings per share came in at $0.34, compared to an estimate of $0.32. Chipotle's bean counters must be working overtime.

• Same-store sales jumped 11.1% year over year, versus the 9.23% Wall Street anticipated. In Q1, same-store sales were up 7%, highlighting the acceleration the business is experiencing.

• Foot traffic jumped 8% in the quarter, more than the 6.3% expected, with growth across all income cohorts. Apparently, the allure of a good burrito knows no socioeconomic bounds.

When Burritos Buck the Trend: Unlike many of the companies in the restaurant industry, CEO Brian Niccol said that Chipotle won't be pushing out bundle deals, and is not going to lean into promotional pricing. Additionally, in response to the portion sizing backlash experienced on social media recently (because nothing says "first world problems" like complaining about burrito sizes online), Niccol said 90% of the stores were executing sizes properly, while 10% were "outliers" that were re-coached to ensure "the right standards." It's good to know that in these uncertain times, we can still count on Chipotle to take our burrito sizes seriously.

MORE NEWS

Additional market-moving events🌎

Revolut Joins the Club: Europe’s most valuable startup Revolut clinches UK banking license, ending three-year wait. (CNBC)

BTC Beats the QQQ: Since its inception, Blackrock’s Spot Bitcoin ETF ($IBIT) has generated more inflows year-to-date, roughly $18.4 billion, than its own Invesco Nasdaq 100 ETF ($QQQ) at $17.9 billion. (Koyfin)

UK Bounces Back: UK businesses ‘optimistic about future’ as activity grows post-election as the S&P Global flash UK composite purchasing managers’ index (PMI) reported a reading of 52.7 in July, up from 52.3 in June. (Independent)

Socialist AI: Chinese regulators are reviewing GenAI models for ‘core socialist values,’. (Financial Times)

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: $23.30 (📈+60.88%)

• PayPal: $58.26 (📉-3.88%)

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