💰 Qualcomm Wants to Buy Intel

MARKET UPDATE

Good Morning Investor! On Friday, financial markets sold off in anticipation of this coming week’s economic data. Despite this selloff, there were a few winners. Constellation Energy ($CEG) and Vistra ($VST) rose 22% and 16% respectively on news that Constellation is set to restart the Three Mile Island nuclear plant and sell the power to Microsoft to power its AI data centres. The Unit 1 reactor is expected to come back online by 2028.

Additionally, shares of Novo Nordisk ($NVO) sold off 5.4% on negative results from a Phase 2a trial of the Danish drugmaker's experimental obesity pill monlunabant.

TODAY’S BIG HEADLINES

Qualcomm Wants to Buy Intel

The UK’s Soaring Debt Hit a New Milestone

23andMe’s Entire Board Resigns

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SEMICONDUCTORS

Qualcomm Wants to Buy Intel💰

A Silicon Valley Soap Opera: Friday was messier than a toddler's attempt at cable management for the market, with a broad market selloff taking place in anticipation of the coming week’s economic data. Yet, amid this digital dumpster fire, Intel ($INTC) emerged as the belle of the ball, its share price surging 3.3%. Why?

• The Wall Street Journal reported that Chip maker Qualcomm ($QCOM) has been sliding into Intel's DMs about a potential takeover — potentially bringing an end to the ARM vs X86 war that’s been waging for years.

Strike While the Silicon's Hot: This is a perfectly sensible move for Qualcomm too (despite investors reacting like they just found out their favorite crypto was actually a Ponzi scheme with a 2.8% selloff on the day), as the chip maker reentered the desktop processor market this year as a part of Microsoft’s AI PC strategy after years of dominance in mobile processors with its Snapdragon range of processors. Intel is also set to be the beneficiary of up to $3 billion in funding to make chips for the US military. Qualcomm would gladly takeover this contract, because who doesn't want to make chips that go boom?

Falling Jenga Chip Tower: This could be the Hail Mary pass that the beleaguered tech giant needs after two years so bad, even Internet Explorer would cringe. Intel has seen its data centre market share get eaten away by competitor Nvidia ($NVDA), lose ground in the consumer PC market to Advanced Micro Devices ($AMD) and their margins have become thinner than the plot of a Michael Bay movie.

Blue Light Special in Aisle 4: Given Intel's precarious predicament - a situation more unstable than a Jenga tower in an earthquake - Qualcomm finds itself in a position to snag a deal sweeter than a genetically modified strawberry. The chip giant could potentially be purchasing manufacturing facilities, along with valuable IP and technology. This acquisition could propel Qualcomm to the top of the consumer computing industry and get Qualcomm's foot in the door of the lucrative data centre market. And the kicker? All of this could be acquired for a cut-price deal.

• Just last week, Intel's CEO Pat Gelsinger announced the company will be spinning off its chip making foundry business into an independent subsidiary as part of its plans to reverse billions in losses. Because nothing says "we're doing great" quite like amputating a limb to save the body. Its chipmaking business alone racked up $7 billion in operating losses in 2023.

• Another avenue the company is pursuing in an effort to reverse its current state of affairs is mass layoffs, with the company having announced In August, layoffs affecting 15,000 workers, and now it says it is “more than halfway” to this goal.

MACROECONOMICS

The UK’s Soaring Debt Hit a New Milestone🥇

The UK’s Spending Addiction: Believe it or not, the US isn't the only major global economy experiencing a surging debt crisis. The UK's national debt relative to the size of its economy has hit 100% for the first time since 1961. Brits don't even have groovy tunes and go-go boots to distract them this time - just the soul-crushing reality of fiscal irresponsibility.

Deficit Balloons: The UK government's budget deficit – the difference between its revenues and expenses – has been widening faster than Boris Johnson's vocabulary of Latin phrases. More money is being spent on energy subsidies, social services, public-sector pay, and interest payments on debt. In other words, the UK’s government has a spending problem, much like an addicted shopper during the festive period.

• The government’s been forced to borrow money by selling bonds. At some scale, too: it borrowed a more-than-expected £13.7 billion ($18.2 billion) last month. That’s the highest August figure on record outside of the pandemic.

• Since the start of the financial year in April, the UK government has borrowed a heart-rate-raising £64.1 billion ($85.1 billion) – 11% more than the Office for Budget Responsibility had initially predicted in March.

Austerity Returns to Britain: The report is the penultimate snapshot of the country’s public finances before the newly elected government reveals its financial plan at the annual Budget event next month, and it's expected to be about as popular as warm beer and cold chips. This one could be a biggie: the UK has already been warned of “difficult decisions”, after a pick-up in the economy earlier this year failed to improve the country’s finances. In other words, folk should expect an unpopular combination of spending cuts and tax hikes.

• The government have already scrapped a policy known as “winter fuel payments” which helped pensioners with their rising energy bills during the bitterly cold winter. It’s widely anticipated that further creative measures will be taken to both reduce costs and increase the tax burden. In my eyes, the solution is simple. Stop spending more than you bring in through tax revenue.

• Brits seem to have heeded the warning. Data out on Friday showed that a key index of consumer confidence in the UK plunged seven points to land firmly in the negatives, indicating high levels of pessimism. The last time it fell this fast, energy costs were higher than Snoop Dogg — in April 2022, when energy costs hit the roof in the wake of Russia’s invasion of Ukraine. That signals that households are losing faith in their finances – a big deal given that consumer spending accounts for two-thirds of the UK economy.

HEALTHCARE

23andMe’s Entire Board Resigns 💉

A Genetic Comedy of Errors: Corporate boardroom battles always drum up drama, but CEO Anne Wojcicki's ongoing effort to take genetic testing company 23andMe private has turned into a soap opera that would make even daytime TV blush. On Thursday, all seven independent directors of the board resigned at once, presumably in a synchronized hair-flip that would make any reality TV star proud. Yet, in a twist more surprising than finding out you're 2% Neanderthal, shares of the company ($ME) were up 8% on Friday. Since the dedicated Netflix series would take a few years to produce, we'll give you the short version now. Spoiler alert: It's messier than your family tree.

How Not to Spit and Get Rich: 23andMe, a genetic testing company, made its debut on the public markets back in 2021 via special purpose acquisition corp — also known as a SPAC, or as we like to call it, "Financial Russian Roulette." Since then, the stock has performed about as well as a DNA test at a family reunion - miserably. The firm has struggled to build a profitable business model, despite its DNA testing kits being more popular than finding out you're distantly related to royalty. The crux of the matter is that users only need to take the test once, which makes it hard for the gene-gathering firm to expand its customer base, or even retain its existing customers beyond their initial purchase.

• After an ill-fated foray into using that DNA data to develop pharmaceuticals (because nothing says "trust us with your genetic information" quite like pivoting to drug development), the company is now trying its hand at weight loss drugs.

• Since the company went public three years ago, shares have dropped over 97%. That's not a drop, that's a nosedive that would make Icarus say, "Whoa, take it easy."

Concepts of a Plan, But No Plan: Wojcicki, who founded the firm in 2006, says the solution is to abandon the stock market altogether and go back to being a private outfit. However, the firm's (now former) board of directors believe that Wojcicki doesn't have a solid plan for moving forward, stating in an open letter that she was missing key components necessary to go private, including the funding to do so.

Toss of a Coin: “After months of work, we have yet to receive from you a fully financed, fully diligenced, actionable proposal that is in the best interests of the non-affiliated shareholders,” were the final words of the directors prior to resigning en masse from the board. The question is, after falling 97% since its debut, is this a falling knife, or is there potential upside should a deal be negotiated?

MORE NEWS

Additional market-moving events🌎

The Weight Loss Wars: Hims & Hers Health ($HIMS) sold off 3.6% after news emerged that Eli Lilly ($LLY) is gathering medical records to potentially build a case against sellers of compounded Tirzepatide. The kicker? Hims doesn’t even sell compounded Tirzepatide. (Bloomberg)

Indian Ed-Tech Raises $210 Mil: Indian education technology startup Physics Wallah announced on Friday that it had raised $210 million at a valuation of $2.8 billion. The money will be used to expand its business and do acquisitions. (CNBC)

Salesforce Becomes AI: Salesforce shares surged 4% last week, on news of CEO Benioff’s billion-agent AI strategy. The software company recently unveiled a change in its AI strategy to focus on building AI “agents” that don’t require human supervision for specific tasks such as customer service or scheduling sales meetings. (Fortune)

Britain Wants to Tax the Rich: Almost two-thirds (63%) of wealthy investors said they plan to leave the U.K. within two years or “shortly” if the Labour government moves ahead with plans to ax the colonial-era tax concession, while 67% said they would not have emigrated to Britain in the first place. (CNBC)

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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. Lastly, on August 6th, we initiated a position in Celsius holdings.

Here’s how the stocks have performed since:

• Hims & Hers Health: $16.39 (📈+13.27%)

• PayPal: $76.76 (📈+26.58%)

• Celsius: $33.18 (📉-17.89%)