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Trump and immigration: What could actually happen?

A potential Trump 2.0 administration is poised to double down on stringent immigration policies, but what are the realistic outcomes? According to Evercore ISI, along with taxes and trade, immigration is a pivotal macro-policy driver under Trump, especially with immigration emerging as a top voter issue and giving Trump a significant edge.

A Trump victory would likely result in immediate actions to curb immigration. “Expect a Trump 2.0 Administration to move quickly to limit inflows via asylum and parole and to begin withdrawing protected statuses from as many as 5 million people,” Evercore ISI analysts state.

Interior removals, however, are anticipated to take longer to ramp up.

The bank explains that one key difference this time is the improved legal groundwork. “Trump’s future actions on immigration will be far more likely to survive legal challenge than under Trump 1.0 due to better preparation and a more favorable judiciary,” analysts explain. They add that suggests that Trump 2.0’s immigration measures could have more staying power in the face of judicial scrutiny.

Despite Trump’s claims of deporting 15-20 million people, Evercore ISI highlights practical limitations. “There is no real mechanism to achieve Trump’s goal of deporting 15-20 million people,” they state.

Instead, Evercore says more realistic scenarios involve significant but smaller scale increases in removals: “500,000-1 million per year in a base case and 2-3 million per year in a high case.”

Achieving the high case could provoke major backlash, potentially involving “large-scale use of the military to conduct immigration raids.”

Trump 2.0 is also expected to scrutinize traditional legal pathways, including family-based immigration and temporary work visas for high-skill workers (H-1B).

Evercore says policies targeting immigrants already in the U.S. may lead to increased voluntary out-migration, adding to the outflows from formal removals.

 

NVIDIA consensus suggests a lot of imminent AI energy is needed: Barclays

In a recent thematic investing report, Barclays analysts discussed the energy demands poised to accompany the rise of artificial intelligence (AI) technologies, with a particular focus on NVIDIA’s (NASDAQ:NVDA) role in this landscape.

According to analysts, the projected energy needs tied to AI advancements underscore a crucial aspect of NVIDIA’s market outlook.

Barclays’s analysis indicates that data centers could consume more than 9% of the current U.S. electricity demand by 2030, driven largely by AI power requirements. The “AI power baked into NVIDIA consensus” is one of the key factors behind this substantial energy forecast, analysts noted.

The report also points out that while AI efficiency continues to improve with each new generation of GPUs, the size and complexity of AI models are growing at a rapid pace. For instance, the size of major large language models (LLMs) has been increasing approximately 3.5 times per year.

Despite these improvements, the overall energy demand is set to rise due to the expanding scope of AI applications. Each new generation of GPUs, such as NVIDIA’s Hopper and Blackwell series, is more energy-efficient. Still, the larger and more complex AI models require substantial computational power.

“Large language models (LLMs) require immense computational power for real-time performance,” the report writes. “The computational demands of LLMs also translate into higher energy consumption as more and more memory, accelerators, and servers are required to fit, train, and infer from these models.”

“Organizations aiming to deploy LLMs for real-time inference must grapple with these challenges,” Barclays added.

To illustrate the scale of this energy demand, Barclays projects that powering approximately 8 million GPUs will require around 14.5 gigawatts of power, translating to roughly 110 terawatt-hours (TWh) of energy. This forecast assumes an 85% average load factor.

With about 70% of these GPUs expected to be deployed in the U.S. by the end of 2027, this equates to over 10 gigawatts and 75 TWh of AI power and energy demand in the U.S. alone within the next three years.

“NVIDIA’s market cap suggests this is just the start of AI power demand deployment,” analysts said. The chipmaker’s ongoing development and deployment of GPUs are poised to drive significant increases in energy consumption across data centers.

Moreover, the reliance on grid electricity for data centers stresses the importance of addressing peak power demands. Data centers operate continuously, necessitating a balanced power supply.

The report cites a notable statement from Sam Altman, CEO of OpenAI, at the Davos World Economic Forum, “We do need way more energy in the world than I think we thought we needed before…I think we still don’t appreciate the energy needs of this technology.”

 

Investors react to shooting at Trump election rally

(Reuters) -Following are investor and analyst reactions after Donald Trump was shot in the ear during a campaign rally in Pennsylvania on Saturday in what the FBI said it was treating as an assassination attempt. 

The Trump campaign later said the former president was “doing well” and appeared to have suffered no major injury besides a wound on his upper right ear.

JACK ABLIN, CHIEF INVESTMENT OFFICER AT CRESSET CAPITAL, CHICAGO: 

“The specter of political violence introduces a whole new level of potential instability. 

“It’s uncertainty and volatility, and of course markets don’t like that. It’s not an environment anyone wants to see.

The attempted assassination probably enhances Trump’s “reputation for strength,” Ablin said.

Bond markets may repeat a trading pattern similar to after President Joe Biden’s debate performance against Trump, Ablin said, referring to a steeper Treasury yield curve.   

“Perhaps we see the market begin projecting longer-term rates higher, and anticipating lower short-term rates, because I think it’s clear that as president, Trump would push for lower rates right away.” 

STEVE SOSNICK, CHIEF STRATEGIST AT INTERACTIVE BROKERS, GREENWICH

“I’ll be looking to see if the October-December bump in VIX futures expands or if the Treasury yield curve steepens. The former indicates concerns about electoral and post-electoral volatility, while the latter would indicate bond market concerns about Trump’s likelihood of replacing income taxes with tariffs. 

“I’m not sure that this will have much of an impact on equity markets. Stock traders are not particularly good at pricing in events with a nebulous impact on revenues, earnings, cash flows, etc. and this weekend’s events fall into that category.”

JOHN CHAMBERS, FORMER CHAIRMAN SOVEREIGN RATINGS COMMITTEE,

STANDARD & POOR’S, NEW YORK

“Like everyone, I am appalled by the assassination attempt on former President Trump.

“It could harbinger a return to political violence, the likes of which the US experienced in the 1960s.

Such an outcome would be grievous, but given the strength of U.S. institutions, I don’t believe it would have an impact on ratings.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

“It was horrible to watch the video clips. From a purely markets perspective, the question is – what it does to the odds of one candidate winning over the other? Will it throw Trump off his game, as these types of rallies are a key part of his campaign strategy? It could strengthen the resolve of his supporters to go to the voting booth. Voter turnout is the key to winning.”

TINA FORDHAM, GEOPOLITICAL STRATEGIST AND FOUNDER, FORDHAM GLOBAL FORESIGHT, LONDON

“The shooting further complicates the election outlook for Democrats, already divided over Biden’s future as a candidate. 

“U.S. political violence is sadly a feature and not a bug … the question now is how a nation, in which a significant proportion of citizens believe civil war is increasingly likely, will respond.

“We don’t expect there to be an initial reaction in financial markets. If anything, the near-term implication will be the acceleration of the consensus view in markets of a Trump victory.”

IAN BREMMER, PRESIDENT, EURASIA GROUP, NEW YORK

“I deeply worry that it presages much more political violence and social instability to come. This is the kind of thing we have seen historically in lots of countries facing instability and frequently does not end well.

“Democracy is not in crisis right now. This is a year of many, many elections and we’ve seen them in India, the world’s most populous country, with 1.5 billion people. We’ve seen it across the European Union, the largest common market. We’ve seen it France, in the United Kingdom, in Mexico – rich countries, poor countries, democracies, all. 

“They have had free, fair elections with peaceful transitions. That is not what we are seeing right now in the United States. The U.S. is the only major democracy in the world today that is experiencing a serious crisis.”

KHOON GOH, HEAD OF ASIA RESEARCH, ANZ, SINGAPORE

“The probability of Trump winning has increased to 70% in the betting markets after the assassination attempt. I am not sure how markets will respond.

“The bitcoin rally could be (on) concerns of more civil unrest. We will likely see some risk off moves on the market open, but that should fade quickly.”

NICK TWIDALE, CHIEF MARKET ANALYST, ATFX GLOBAL, SYDNEY:

“I think it probably increases his chances, and we will probably see some haven flows in the morning.”

RONG REN GOH, PORTFOLIO MANAGER, EASTSPRING INVESTMENTS, SINGAPORE

“The shooting is likely to bolster Trump’s support, and only further augments the positive momentum he has been enjoying following the Presidential debates two weeks ago. 

“The market reaction function to a Trump presidency has been characterized by a stronger U.S. dollar and a steepening of the U.S. Treasuries curve, so we might observe some of that this coming week if his election odds are assessed to have further improved following this incident.”

NICK FERRES, CHIEF INVESTMENT OFFICER, VANTAGE POINT ASSET MANAGEMENT, SINGAPORE

“The election is likely to be a landslide (for Trump). This probably reduces uncertainty.

“Trump has always been more ‘pro-market’ – the key issue looking forward is whether fiscal policy remains irresponsibly loose and the implication that might have for (renewed) inflation and the future path of interest rates.”

Ferres cited polls showing a surge in support for Ronald Reagan after a 1981 assassination attempt. 

According to statistics recorded by the American Presidency Project at the University of California Santa Barbara, Reagan’s approval rating, already rising sharply in the early months of his presidency, went up by a further 7 percentage points in the first poll conducted after the attempt. 

The increase was temporary and subsided over the course of the next three months. 

HEMANT MISHR, CHIEF INVESTMENT OFFICER, S CUBE CAPITAL, SINGAPORE

“I do think this will have a shock reaction on a market that has been on tenterhooks on the U.S. election.

“I see the odds of the Trump trade getting reinforced over the next few months till November, unless the Democrats can come up with a really credible alternative.

“It just significantly improves the odds in his favour and will lead to a steepening of the U.S. curve over the next few months. (I) would bet on high growth, high inflation trades – financials and energy to do well, and negative for Asian currencies.”

 

‘Bad news for stocks’: Trump will raise taxes, not cut them- strategists

BCA Research economists have challenged the prevailing market expectations regarding the impact of a potential second term for President Trump, suggesting a shift from anticipated tax cuts to increased taxes through higher tariffs.

Their view contrasts with the widely held belief that a Trump re-election would lead to further corporate tax reductions, favoring stocks over bonds.

The firm points out several issues with the current market consensus. BCA Research highlights that even if Trump was to win, the likelihood of significant corporate tax cuts is slim.

With bond yields already over 4%, a budget deficit at 7% of GDP, and the trajectory of federal government debt being unsustainable, moderate Republicans are expected to resist policies that could worsen the fiscal situation.

Furthermore, the populist shift within the Republican Party may lead to opposition against tax cuts for corporations perceived as “woke.”

BCA Research recalls that, despite the initial increase in the 10-year Treasury yield following the 2016 election, the rate experienced a decline by August 2019.

This was attributed to the lack of significant rise in capital spending after the Tax Cuts and Jobs Act was passed, countering the argument that further tax cuts would substantially boost aggregate demand.

The analysis also considers the potential impact of the Federal Reserve’s approach to the growing government debt. If the Fed opts not to use inflation to manage the debt, the result could be deflationary due to the need for spending cuts to manage increased interest payments.

On the other hand, fears of the Fed inflating away the debt could drive long-term bond yields higher.

Lastly, BCA Research suggests that other aspects of Trump’s agenda, such as higher tariffs and reduced immigration, might temporarily increase inflation but would also likely slow down long-term economic growth. 

“The conventional wisdom is wrong: Trump is not going to substantially cut taxes once in office; he is going to raise taxes by jacking up tariffs,” strategists said.

“To the extent that this dampens economic activity, it is bad news for stocks but good news for bonds.”

 

5 big analyst AI moves: Tesla and SMCI stocks downgraded

Investing.com — Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.

InvestingPro subscribers always get first dibs on market-moving AI analyst comments. Upgrade today!

UBS cuts Tesla (NASDAQ:TSLA) to Sell on valuation reassessment, high AI costs

UBS analysts on Friday downgraded Tesla stock from Neutral to Sell, while raising the price target from $147 to $197.

This adjustment aims to reflect a reassessment of Tesla’s valuation amid market expectations for its growth, particularly in AI.

The UBS acknowledged Tesla’s diversification beyond automotive manufacturing, citing positive developments in its Energy and Full Self-Driving (FSD) segments as supportive factors.

However, expectations for Tesla’s core auto business are declining, analysts cautioned. They noted that Tesla’s valuation has historically included a premium for its potential growth in various areas. Still, the challenge lies in accurately valuing this “optionality.”

Recently, Tesla’s premium has expanded due to increased enthusiasm around AI. After evaluating Tesla’s various segments, UBS concluded that the current stock price implies a value of over $500 billion for future growth initiatives.

To justify the current stock levels, Tesla would need to achieve a future value of $1 trillion within five years, and even more to support a Buy rating, analysts said. 

They also raised concerns over the high costs of AI investments, the unpredictable pace of improvement, and the long-term nature of potential returns. The firm warned that if market excitement for AI diminishes, Tesla’s stock multiple could be negatively impacted.

With the stock trading at 86 times the next twelve months (NTM) P/E, the lack of visibility and potential for delayed growth opportunities warranted the downgrade to Sell, UBS said.

BofA ups Apple (NASDAQ:AAPL) price target on AI-driven iPhone upgrade cycle

Bank of America raised its price target for Apple to $256, up from $230, in a note to clients on Thursday, citing increased confidence in a multi-year iPhone upgrade cycle.

The hike is driven by a global smartphone survey and analysis of Apple’s aging installed base, indicating strong upside potential. 

“We are raising our PO on Apple to $256 on increased confidence of a multi-year iPhone upgrade cycle driven by an aging installed base and GenAI features that should provide a boost to customers’ intentions to upgrade,” analysts wrote in a note.

The survey, conducted in the US, UK, China, and India, revealed that a large portion of iPhone users still use older models: 29% own an iPhone 13, 13% have an iPhone 12, and over 31% have an iPhone 11 or older.

The note also highlighted that the recent Worldwide Developers Conference (WWDC) has increased customer intentions to upgrade in 2024. This is further supported by strong services growth and margin expansion, prompting BofA to reiterate a positive outlook on AAPL.

Nomura downgrades SMCI amid ‘limited share price upside’

Earlier in the week, Nomura research analysts downgraded Super Micro Computer (NASDAQ:SMCI) stock from Buy to Neutral due to “limited share price upside.”

“After Supermicro’s strong guidance for CY4Q23-CY1Q24, we believe Supermico’s performance potential changed from ‘easy to beat low market expectations’ in CY4Q23 to ‘less room to beat already-high market expectations’,” analysts noted.

Nomura’s revised outlook is due to uncertainties surrounding the gradual easing of CoWoS-S supply in 2024 and the potential transition period between Nvidia’s Hopper and Blackwell GPUs in the second half of the year.

While SMCI’s advanced liquid cooling solutions provide a competitive edge and support gross profit margins, analysts said that limited order visibility amid these uncertainties could make it challenging to exceed sales expectations “and thus this could be a mixed bag, in our view,” Nomura’s team added.

The firm expects AI server maker’s June quarterly sales to align with its guidance of $5.1-$5.5 billion, noting that some liquid cooling projects have been delayed to later quarters, reducing the likelihood of surpassing the guidance.

Nomura analysts also believe Supermicro’s near- to mid-term outlook remains unclear due to potential AI server order uncertainties. This is due to new procurement decisions by leading customers and the transition between Nvidia’s Hopper and Blackwell GPUs, which may affect SMCI as customers lean towards adopting Blackwell GPU solutions.

Microsoft (NASDAQ:MSFT) is still a GenAI leader – Morgan Stanley

Morgan Stanley analysts said Microsoft remains a strong GenAI leader, citing a recent 2Q24 CIO survey.

The survey data shows Microsoft’s leadership in GenAI is driving substantial incremental IT share gains.

“Microsoft’s lead in terms of core spending intentions and positioning in GenAI is improving more meaningfully,” analysts said in a note.

Core spending growth expectations for Microsoft rose to 6.6%, the highest since Q2 2021. This increase is largely due to Microsoft’s strong presence in GenAI functionality and its Azure Cloud business.

CIOs are particularly optimistic about Microsoft’s GenAI products. The survey reveals that 94% of CIOs plan to adopt Microsoft Generative AI products in the next 12 months, up from 63% in Q4 2023 and 47% in Q2 2023.

Microsoft 365 Copilot is the preferred solution, with 68% of CIOs intending to use it, followed by Azure OpenAI Services at 41%.

Keybanc hikes PTs on AI chipmakers as AI boom marches on

KeyBanc Capital Markets lifted price targets for several major chipmakers, reiterating robust demand for AI products.

KeyBanc highlighted a significant recovery in traditional server demand, primarily driven by major U.S. cloud providers like Meta (NASDAQ:META) and Microsoft, along with sustained demand from Chinese cloud service providers (CSPs) and moderately improving demand within the Enterprise sector.

“For 2024, we’re increasing our total server shipment estimates to +7% vs. +4% prior, with Enterprise +5% and Cloud +8%,” analysts stated. They also project AI servers to grow by 150% to approximately 450,000 units in 2024.

Regarding Nvidia’s GB200, KeyBanc believes that the NVL72 configuration will dominate demand in 2025 over the NVL36. The NVL72 offers performance 20-30 times greater than the H100 and provides the lowest cost per token solution. Thus, they expect GB200 to generate over $200 billion in data center revenues for the chipmaker in 2025.

KeyBanc has revised its price targets for several leading chip stocks, including NVDA from $130 to $180, Monolithic Power (NASDAQ:MPWR) from $850 to $975, Cirrus Logic (NASDAQ:CRUS) from $120 to $155, and Marvell (NASDAQ:MRVL) Technology from $90 to $95.

 

Trump and immigration: What could actually happen?

A potential Trump 2.0 administration is poised to double down on stringent immigration policies, but what are the realistic outcomes? According to Evercore ISI, along with taxes and trade, immigration is a pivotal macro-policy driver under Trump, especially with immigration emerging as a top voter issue and giving Trump a significant edge.

A Trump victory would likely result in immediate actions to curb immigration. “Expect a Trump 2.0 Administration to move quickly to limit inflows via asylum and parole and to begin withdrawing protected statuses from as many as 5 million people,” Evercore ISI analysts state.

Interior removals, however, are anticipated to take longer to ramp up.

The bank explains that one key difference this time is the improved legal groundwork. “Trump’s future actions on immigration will be far more likely to survive legal challenge than under Trump 1.0 due to better preparation and a more favorable judiciary,” analysts explain. They add that suggests that Trump 2.0’s immigration measures could have more staying power in the face of judicial scrutiny.

Despite Trump’s claims of deporting 15-20 million people, Evercore ISI highlights practical limitations. “There is no real mechanism to achieve Trump’s goal of deporting 15-20 million people,” they state.

Instead, Evercore says more realistic scenarios involve significant but smaller scale increases in removals: “500,000-1 million per year in a base case and 2-3 million per year in a high case.”

Achieving the high case could provoke major backlash, potentially involving “large-scale use of the military to conduct immigration raids.”

Trump 2.0 is also expected to scrutinize traditional legal pathways, including family-based immigration and temporary work visas for high-skill workers (H-1B).

Evercore says policies targeting immigrants already in the U.S. may lead to increased voluntary out-migration, adding to the outflows from formal removals.

 

NVIDIA consensus suggests a lot of imminent AI energy is needed: Barclays

In a recent thematic investing report, Barclays analysts discussed the energy demands poised to accompany the rise of artificial intelligence (AI) technologies, with a particular focus on NVIDIA’s (NASDAQ:NVDA) role in this landscape.

According to analysts, the projected energy needs tied to AI advancements underscore a crucial aspect of NVIDIA’s market outlook.

Barclays’s analysis indicates that data centers could consume more than 9% of the current U.S. electricity demand by 2030, driven largely by AI power requirements. The “AI power baked into NVIDIA consensus” is one of the key factors behind this substantial energy forecast, analysts noted.

The report also points out that while AI efficiency continues to improve with each new generation of GPUs, the size and complexity of AI models are growing at a rapid pace. For instance, the size of major large language models (LLMs) has been increasing approximately 3.5 times per year.

Despite these improvements, the overall energy demand is set to rise due to the expanding scope of AI applications. Each new generation of GPUs, such as NVIDIA’s Hopper and Blackwell series, is more energy-efficient. Still, the larger and more complex AI models require substantial computational power.

“Large language models (LLMs) require immense computational power for real-time performance,” the report writes. “The computational demands of LLMs also translate into higher energy consumption as more and more memory, accelerators, and servers are required to fit, train, and infer from these models.”

“Organizations aiming to deploy LLMs for real-time inference must grapple with these challenges,” Barclays added.

To illustrate the scale of this energy demand, Barclays projects that powering approximately 8 million GPUs will require around 14.5 gigawatts of power, translating to roughly 110 terawatt-hours (TWh) of energy. This forecast assumes an 85% average load factor.

With about 70% of these GPUs expected to be deployed in the U.S. by the end of 2027, this equates to over 10 gigawatts and 75 TWh of AI power and energy demand in the U.S. alone within the next three years.

“NVIDIA’s market cap suggests this is just the start of AI power demand deployment,” analysts said. The chipmaker’s ongoing development and deployment of GPUs are poised to drive significant increases in energy consumption across data centers.

Moreover, the reliance on grid electricity for data centers stresses the importance of addressing peak power demands. Data centers operate continuously, necessitating a balanced power supply.

The report cites a notable statement from Sam Altman, CEO of OpenAI, at the Davos World Economic Forum, “We do need way more energy in the world than I think we thought we needed before…I think we still don’t appreciate the energy needs of this technology.”

 

Investors react to shooting at Trump election rally

(Reuters) -Following are investor and analyst reactions after Donald Trump was shot in the ear during a campaign rally in Pennsylvania on Saturday in what the FBI said it was treating as an assassination attempt. 

The Trump campaign later said the former president was “doing well” and appeared to have suffered no major injury besides a wound on his upper right ear.

JACK ABLIN, CHIEF INVESTMENT OFFICER AT CRESSET CAPITAL, CHICAGO: 

“The specter of political violence introduces a whole new level of potential instability. 

“It’s uncertainty and volatility, and of course markets don’t like that. It’s not an environment anyone wants to see.

The attempted assassination probably enhances Trump’s “reputation for strength,” Ablin said.

Bond markets may repeat a trading pattern similar to after President Joe Biden’s debate performance against Trump, Ablin said, referring to a steeper Treasury yield curve.   

“Perhaps we see the market begin projecting longer-term rates higher, and anticipating lower short-term rates, because I think it’s clear that as president, Trump would push for lower rates right away.” 

STEVE SOSNICK, CHIEF STRATEGIST AT INTERACTIVE BROKERS, GREENWICH

“I’ll be looking to see if the October-December bump in VIX futures expands or if the Treasury yield curve steepens. The former indicates concerns about electoral and post-electoral volatility, while the latter would indicate bond market concerns about Trump’s likelihood of replacing income taxes with tariffs. 

“I’m not sure that this will have much of an impact on equity markets. Stock traders are not particularly good at pricing in events with a nebulous impact on revenues, earnings, cash flows, etc. and this weekend’s events fall into that category.”

JOHN CHAMBERS, FORMER CHAIRMAN SOVEREIGN RATINGS COMMITTEE,

STANDARD & POOR’S, NEW YORK

“Like everyone, I am appalled by the assassination attempt on former President Trump.

“It could harbinger a return to political violence, the likes of which the US experienced in the 1960s.

Such an outcome would be grievous, but given the strength of U.S. institutions, I don’t believe it would have an impact on ratings.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

“It was horrible to watch the video clips. From a purely markets perspective, the question is – what it does to the odds of one candidate winning over the other? Will it throw Trump off his game, as these types of rallies are a key part of his campaign strategy? It could strengthen the resolve of his supporters to go to the voting booth. Voter turnout is the key to winning.”

TINA FORDHAM, GEOPOLITICAL STRATEGIST AND FOUNDER, FORDHAM GLOBAL FORESIGHT, LONDON

“The shooting further complicates the election outlook for Democrats, already divided over Biden’s future as a candidate. 

“U.S. political violence is sadly a feature and not a bug … the question now is how a nation, in which a significant proportion of citizens believe civil war is increasingly likely, will respond.

“We don’t expect there to be an initial reaction in financial markets. If anything, the near-term implication will be the acceleration of the consensus view in markets of a Trump victory.”

IAN BREMMER, PRESIDENT, EURASIA GROUP, NEW YORK

“I deeply worry that it presages much more political violence and social instability to come. This is the kind of thing we have seen historically in lots of countries facing instability and frequently does not end well.

“Democracy is not in crisis right now. This is a year of many, many elections and we’ve seen them in India, the world’s most populous country, with 1.5 billion people. We’ve seen it across the European Union, the largest common market. We’ve seen it France, in the United Kingdom, in Mexico – rich countries, poor countries, democracies, all. 

“They have had free, fair elections with peaceful transitions. That is not what we are seeing right now in the United States. The U.S. is the only major democracy in the world today that is experiencing a serious crisis.”

KHOON GOH, HEAD OF ASIA RESEARCH, ANZ, SINGAPORE

“The probability of Trump winning has increased to 70% in the betting markets after the assassination attempt. I am not sure how markets will respond.

“The bitcoin rally could be (on) concerns of more civil unrest. We will likely see some risk off moves on the market open, but that should fade quickly.”

NICK TWIDALE, CHIEF MARKET ANALYST, ATFX GLOBAL, SYDNEY:

“I think it probably increases his chances, and we will probably see some haven flows in the morning.”

RONG REN GOH, PORTFOLIO MANAGER, EASTSPRING INVESTMENTS, SINGAPORE

“The shooting is likely to bolster Trump’s support, and only further augments the positive momentum he has been enjoying following the Presidential debates two weeks ago. 

“The market reaction function to a Trump presidency has been characterized by a stronger U.S. dollar and a steepening of the U.S. Treasuries curve, so we might observe some of that this coming week if his election odds are assessed to have further improved following this incident.”

NICK FERRES, CHIEF INVESTMENT OFFICER, VANTAGE POINT ASSET MANAGEMENT, SINGAPORE

“The election is likely to be a landslide (for Trump). This probably reduces uncertainty.

“Trump has always been more ‘pro-market’ – the key issue looking forward is whether fiscal policy remains irresponsibly loose and the implication that might have for (renewed) inflation and the future path of interest rates.”

Ferres cited polls showing a surge in support for Ronald Reagan after a 1981 assassination attempt. 

According to statistics recorded by the American Presidency Project at the University of California Santa Barbara, Reagan’s approval rating, already rising sharply in the early months of his presidency, went up by a further 7 percentage points in the first poll conducted after the attempt. 

The increase was temporary and subsided over the course of the next three months. 

HEMANT MISHR, CHIEF INVESTMENT OFFICER, S CUBE CAPITAL, SINGAPORE

“I do think this will have a shock reaction on a market that has been on tenterhooks on the U.S. election.

“I see the odds of the Trump trade getting reinforced over the next few months till November, unless the Democrats can come up with a really credible alternative.

“It just significantly improves the odds in his favour and will lead to a steepening of the U.S. curve over the next few months. (I) would bet on high growth, high inflation trades – financials and energy to do well, and negative for Asian currencies.”

 

‘Bad news for stocks’: Trump will raise taxes, not cut them- strategists

BCA Research economists have challenged the prevailing market expectations regarding the impact of a potential second term for President Trump, suggesting a shift from anticipated tax cuts to increased taxes through higher tariffs.

Their view contrasts with the widely held belief that a Trump re-election would lead to further corporate tax reductions, favoring stocks over bonds.

The firm points out several issues with the current market consensus. BCA Research highlights that even if Trump was to win, the likelihood of significant corporate tax cuts is slim.

With bond yields already over 4%, a budget deficit at 7% of GDP, and the trajectory of federal government debt being unsustainable, moderate Republicans are expected to resist policies that could worsen the fiscal situation.

Furthermore, the populist shift within the Republican Party may lead to opposition against tax cuts for corporations perceived as “woke.”

BCA Research recalls that, despite the initial increase in the 10-year Treasury yield following the 2016 election, the rate experienced a decline by August 2019.

This was attributed to the lack of significant rise in capital spending after the Tax Cuts and Jobs Act was passed, countering the argument that further tax cuts would substantially boost aggregate demand.

The analysis also considers the potential impact of the Federal Reserve’s approach to the growing government debt. If the Fed opts not to use inflation to manage the debt, the result could be deflationary due to the need for spending cuts to manage increased interest payments.

On the other hand, fears of the Fed inflating away the debt could drive long-term bond yields higher.

Lastly, BCA Research suggests that other aspects of Trump’s agenda, such as higher tariffs and reduced immigration, might temporarily increase inflation but would also likely slow down long-term economic growth. 

“The conventional wisdom is wrong: Trump is not going to substantially cut taxes once in office; he is going to raise taxes by jacking up tariffs,” strategists said.

“To the extent that this dampens economic activity, it is bad news for stocks but good news for bonds.”

 

5 big analyst AI moves: Tesla and SMCI stocks downgraded

Investing.com — Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.

InvestingPro subscribers always get first dibs on market-moving AI analyst comments. Upgrade today!

UBS cuts Tesla (NASDAQ:TSLA) to Sell on valuation reassessment, high AI costs

UBS analysts on Friday downgraded Tesla stock from Neutral to Sell, while raising the price target from $147 to $197.

This adjustment aims to reflect a reassessment of Tesla’s valuation amid market expectations for its growth, particularly in AI.

The UBS acknowledged Tesla’s diversification beyond automotive manufacturing, citing positive developments in its Energy and Full Self-Driving (FSD) segments as supportive factors.

However, expectations for Tesla’s core auto business are declining, analysts cautioned. They noted that Tesla’s valuation has historically included a premium for its potential growth in various areas. Still, the challenge lies in accurately valuing this “optionality.”

Recently, Tesla’s premium has expanded due to increased enthusiasm around AI. After evaluating Tesla’s various segments, UBS concluded that the current stock price implies a value of over $500 billion for future growth initiatives.

To justify the current stock levels, Tesla would need to achieve a future value of $1 trillion within five years, and even more to support a Buy rating, analysts said. 

They also raised concerns over the high costs of AI investments, the unpredictable pace of improvement, and the long-term nature of potential returns. The firm warned that if market excitement for AI diminishes, Tesla’s stock multiple could be negatively impacted.

With the stock trading at 86 times the next twelve months (NTM) P/E, the lack of visibility and potential for delayed growth opportunities warranted the downgrade to Sell, UBS said.

BofA ups Apple (NASDAQ:AAPL) price target on AI-driven iPhone upgrade cycle

Bank of America raised its price target for Apple to $256, up from $230, in a note to clients on Thursday, citing increased confidence in a multi-year iPhone upgrade cycle.

The hike is driven by a global smartphone survey and analysis of Apple’s aging installed base, indicating strong upside potential. 

“We are raising our PO on Apple to $256 on increased confidence of a multi-year iPhone upgrade cycle driven by an aging installed base and GenAI features that should provide a boost to customers’ intentions to upgrade,” analysts wrote in a note.

The survey, conducted in the US, UK, China, and India, revealed that a large portion of iPhone users still use older models: 29% own an iPhone 13, 13% have an iPhone 12, and over 31% have an iPhone 11 or older.

The note also highlighted that the recent Worldwide Developers Conference (WWDC) has increased customer intentions to upgrade in 2024. This is further supported by strong services growth and margin expansion, prompting BofA to reiterate a positive outlook on AAPL.

Nomura downgrades SMCI amid ‘limited share price upside’

Earlier in the week, Nomura research analysts downgraded Super Micro Computer (NASDAQ:SMCI) stock from Buy to Neutral due to “limited share price upside.”

“After Supermicro’s strong guidance for CY4Q23-CY1Q24, we believe Supermico’s performance potential changed from ‘easy to beat low market expectations’ in CY4Q23 to ‘less room to beat already-high market expectations’,” analysts noted.

Nomura’s revised outlook is due to uncertainties surrounding the gradual easing of CoWoS-S supply in 2024 and the potential transition period between Nvidia’s Hopper and Blackwell GPUs in the second half of the year.

While SMCI’s advanced liquid cooling solutions provide a competitive edge and support gross profit margins, analysts said that limited order visibility amid these uncertainties could make it challenging to exceed sales expectations “and thus this could be a mixed bag, in our view,” Nomura’s team added.

The firm expects AI server maker’s June quarterly sales to align with its guidance of $5.1-$5.5 billion, noting that some liquid cooling projects have been delayed to later quarters, reducing the likelihood of surpassing the guidance.

Nomura analysts also believe Supermicro’s near- to mid-term outlook remains unclear due to potential AI server order uncertainties. This is due to new procurement decisions by leading customers and the transition between Nvidia’s Hopper and Blackwell GPUs, which may affect SMCI as customers lean towards adopting Blackwell GPU solutions.

Microsoft (NASDAQ:MSFT) is still a GenAI leader – Morgan Stanley

Morgan Stanley analysts said Microsoft remains a strong GenAI leader, citing a recent 2Q24 CIO survey.

The survey data shows Microsoft’s leadership in GenAI is driving substantial incremental IT share gains.

“Microsoft’s lead in terms of core spending intentions and positioning in GenAI is improving more meaningfully,” analysts said in a note.

Core spending growth expectations for Microsoft rose to 6.6%, the highest since Q2 2021. This increase is largely due to Microsoft’s strong presence in GenAI functionality and its Azure Cloud business.

CIOs are particularly optimistic about Microsoft’s GenAI products. The survey reveals that 94% of CIOs plan to adopt Microsoft Generative AI products in the next 12 months, up from 63% in Q4 2023 and 47% in Q2 2023.

Microsoft 365 Copilot is the preferred solution, with 68% of CIOs intending to use it, followed by Azure OpenAI Services at 41%.

Keybanc hikes PTs on AI chipmakers as AI boom marches on

KeyBanc Capital Markets lifted price targets for several major chipmakers, reiterating robust demand for AI products.

KeyBanc highlighted a significant recovery in traditional server demand, primarily driven by major U.S. cloud providers like Meta (NASDAQ:META) and Microsoft, along with sustained demand from Chinese cloud service providers (CSPs) and moderately improving demand within the Enterprise sector.

“For 2024, we’re increasing our total server shipment estimates to +7% vs. +4% prior, with Enterprise +5% and Cloud +8%,” analysts stated. They also project AI servers to grow by 150% to approximately 450,000 units in 2024.

Regarding Nvidia’s GB200, KeyBanc believes that the NVL72 configuration will dominate demand in 2025 over the NVL36. The NVL72 offers performance 20-30 times greater than the H100 and provides the lowest cost per token solution. Thus, they expect GB200 to generate over $200 billion in data center revenues for the chipmaker in 2025.

KeyBanc has revised its price targets for several leading chip stocks, including NVDA from $130 to $180, Monolithic Power (NASDAQ:MPWR) from $850 to $975, Cirrus Logic (NASDAQ:CRUS) from $120 to $155, and Marvell (NASDAQ:MRVL) Technology from $90 to $95.

 

Fed’s Powell ‘may prefer not to change rates before an election’, strategists say

The softer-than-expected inflation report for June has fueled market expectations of a rate cut by the end of the year, which could occur before the November elections.

This speculation contributed to the US dollar’s recent decline and a surge in various market sectors, including bonds, small-cap stocks, and homebuilders.

Gavekal Research’s analysis pointed out that the current inflation data is more favorable for rate cuts than it was at the end of last year. As of December, the three-month annualized consumer price index (CPI) was below the Fed’s 2% target after adjustments.

Moreover, core CPI, which excludes volatile food and energy prices, also fell below the target, registering at 1.8% on a three-month adjusted basis.

Gavekal Research noted that if inflation continues to remain low and the Federal Reserve is confident it will stay that way, policy rates are likely to be lowered before 2024 ends, potentially ahead of the elections.

“In an ideal world, Fed chair Jay Powell may prefer not to change rates before an election, but such objections can be overridden by the data,” the strategists said in a note.

The research firm reflected on the historical precedent of the Federal Reserve altering rates in the months leading up to presidential elections.

Since 1974, during the 10 months preceding the 13 presidential elections, the Fed has changed rates eight times and maintained them five times.

This history suggests that the central bank does not shy away from making policy changes during election periods if warranted by economic indicators.

While the market reacts to the latest inflation data and its implications, the Federal Reserve, under Chair Powell’s leadership, remains committed to responding to economic data.

Hence, Gavekal Research strategists conclude that an interest rate change before the November elections is likely if the current inflationary trends persist.

 

Top 5 things to watch in markets in the week ahead

Here’s your look at what’s happening in markets for the week ahead.

1. Donald Trump speech at GOP convention

Former President Donald Trump was the target of an attempted assassination during a campaign rally in Butler, Pennsylvania. The assailant fired shots at Trump, hitting him in the right ear before being neutralized by security forces.

The incident occurred as Trump was addressing his supporters. According to Trump’s own account shared on his Truth social media platform, he heard the sound of gunfire and felt the bullet as it pierced his skin.

Despite the attack, Trump was able to speak after the event, urging his audience to “Fight! Fight! Fight!”

Trump will receive his party’s official nomination for US election this week at the four-day Republican National Convention in Milwaukee. His speech could be the first public appearance since the attempted assassination.

2. Fed Chair Powell speaks

Fed Chairman Jerome Powell will be interviewed by David Rubenstein at the Economic Club of Washington DC. A session including questions is scheduled after the interview. 

In his recent testimony on Capitol Hill, Powell highlighted the central bank’s ongoing efforts to tackle inflation and its commitment to a dual mandate.

Powell also expressed cautious optimism about inflation trends, noting some confidence in inflation moving down towards the 2% goal.

However, he clarified that it was premature to assert that the trend towards the 2% target would be sustainable.

3. Earnings season continues

The Q2 earnings season has started last week, and it will continue as soon as Monday when Goldman Sachs and BlackRock (NYSE:BLK) are scheduled to report on their financial performance.

Later in the week, Bank of America, Morgan Stanley, ASML (AS:ASML), and Netflix (NASDAQ:NFLX) are also due to report their results.

Wall Street is expecting a very strong earnings season, much of which is already baked into current stock valuations. 

4. ECB interest rate decision

The European Central Bank (ECB) is widely expected to maintain its current rates after they eased in June. 

“We expect the ECB to be on hold at the July meeting. The press conference should focus on the future rate path and the developments in France,” Morgan Stanley said in a note.

5. Jobless claims, Retail sales, Fed’s Beige Book

Many pieces of economic data are expected to be released this week.

Among other things, the Federal Reserve will publish its Beige Book report, which is a collection of anecdotal information on current economic conditions from each of the twelve Federal Reserve Districts.

The report for the June FOMC meeting period highlighted that economic activity has continued to expand during the spring season. However, the expansion has been uneven across different sectors and districts.

The Beige Book detailed that businesses have observed a weakness in discretionary spending, attributing this to an increased price sensitivity among consumers.

Jobless claims and retail sales data are also due in the week ahead.

 

Google near deal to acquire cybersecurity startup Wiz for $23 billion – WSJ

Alphabet Inc Class A (NASDAQ:GOOGL), the parent company of Google, is in advanced talks to acquire cybersecurity startup Wiz for about $23 billion, the Wall Street Journal reported Sunday, citing people familiar with the matter. If the deal is finalized, it will be the company’s largest ever acquisition.

The news comes days after reports surfaced that Alphabet has decided not to pursue an acquisition of HubSpot (NYSE: NYSE:HUBS), a company with a market cap of over $24 billion.  Antitrust scrutiny was said to have played a part in the company’s decision not to acquire HubSpot.

Wiz posted annual recurring revenue of $350 million in 2023, up from $100 million in its first 18 months after its founding in 2020 by CEO Assaf Rappaport.

The company raised $1 billion earlier this year at a valuation of $12 billion, suggesting the takeover is nearly double from those levels.  Wiz is backed by venture capitalists, including Sequoia Capital, Andreessen Horowitz, Index Ventures, and Lightspeed Venture Partners. 

Wiz was one of the rare startups outside of AI to raise capital at a higher valuation in 2024. Many startups are suffering from a tech boom hangover fueled by the low-interest rate environment.

If a deal is completed, it would be nearly double the value of Google’s largest deal to date, a $12.5 billion takeover of Motorola Mobility in 2012. Meanwhile, its second-largest acquisition to date was a $5.4 billion purchase of another security company, Mandiant.