The Rundown - Google Signs Nuclear Energy Deal, Big Banks Post Better-Than-Expected Earnings

Episode Date: October 15, 2024

Stock market update for October 15, 2024.

Public.com presents the rundown, your daily market update in five minutes. My name is Zadadmani, and today is Tuesday, October 15th. In today's episode, we tell you why NVIDIA shares are making record highs despite potential export restrictions by the U.S. government. We also recap some of the biggest earnings, including Goldman Sachs, United Healthcare, and Walgreens. Then stick around to the end of the show to find out how much electricity it takes to ask ChatGPT a question.

It's a lot more than a Google. All right, let's go. Well, guys, the stock market is off to a nice start this week with more records being broken. The S&P 500 moved higher yesterday to a new record close. The NASDAQ was up nearly 1% yesterday and it's really close to a record high. And the Dow also hit a record high, passing 43,000 for the first time ever. Still don't care about the Dow. Now, a stock that everyone seems to care about these days is InVIDIA.

InVIDIA's stock closed at a record high yesterday as well for the first time. since June. So it's been a few months. And Nvidia's stock has been on a hot streak lately. It's up 14% this month alone off the backs of the huge demand for their latest Blackwell AI chips, which Nvidia's CEO Jensen Huang said are in full production and that demand for it has been insane. So it's easy to see why investors are so hyped right now. And Nvidia's market cap is now about $3.4 trillion and they're getting pretty close to reclaiming the most valuable company in the world title from Apple, which has a market cap of $3.5 trillion. So after a tough summer where Nvidia's stock was down over 25% from its peak, Nvidia's back

to making new highs. Hope some of you guys bought the dip. And let's do a quick roundup of earnings from Goldman Sachs, Bank of America, and Citigroup, which all reported earnings this morning before the bell. Let's start with Goldman Sachs. They beat on top and bottom line getting a boost from their equity trading and investment banking business, which were up 18 and 20% respectively. deal-making environment for investment banks like Goldman is expected to get stronger as the Fed lowers interest rates. Goldman says that their deal backlog is up from a year ago and Q2. Goldman's shares are up 3% this morning. Now Bank of America saw their profits decline in the third quarter, but not as much as analysts were expecting. While lower rates could be a boost for investment banks like Goldman,

major lenders like Bank of America end up earning less interest income on their loans. Net interest income was down 3% for Bank of America in Q3. But still, shares of Bank of America were up nearly 3% this morning. And finally, Citigroup, their profits fell less than expected, also thanks to a bounce back in their investment banking and wealth management division. City stock is up nearly 2% this morning. So the trio big bank earnings rounds out what has been a pretty positive quarter for big banks. The KVW Bank Index, which tracks the performance of leading banks, is now up nearly 60% since the start of the year. So pretty good year for banks. Let's run through some headlines. Let's start with Google, because they announced that they're signing a first-of-a-kind nuclear energy deal to power their

AI data centers. The tech giant is buying seven small modular reactors that will be built by Keros Power, which is a seven-year-old startup funded by the U.S. Department of Energy. And this will be the first time that a tech company has commissioned the development of a nuclear power plant. And Google says the first of seven reactors will be ready by 2030, with the additional reactors ready by 2035. So we're talking the decade timeline here. And what's known. What now worthy here is that this would be the first small modular reactor in the U.S., which is different than a traditional nuclear power plant because it provides less power, but these small modular reactors cost less and have more flexibility.

So I feel like nuclear power might be making a comeback in the U.S. Thanks to these tech companies and their AI data centers that require so much energy. Like Google isn't the first tech company to partner with a nuclear energy company this year. Microsoft is teaming up with Constellation Energy to bring back the Three Mile Island nuclear plant in Pennsylvania, and Amazon recently bought a data center powered by a nuclear power plant as well. Nuclear energy is looking to be the go-to for data centers because of its ability to provide consistent and carbon-free energy around the clock. So it's crazy to think that AI might be the reason that we're kicking off a new era of nuclear power.

And speaking of AI, the U.S. government is thinking about capping the exports of AI chips from Nvidia and AMD to some countries. The countries in question are around the Persian Gulf, including Iraq, Iran, and Qatar. And the reason the government is thinking about doing this is because they don't want China getting their hands on these advanced AI chips. Now, there's already restrictions by the U.S. government on what AI chips can be exported to China. But not just that, the Biden administration has restrictions on AI chip shipments to over 40 countries because they're worried that these AI chips will ultimately end up being diverted to China. Chinese vendors have been going all over the world to scoop up these AI chips, including India, Singapore, and Taiwan.

So we'll have to see if the U.S. government decides to increase export restrictions on these AI chips. AI chips to more countries. Nvidia and AMB shares are down around 1% on this news. Let's talk about some stocks making moves today. And we're going to focus on the healthcare industry, starting with Walgreens. Their shares are rising after the company reported revenue and profits that beat Wall Street estimates. The multinational retail pharmacy giant has been cutting costs and announced plans to close

200 stores over the next three years in the U.S. What really shocked me was that Walgreens has over 8,700 locations. in the U.S. And according to the company, a quarter of those stores are unprofitable, which is crazy. So they're going to be closing those stores down. So Walgreens's earnings,

along with the commitment to cutting costs, has investors excited today, and shares are up around 4% in the pre-market. But they're going to have to do a lot more to turn things around. The stock is down more than 65% for the year, making it the worst performing stock in the S&P 500 in 2024.

Now, on the flip side, shares of United Healthcare are down after they reported earnings this morning. The healthcare giant's earnings weren't so bad. The company did beat on revenue in profit, but they did miss on a key metric called medical cost ratio, which is pretty important for insurance companies. This ratio tells you how much money is paid out for medical expenses compared to the insurance premiums that the company collects.

And United Health Care's medical ratio this past quarter was 85.2%, which is higher than estimates, which means that United Healthcare is paying more for medical care than what Wall Street was expecting. And that was enough to send shares lower by nearly 4% in the pre-market. By the way, United Healthcare is the 13th largest company in the U.S. by market cap. They have a market cap of over $550 billion. Let's wrap the show with a fun fact. A single search for a AI chat box like chat GPT consumes nearly 10 times as much energy as a typical Google search. This is according to the International Energy Agency. This just kind of fits the theme of the show that AI consumes a lot of power.

The IEA estimates that electricity consumption from data centers, AI, and cryptocurrency sector could double by 2026 and reach the total electricity consumption of Japan. So I guess that just tells you why these tech companies are investing so much money in nuclear power and other forms of energy. Well, all right, guys, that's the rundown for today. Hope you guys enjoyed today's episode. If you did, consider giving us a five-star rating on Apple and Spotify.

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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. Run-down guests are not financial advisors and are not affiliated with public holdings or its subsidiaries.

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