Traders work on the trading floor of the New York Stock Exchange on August 16, 2024.
Angela Weiss | AFP |
This report is from today’s CNBC Daily Open, our newsletter for international markets. CNBC Daily Open informs investors what they need to know, no matter where they are. Like what you see? You can subscribe Here.
What you need to know today
Winning streak
The S&P 500 and Nasdaq Composite rose for the eighth straight session, up 0.97% and 1.39%, respectively, snapping their longest winning streaks so far this year. The Dow Jones Industrial Average jumped 0.58%. Meanwhile, the yield on the 10-year U.S. Treasury note was little changed as investors await the minutes of the Federal Reserve meeting and Chairman Jerome Powell’s speech in Jackson Hole on Friday. U.S. oil prices fell nearly 3% as the U.S. pushes for a ceasefire in the Middle East.
AMD deal
Advanced Micro Devices is acquiring server maker ZT Systems for $4.9 billion to bolster its AI chip and hardware portfolio. The move will allow AMD to bring AI chips to market at the scale demanded by customers such as Microsoft and compete more effectively with Nvidia. AMD, which had $5.34 billion in cash and short-term investments in the second quarter, plans to finance 75 percent of the acquisition with cash and the rest with stock. The company also plans to split and sell its server manufacturing business because it does not want to compete with companies such as Super Micro Computer, CEO Lisa Su said.
Layoffs at GM
General Motors is laying off more than 1,000 employees worldwide in its software and services division as part of a review to streamline operations, CNBC has learned. The cuts will affect about 600 jobs at its technology campus near Detroit. The layoffs, which affect 1.3% of GM’s global workforce, come as automakers, including GM, focus on cutting costs amid industry challenges while investing heavily in electric and so-called software-defined vehicles.
Icahn must pay a fine
The US Securities and Exchange Commission (SEC) has fined billionaire activist Carl Icahn and his company $2 million for failing to disclose billions in personal margin loans pledged as collateral for Icahn Enterprises shares. Without admitting wrongdoing, Icahn agreed to pay $500,000, while the company will pay $1.5 million. Icahn had pledged 51 to 82 percent of his company’s shares as collateral for billions in loans.
New low
Trump Media’s stock hit a new low after the merger, closing at $22.24, down 3.5 percent. The company, which owns Truth Social and is majority-owned by former President Donald Trump, has seen volatile stock prices since its debut. Its fate remains closely tied to Trump’s political trajectory. President Biden’s unexpected withdrawal from the campaign and his support of Vice President Harris as the Democratic candidate have shifted betting odds in Harris’s favor, which will likely impact the stock.
(PRO) Price in
MoffettNathanson has a $211 price target for Apple, down 7% from Monday. Analyst Craig Moffett acknowledges Apple’s potential success in AI, but argues that it is already reflected in the stock price.
The conclusion
AMD estimates that the AI chip market will reach $400 billion by 2027. CEO Lisa Su has set her sights on capturing a significant share of that market, but the company will have to compete with industry leader Nvidia to do so. Analysts predict that Nvidia’s AI revenue from data centers will reach $105.9 billion this year, while AMD lags behind at $4.5 billion.
It’s as if Microsoft’s Bing is challenging Google’s search business. But AMD is gaining customers, including Microsoft and Meta Platform. And the company is looking to strengthen its offerings with the acquisition of ZK Servers to better compete with Nvidia.
“I don’t think anything changes in the next year or two,” said Doug Clinton, managing partner at Deepwater Asset Management, on CNBC’s “Closing Bell.” He stressed that AMD’s focus is on becoming more competitive in building clusters and helping hyperscalers build data centers. But Nvidia already excels in that space. “It’s not a big threat,” Clinton added.
Nvidia’s dominance is so strong that Bank of America expects its earnings report on August 28 to be a bigger market catalyst than Powell’s speech at Jackson Hole on August 23. CNBC’s Sarah Min reports the bank’s views in more detail.
While investors feared a recession at the beginning of the month and therefore triggered a wave of selling, Goldman Sachs has reduced the probability of a recession to 20 percent following more favorable data on employment and retail sales.
Jan Hatzius, chief economist at Goldman Sachs, told CNBC’s “Squawk on the Street” that the investment bank could lower the probability even further depending on the next jobs report in September. In the meantime, Hatzius doesn’t think Powell will be “pinned down” on what the Fed’s next move will be.
“I think he will not be specific about the measures that are coming. I am sure his comments will be consistent with the idea that the risks are more two-sided and there are signs of moderation in some areas and, more importantly or equally importantly, inflation has come down. I don’t think he will commit himself one way or the other,” Hatzius said.
“If the data supports 50 (basis points), they should do 50, and I think they will do 50, but I think it’s much more likely that things look good enough that a series of 25 basis point cuts will do the job they want.”
— CNBC’s Alex Harring, Kevin Breuninger, Samantha Subin, Jenni Reid, Rohan Goswami, Michael Wayland and Spencer Kimball contributed to this report.
