The Rundown - Palantir Shook by Possible Defense Spending Cuts, Walmart Slides Following Profit Warning

Episode Date: February 20, 2025

Stock market update for February 20, 2025.

Public.com presents the rundown. Your daily market update in five minutes. My name is Zadadmani, and today is Thursday, February 20th. In today's episode, we tell you about Microsoft's quantum breakthrough that has investors jumping back into quantum stocks. We also tell you about why budget cuts at the Pentagon is sending Pallenteer stock lower. Then stick around to the end of the show for an earnings recap of Alibaba and Walmart, and find out why the success of this animated movie from China could mean trouble for Hollywood.

All right, let's go. Well, the stock market continued to rally on Wednesday. The S&P 500 was up 0.2% for another record close, while the NASDAQ had another flat day, still technically in the green, so we'll take it. Some of the biggest winners yesterday were quantum stocks thanks to a quantum breakthrough from Microsoft. Microsoft announced they created a new quantum chip

they're calling the Maya Rana 1, which uses a new state of matter. It's pretty mind-boggling stuff. We don't have enough time on this episode to dig into the technical details. Maybe we'll do a deep dive episode on it soon. But the main takeaway is that this chip will accelerate the timeline for practical use of quantum computing. Microsoft CEO Satya Nadella said it could mean we have quantum computers within years and not decades.

I wonder if Jensen Huang will change his mind on quantum computing now. But yeah, this announcement from Microsoft brought the hype back to quantum stocks, companies like D-Wave, Rageddi Computing, and Quantum Computing, Inc. We're up more than 6% yesterday. These quantum stocks that I just mentioned are still down more than 25% for the year. So a long way to go before we return to the hype from last year. Now, speaking of Jensen Huang, I have to mention that Nvidia earnings are less than a week away. NVIDIA reports earnings on Wednesday, February 26th after the market close.

And I feel like NVIDIA earnings are the most important earnings of the season. And we'll find out how NVIDIA's business is doing. and if there's been any slowdown in the demand for AI chips. On top of that, we're also getting earnings from Hymns, Kava, Salesforce, and more next week. So there's still some juice left in this earning season. So if you're new to the podcast, it's a great time to get subscribed because we're going to be breaking down all those earnings and more over the next few weeks. Let's run through some headlines.

Starting with Apple. Apple also had a big announcement yesterday. The release of their new phone, the iPhone 16E. Not quite as exciting as a quantum breakthrough, but this new phone is notable for a couple of reasons. For one, it's a cheaper stripped down version of the iPhone 16. You know, it only comes with one camera, it doesn't have Mac safe, but it still includes key features like Apple Intelligence. I'm not going to lie, I think at this point I would rather have Macsafe than Apple Intelligence. But what makes this phone notable is that it'll be the first iPhone to use Apple's in-house cellular chip that they're calling the Apple C-1.

Up until this point, Apple has been getting their cellular chips from Qualcomm. and paying billions of dollars in licensing fees as a result. But they're trying to move away from that. And after years of developing it, they finally had their own in-house cellular chip. And if this C-1 chip performs well, I bet it's going to be in future iPhones. It might even be in the iPhone 17 that's going to be launching in the fall.

So I think the performance of the C-1 chip is the main thing to keep an eye on regarding the iPhone 16E. As for the phone overall, it's marketed towards people looking for a budget iPhone. It replaces the previous iPhone SE, which I kind of liked, I'm not going to lie. Apple is selling the iPhone 16E at $600, making it $200 cheaper than their main iPhone 16 model. It's probably a great phone for someone like my parents, who don't really care about all the fancy features. So it'll be interesting to see what the sales numbers for this phone's going to be.

I just wish, though, that they could have kept the price under $500, like the previous iPhone SE models. It would have been a no-brainer phone for my parents. 600 is kind of on the price of your side. But I mean, hey, this is Apple we're talking about. Now, speaking of things that are kind of pricey, let's talk about Palantir stock. It's been one of the best performing stocks in the S&P 500 this year, but it took a plunge yesterday due to a double dose of negative news. The stock dropped 10% on Wednesday, and it's down another 6% so far this morning,

after it was reported that the Defense Secretary Pete Heg-Seth plans to cut military spending by 8% in each of the next five years. And that could be a direct hit to Palantir's business, because U.S. government contracts make up 64% of Palantir's U.S. revenue, according to the most recent quarterly earnings. And it's a fast-growing segment for Palantir with sales accelerating by 40% on an annual basis. Now, it's still possible that this is a knee-jerk reaction from the markets because there are no details on what exactly will be cut from the spending. We should have more details pretty soon. Now, the second piece of news that shook the stock is that Palantir CEO Alex Carp

has a new trading plan to sell over $1 billion worth of his shares over the next six months. Now, last year, Alex Carp sold nearly 41 million shares, cashing out a total of $1.9 billion, according to Barron's. Now, these trading plans are typical for CEOs, and they're meant to provide executives a way to sell shares in a pre-planned way that removes any bias or possibility of insider trading. But it still raises eyebrows when its CEO sells a large batch of stocks. This new trading plan by Alex Carp allows him to sell almost 10,000. million shares within the next six months. So that has the markets asking questions. Why is he

selling so much stock? Let's talk about some stocks making moves today. And we're going to cover two major earnings that came out this morning. Starting with Alibaba, their shares are on the rise this morning after the Chinese tech giant delivered strong profits from its cloud and e-commerce units. Their cloud revenue grew by 13% compared to a year ago. And AI-related products generated triple-digit revenue growth for the sixth straight quarter. Alibaba has emerged one of 2025's biggest AI winners so far after benefiting from the Deep Seek rally. They're making progress on their own AI models and also announced a partnership with Apple where their AI will be used in iPhones that are sold in China. As a result, Alibaba's stock is up

more than 10% today and it's up more than 60% since the start of the year. I mean, this stock has been on fire. Now on the flip side, shares of Walmart aren't doing so great this morning. Despite the world's largest retailer reporting strong revenues and profits in Q4 that beat Wall Street estimates. Revenues in Q4 were up 4% and operating income was up more than 8%. Walmart continues to grow their e-commerce business with U.S. sales up more than 20% thanks to upper income shoppers using store pickups and taking advantage of home deliveries. But despite a strong Q4, Walmart shares are down more than 5% this morning because of the company's weak guidance. Walmart executives expect sales to grow between 3 to 4% this year, which is lower than the 5% growth they saw last year.

The company blames an uncertain geopolitical landscape, especially the threat of tariffs. Now, two-thirds of what Walmart sales is made in the U.S., but if there are tariffs on Mexico and Canada, Walmart executives said that will impact their business. And I think that uncertainty has investors a bit worried about Walmart sending the stock lower this morning. But if you zoom out a bit, Walmart stock has gone up more than 75% over the last 12 months, making it a much better performer than Amazon. Let's wrap the show with a fun fact.

The highest grossing animated movie of all time now belongs to China. The Chinese animated movie Nezatou has made over $1.6 billion since coming out on January 29th, and it overtook Inside Out Two to become the highest animated movie of all time. Inside Out2 only held that title for like seven months. And what's crazy about Nezatou is that it's currently

the eighth highest grossing movie of all time, and it's the first non-English-speaking movie to be in the top ten. I think the bigger takeaway from me is that China no longer needs Hollywood. It looks like China's domestic movie production seems to be crushing it right now. And this could mean more bad news for Hollywood studios since the box office in the U.S. has struggled to rebound post-COVID, and now U.S. movies are facing increased competition at the Chinese box office from domestic Chinese movies. So yeah, not great news for Hollywood. Well, all right guys, that That's the rundown for today. Hope you guys enjoyed today's episode.

If you did and you have like 10 extra seconds, consider giving us a five-star rating on Apple or Spotify. Leave us a comment on Spotify, vote in today's Spotify poll. All that engagement really does help us out, and it helps other people find the show. Thank you guys again for listening. Shout out to Mike and Connor for all the help behind the scenes. And we'll see you guys back here tomorrow.

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