The Rundown - AMD Hits $1 Billion in Quarterly AI Chip Sales, Microsoft Cloud Growth Underwhelms

Episode Date: July 31, 2024

Stock market update for July 31, 2024.

Public.com presents the rundown, your daily market update in five minutes. My name is Zad Admani, and today is Wednesday, July 31st. In today's episode, we get you ready for the Fed meeting today and why we might get an interesting press conference from Jerome Powell. Also, we recap earnings from Microsoft and AMD and the reaction from investors. Pretty different for both companies. Then stick around to the end of the show to find out how much money previous Olympic hosting cities have lost.

All right, let's go. Well, there was more pain in the stock market yesterday. The S&P and NASDAG both finished lower for the day, dragged down by another bad day for big tech, especially NVIDIA, which dropped 7% on Tuesday. You know, it's been just over a month since NVIDIA became the most valuable company in the world with a market cap of over $3.3 trillion.

And since then, the stock is down more than 20% from its peak. And while we are getting a ton of big tech earnings this week, Nvidia actually doesn't report earnings until late August. So we have to wait a few weeks to learn more about how the company's financials are doing. Invidia investors are going to have to hang in there. Hopefully they can enjoy the rest of their summer. Now, today is the last day of July, and while the stock market was making record highs to start the month, it's been a brutal couple of weeks.

In fact, both the S&B and NASDAQ are on track for a down month, the first since April, unless we get an epic rally today. And actually one man that could cause an epic rally is Jerome Powell, and he's going to be talking today as the Fed meeting wraps up, and they make a decision on what to do with interest rates. Right now, the market is predicting only a 3% chance of a rate cut today, so very unlikely to happen. This is according to the CME Fed Watch tool.

But the market is predicting a 100% chance of a rate cut at the Fed's next meeting, which is happening in September. Today's press conference from Jerome Powell might be very interesting to see if he drops any hints of a rate cut. I'll be watching the press conference. It starts at 2.30 p.m. Eastern Time. We'll recap the Fed's decision on interest rates and tell you what Jerome Powell said in tomorrow's episode of the rundown.

So make sure you guys are subscribed. to the podcast so you guys don't miss that one. You know, I wonder if Jerome Powell is going to rock a different color tie this time to maybe hint at rate cuts, you know, because he's been wearing purple all year. Something to keep an eye on. Let's run through some headlines. And let's start with Microsoft earnings. They reported earnings after the market closed yesterday, and the numbers were pretty solid. But guess what? Their stock still dropped in reaction to those earnings. Stop me if you've heard that one before. That's exactly what happened to Google last week. Now let's start with the good stuff. Microsoft's revenues in the second quarter were up 15% to 60%.

$54.7 billion. And they made over $22 billion in profit. Both of those numbers beat Wall Street estimates. So why did the stock still drop? Well, it's because Microsoft's Azure Cloud business only grew by 29%, which is a lot, but it's less than the 31% growth that Microsoft saw last quarter. And that was enough to tank the stock 7% after hours. The stock market is just crazy like that right now. Investors are just looking for an excuse to sell their tech stocks. Now, Microsoft's stock did recover a bit. Now it's only down 3% in pre-market trading. One of the things that investors are keeping an eye on is AI spending from all these big tech companies. Microsoft's capital expenditure last quarter was $19 billion. Most of it was on AI.

That's of 55% from Q2 of last year. So they continued to increase their investment in AI. But Microsoft did say that 8% of Azure's cloud growth came from AI last quarter. So it looks like Microsoft is making some return on their AI investment. Overall, though, I say Microsoft management is feeling pretty good right now, despite what the stock market is saying. In fact, Microsoft employees will get a one-time cash award of 25% of their annual bonus. So that's pretty nice. All right, let's talk about AMD. They reported earnings last night, and they had pretty solid numbers as well.

Their data center sales more than doubled in a year up 115% and now make up for nearly half of all of AMD's revenue. The company sold over $1 billion of their highest-end AI chip. It's called the MI-300, and it competes with NVIDIA's H-100 chips. This is the first time that AMD has topped $1 billion in quarterly AI chip sales. So they're starting to cash in on the AI gold rush as well. AMD also raised its 2024 forecast for AI chips. They now expect to sell over $4.5 billion in AI chips due to rising demand. Now, to be fair, while AMD's AI chips do go ahead to head with Nvidia,

its data center business is just a fraction of what NVIDIA's is. Just to put it into perspective, AMD's quarterly data center revenue is $2.8 billion. Compare that to Nvidia, which did $22.8 billion in data center revenue last quarter. So we're talking almost 10x bigger for Nvidia. But investors seem to be pretty optimistic about AMD's trajectory. And they're looking forward to AMD's new chip release, which includes the MI350 in 2025. AMD's CEO says that it'll be very competitive with Nvidia's Blackwell chips.

And they had some other bright spots as well. AMD's PC chip sales were up 49%. in the quarter to $1.5 billion. So solid earnings report from AMD, and as a result, their stock is up more than 8% in pre-market trading. Let's talk about some stocks making moves today. Shares of Match Group are soaring after the company announced that it's cutting 6% of its staff. On top of the cuts, the company reported earnings and met earnings estimates and beat revenue expectations, with revenues for hinge being up 48% year over year. Also, paid users are up 24%. Shares have match are up around 10% in reaction to this news. What really caught my attention was the number of people

that are paying for these dating apps. So we're going to make that the poll on Spotify today. Have you guys ever paid for a dating app before? I think it's starting to become a lot more common. Another winner for today is Starbucks. Shares are up despite the company reporting. Its second straight decline in quarterly sales. U.S. same store sales fell by 2% while profits dropped by 7.5%. And get this, Starbucks same store sales in China dropped by by 14% in the quarter. So that's pretty brutal. To address the weakness in China, Starbucks announced that it's seeking a strategic partner in China to help boost its declining business. Starbucks stock jumped 4% in the pre-market and reaction to these earnings, but still,

shares were down 25% for the year heading into the report on Tuesday. A stock not having a great morning is Pinterest. Shares of Pinterest are plummeting after its Q3 guidance came in below expectations. Monthly active users for Pinterest in the U.S. and Canada came in slightly below estimates at 98 million, and the average revenue per user in US and Canada also missed estimates. As a result, the stock is down 8% on this news. All right, let's wrap the show with a fun fact. The Olympics are happening right now in Paris. I've been watching.

It's been pretty fun to watch, but it's pretty expensive to host the Olympics. The Paris Olympic Committee spent around $9 billion on infrastructure spending and other things to host the Olympics. And I bring that up because they might not make a profit from these games. Historically hosting nations and cities don't make a profit. And in fact, they end up losing a lot of money. For example, Athens hosted the 2004 Summer Olympics. They lost $14.5 billion.

It's actually one of the reasons why Greece had financial instability in the 2010s. Tokyo hosted the last Olympics back in 2021. They lost $7.2 billion. Rio de Janeiro hosted the 2016 Summer Olympics. They lost $2 billion. So not a great history of making a profit from hosting the Olympic Games. All right, guys, that's the rundown for today. Hope you guys enjoyed today's episode.

We still got an action pack week coming up. bed meeting, meta earnings, Apple, Amazon earnings. A lot to talk about. Make sure you guys are subscribed to the podcast. And don't forget to vote in the Spotify poll for today. That engagement really does help the show. Thank you guys so much for listening. Shout out to Connor and Mike for all the help behind the scenes.

And we'll see you guys back here tomorrow. This is the rundown. Your real-time resource for news events and trends in the markets. All views presented in the show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell, or hold that security. Rundown guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial. and investment decisions or consult.

Respected professionals. Learn more at public.com disclosures. In partnership with Zaidamani, brokerage services for US listed, registered securities are offered by Open to the Public Investing Incorporated, member FINRA and SIPC.