Month: March 2024

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

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Citi attributes Apple-Baidu AI collaboration to regulatory factors

Citi analysts recently turned their attention to Apple’s partnership with Baidu (NASDAQ:BIDU), saying that their collaboration on AI initiatives is primarily driven by regulatory concerns.

According to a report from the Wall Street Journal, Apple (NASDAQ:AAPL) plans to integrate Baidu’s ERNIE Bot as the local large language model (LLM) provider for its forthcoming iOS18, with monetization occurring through API interfaces.

“If true, we believe the collaboration is mostly driven by regulatory concerns while Apple is reported to be in talks with Google (NASDAQ:GOOGL) and OpenAI amidst internal Gen-AI efforts for other markets,” Citi analysts commented.

“China published an AI regulation in 2023 where it requires generative AI models to be approved before launching to the public, and ERNIE is one of the 40 models already approved,” they added.

Wedbush lifts Microsoft PT on bullish Copilot outlook

On Monday, Wedbush upped its price target for Microsoft Corporation (NASDAQ:MSFT) to $500 from $475, while reiterating its outperform rating.

The firm remains optimistic about Microsoft’s AI capabilities, particularly regarding Copilot’s financial prospects, and observed a surge in AI adoption among Microsoft’s clients and industry leaders.

“We strongly view this as Microsoft’s ‘iPhone Moment’ with AI set to change the cloud growth trajectory in Redmond the next few years and our recent checks giving further confidence in this dynamic,” analysts noted.

The broker predicts that more than 70% of Microsoft’s user base will integrate its AI functionalities within the next three years, potentially boosting the company’s revenue by an additional $25 billion to $30 billion by 2025.

Simultaneously, it also pointed out several potential risks, including intensified competition, pricing strategies, technological changes, and economic challenges that might affect the company’s ability to meet these expectations.

TSM target price hiked at BofA on advanced nodes strength

Analysts at Bank of America (BofA) lifted their 12-month target price on Taiwan Semiconductor Manufacturing (NYSE:TSM) to NT$880 (US$155) on expectations of stronger structural advanced node demand bolstered by “AI strength, computing power, power and saving requirement.”

“In addition, Intel’s recent confirmation on outsourcing Lunar/Arrow Lake CPU tiles to TSMC should contribute and bode well for TSMC’s industry leadership,” the analysts added.

The analysts highlighted the increased importance of advanced semiconductor nodes due to the rising computing power requirements highlighted by AI, as recently noted by OpenAI CEO Sam Altman and TSMC founder Dr. Morris Chang.

Furthermore, the advanced nodes play a vital role in mitigating the escalating electricity consumption.

Against this backdrop, BofA projects that the revenue for industry-leading edge foundry services (sub-7nm) is expected to see a 22% compound annual growth rate (CAGR) from 2023 to 2025.

“TSMC share price has risen 27% YTD, backed by AI strength and industry recovery. The forward P/E tends to move along with SOX since 2020 but underperformed in 2H23- 2024 YTD,” analysts noted.

“Hence, we believe its valuation should catch up and deserves a re-rating since TSMC is indispensable in the AI era,” they added.

BMO: ‘Adobe still has longer-term growth levers across’

Earlier in the week, Adobe (NASDAQ:ADBE) hosted its much-anticipated Summit user conference and analyst event, where the company unveiled numerous new features.

Commenting on the event, analysts at BMO Capital Markets highlighted that Adobe’s latest product innovations are largely aimed at enhancing enterprise use cases within both its Creative Cloud and Experience Cloud offerings.

This, they noted, reinforces their perspective of Adobe as a forefront company in enterprise workflow solutions.

“While we believe there continues to be a tighter range around FY24 net new ARR, Adobe still has longer-term growth levers across price, mix, and seats, in our view,” BMO’s team said reiterating an Outperform rating and $610 price target on the stock.

Meanwhile, KeyBanc analysts maintained an Underweight rating and a $445 price target on Adobe after the conference.

The brokerage firm noted that the most significant takeaway from the meeting was a reiteration, and highlighted how confusing the initial lack of reiteration was to both analysts and investors.

They noted that Adobe’s FY24 targets were immediately addressed at the beginning of the meeting and, with the exception of the breakup payment related to Figma, remained precisely as initially outlined at the year’s start.

Foundational AI startups roiled by shakeout events – Macquarie

In this week’s note to clients, Macquarie analysts said that the market for foundational AI models seems to be undergoing a “shakeout” phase, which has notably impacted some AI startups.

The financial services firm anticipates such disruptions to continue as companies strive to keep up with rapid innovation.

“Between Inflection AI and Stability AI, it looks like the foundational AI model market is experiencing a shakeout event,” analysts wrote.

“We expect to see more shakeouts as the market allocates capital amidst accelerated innovation,” they added.

In the same note, Macquarie also pointed out that while Apple’s collaboration with Google grabbed attention, the iPhone maker has independently been advancing in local generative AI research.

Its analysts foresee the iOS ecosystem employing a hybrid approach: using Gemini-class models for intricate reasoning and analytical tasks, alongside deploying local AI models within the Apple Neural Engine for routine, daily operations, balancing both centralized and on-device AI capabilities.

SHENZHEN, China (Reuters) -China’s manufacturing activity expanded for the first time in six months in March, an official factory survey showed on Sunday, offering relief to policymakers even as a crisis in the property sector remains a drag on the economy and confidence.

The official purchasing managers’ index (PMI) rose to 50.8 in March from 49.1 in February, above the 50-mark separating growth from contraction and topping a median forecast of 49.9 in a Reuters poll.

Though the pace of growth was modest, it was also the highest PMI reading since March of last year, when momentum from the lifting of tough COVID-19 restrictions began to stall.

“From the indicators, domestic supply and demand has improved, while homeowner and business confidence is recovering, while willingness to consume and invest are increasing,” said Zhou Maohua, an analyst with China Everbright (OTC:CHFFF) Bank.

New export orders rose into positive territory, breaking a 11-month slump, but employment continued to shrink, albeit at a slower rate, the PMI data showed.

Recent upbeat indicators suggest the world’s second-largest economy is slowly getting back on better footing, leading analysts to start upgrading their growth forecasts for the year.

Policymakers have wrestled with persistent economic sluggishness since the abandonment of COVID curbs in late 2022, amid a deepening housing crisis, mounting local government debts and weakening global demand.

“March data show the economy is poised for a strong end to Q1,” China Beige Book, an advisory firm, said in a note last week. “Hiring recorded its longest stretch of improvement since late 2020. Manufacturing picked up, as did retail.”

However, a deep slump in the Asian giant’s property sector remains a major drag on growth, testing the health of heavily indebted local governments and state-owned banks’ balance sheets.

The official non-manufacturing PMI, which includes services and construction, rose to 53 from 51.4 in February, marking the highest reading since September.

Premier Li Qiang announced an ambitious 2024 economic growth target of around 5% earlier this month at the annual meeting of the National People’s Congress, China’s rubber-stamp parliament.

But analysts say policymakers will need to roll out more stimulus to hit that target as they will not be able to count on the low statistical base of 2022 which flattered 2023 growth data.

Citi on Thursday raised its economic growth forecast for China for this year to 5.0% from 4.6%, citing “recent positive data and policy delivery”.

China’s cabinet on March 1 approved a plan aimed at promoting large-scale equipment upgrades and sales of consumer goods. The head of the country’s state planner told a news conference earlier this month the plan could generate market demand of over 5 trillion yuan ($691.63 billion) annually.

Many analysts worry that China may begin flirting with Japan-style stagnation later this decade unless policymakers take steps to reorient the economy towards household consumption and market-allocation of resources, and away from the heavy reliance on infrastructure investments seen in the past.

TOKYO (Reuters) -Health authorities searched a second Kobayashi Pharmaceutical factory in western Japan on Sunday after the company reported five deaths possibly tied to dietary supplements, an official said.

The inspection in Wakayama prefecture follows one on Saturday in Osaka, expanding the investigation into the drugmaker’s use of “Beni-Koji” red yeast materials.

Osaka-based Kobayashi said it found what appeared to be potentially toxic puberulic acid that could have been produced by blue mould penicillium in Beni-Koji materials produced between last April and October at the Osaka factory.

As of Friday, 114 people had been hospitalised and five had died after taking the supplements, which were marketed as helping lower cholesterol levels, the company said.

The cause of the deaths has not been confirmed, the official at Japan’s Health and Welfare Ministry told Reuters. But “it is suspected that Beni-Koji may be the cause, so we have inspected two factories in two days.”

Kobayashi said on Friday it was investigating a suspected link between the products and their effects on the kidney since it received reports of kidney disease linked to the products.

“We will fully cooperate with the investigation so that we can resolve the problems as early as possible,” the head of Kobayashi’s investor relations, Yuko Tomiyama, told reporters on Sunday in footage shown by public broadcaster NHK.

The health official said the ministry “would join hands with other ministries concerned to do our utmost to resolve the ongoing case while asking Kobayashi Pharma to cooperate as needed in looking into the case”.

The factory in Osaka’s Yodogawa Ward was closed in December due to ageing facilities and production shifted to the factory in the city of Kinokawa that was searched on Sunday, Japanese media reported.

The government has criticised the company for taking two months to announce the health impacts of its products. Kobayashi began recalling products on March 22 after receiving reports of kidney ailments.

Its products are also consumed in other countries.

Japanese media said a case of acute renal failure had been reported in Taiwan. Taiwan’s food and drug administration is investigating three “unexpected health reactions” that may be related to imported materials from Kobayashi, Taiwan’s official Central News Agency reported.

A Chinese consumers association urged consumers to stop using potentially affected products, saying it was concerned about the risk of Kobayashi products, state media reported on Friday.

Japan’s health ministry is aware of the Taiwanese cases, the official said, declining to comment further on any international cases.

South Korea’s ministry of food and drug safety has posted the list of 182 Japanese recalled products made by Kobayashi and other companies that contain red yeast rice, asking consumers not to purchase those items online.

The South Korean ministry said on Friday that authorities would dispose or return shipments related to the Kobayashi case at customs. It did not respond to a request for additional comment outside normal business hours.

Kobayashi sells Beni-Koji wholesale to 52 companies, which have conducted voluntary inspections and found no materials requiring medical consultation as of Friday, NHK said. Those companies sell the materials on to 173 others, it said.

TV Asahi reported that some 1,800 foodmakers could be affected.

Beni-Koji contains Monascus purpureus, a red mould used as a food colouring.

Investing.com — U.S. employment data on Friday will be the main highlight of this week’s economic calendar amid hopes the economy is on course for a soft landing. The second quarter gets underway after a stellar performance for stocks in Q1. The yen and the yuan remain on intervention watch while data out of the Eurozone and China will be closely watched. Here’s what you need to know to start your week.

Nonfarm payrolls

Friday’s jobs report will be in the spotlight amid investor confidence that the economy is set for a “soft landing”, in which inflation moderates but the economy avoids a severe downturn.

The U.S. economy is expected to have added 205,000 jobs in March, slowing from the 275,000 jobs added in February.

Hopes for a “soft landing” for the economy were boosted after the Fed at its March meeting stuck to its view of three rate cuts this year while upgrading its outlook for economic growth.

Ahead of the jobs data, investors will also get a chance to hear from several Fed officials including Fed Chair Jerome Powell on Wednesday. Among others due to make appearances are New York Fed President John Williams, San Francisco Fed head Mary Daly and Richmond Fed head Thomas Barkin.

Q2 kicks off

The U.S. stock market has had a strong start to the year, boosted by optimism over artificial intelligence related stocks and expectations the Fed will begin to cut interest rates this year.

Each of the three main U.S. indexes recorded solid quarterly gains, led by a climb of over 10% for the S&P 500 for its biggest first-quarter gain since 2019.

Whether that rally continues into the second quarter is largely down to the Fed. At the start of the year markets had been expecting six rate cuts from the Fed – now just three are priced in and officials have not yet signalled that inflation has come down enough to justify a rate cut.

Continued strong momentum will also depend on corporate earnings which get underway in earnest the second week in April.

Intervention watch

Monetary authorities in Japan and China are on high alert as their currencies weaken past levels that they’ve been defending for months, largely thanks to the strong dollar.

With the yen faltering towards the 152 per dollar level and the yuan struggling to break above the stronger side of 7.2 per dollar, officials have stepped up efforts to bolster their currencies.

In Japan, that means verbal warnings, while in China it has been state banks buying yuan and selling dollars.

Given how much the two big Asian currencies have fallen, there’s a growing school of thought that Beijing could have grown more tolerant of a weak yuan to maintain its competitive edge against the yen but it’s hard to say what’s next.

Eurozone inflation

The Eurozone is to release flash inflation data for March on Wednesday that will be closely watched amid speculation that the European Central Bank is gearing up to cut rates in June.

Inflation in the euro area remained high since the start of the year and needs to fall further to allow the ECB to deliver a summer rate cut, making the next three inflation reports key for markets (and the ECB).

If inflation surprises to the upside, rate cut bets will be pushed out.

Speaking Saturday, ECB Governing Council member Robert Holzmann said it could lower its key interest rate before the Fed, noting that the European economy was growing more slowly than its U.S. counterpart.

China data

China’s manufacturing activity expanded for the first time in six months in March, according to official data published on Sunday, offering relief to policymakers even as a crisis in the property sector remains a drag on the economy and confidence.

Expectations are for Monday’s Caixin manufacturing PMI to show a slight expansion, likely continuing its divergence with the official reading – overall offering a mixed outlook for the world’s No.2 economy.

Policymakers have wrestled with persistent economic sluggishness since the abandonment of COVID curbs in late 2022, amid a deepening housing crisis, mounting local government debts and weakening global demand.

(Reuters contributed reporting)