The seven largest stocks in the S&P 500 are igniting a remarkable rally, delivering a combined 92% return.
Expectations that the Magnificent 7 global technology companies will increase earnings due to the use of artificial intelligence are very significant to U.S. stock investors.
Due to their disproportionate weight in the index, the so-called 'Magnificent Seven' stocks—Apple Inc. (AAPL), Microsoft Corporation (MSFT), Alphabet Inc. (GOOGL), Amazon.com, Inc. (AMZN), NVIDIA Corporation (NVDA), Tesla, Inc. (TSLA), and Meta Platforms, Inc. (META)—have experienced significant rallies that have driven nearly all of the S&P 500's 12% year-over-year gain. The remaining 493 companies, on the other hand, have only grown by 5%, indicating a markedly unbalanced market.
This quarter, the AI-driven stock market boom was starting to weaken until Nvidia Corp.'s spectacular earnings reestablished the market. Early in September, Nvidia's stock price was close to all-time highs as data centre operators stocked up on the company's processors to handle the intensive workloads demanded by AI.
The S&P 500 is up around 12.5% in 2023, which is a notable recovery from the lows of 2022. Although this performance is excellent, recent research by stock market experts highlighted some rally-related concerns.
The Magnificent 7 Total Returns Index has surged by 93% in 2023, thanks to record earnings, and valuations are in line with their five-year averages.
Among the notable companies, Amazon, Tesla, Nvidia, and Alphabet all have price-to-forward-earnings ratios that are below their five-year averages when compared to the performance and values of the Magnificent 7 index. After experiencing a record-breaking stock decline last year, Meta is now back on track. Notably, Nvidia's stock is trading at a level two standard deviations below its typical valuation, as indicated by PEG ratios, while Microsoft is trading one standard deviation below. PEG ratios take long-term earnings growth projections into account.
The US economy is still expanding, and the S&P 500 index, which gauges the performance of US blue-chip stocks and serves as a benchmark for investors worldwide, has increased by more than 14% this year.
Since the 1970s, the S&P 500 index's performance has never been more concentrated. Seven of the largest components have surged higher this year, increasing by between 40% and 180%: Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta. Overall, the remaining 493 companies are stable. The index is completely dominated by large tech corporations. Almost a quarter of the market capitalization of the entire index is comprised of just five of those seven stocks. Apple alone is valued at $2.9 trillion, which is more than the top 100 UK-listed companies combined.
The chipmaker Nvidia has increased its market capitalization by $640 billion just this year by riding the wave of investor interest in artificial intelligence and ripping up its own revenue guidance for the upcoming quarters in favour of more optimistic predictions. The combined market value of the two largest US banks, JPMorgan and Bank of America, is virtually equal to that amount.
Sameer Samana, senior global market analyst at the Wells Fargo Investment Institute (WFII), said of the Magnificent Seven, "Everybody knows these individuals are going to make money." The only question is: How fast is that earnings growth, and have investors overpaid for it?"
In June, the Wells Fargo Investment Institute lowered the rating of the technology industry, which includes Apple, Microsoft, and Nvidia, to "neutral" from "favourable."
Results from Microsoft, Alphabet, Amazon, and Meta, the parent company of Facebook, are anticipated for the next week, while Apple and Nvidia will publish their results the following month.
Tajinder Dhillon, senior research analyst at LSEG, predicts that the S&P 500 as a whole will experience a 2.3% fall in 2023, compared to a 32.8% profit increase for the megacap businesses.
The steady rise in interest rates and Treasury yields, which has been fueled by a combination of Federal Reserve hawkishness in the face of a robust economy and concerns over the U.S. fiscal picture, complicates the outlook.
More positive is Goldman Sachs. This month, it raised its prediction for the S&P 500's end-of-year level, predicting that it would hit 4,500, a rise of 12.5% from its prior prediction and roughly 3% higher than where it was on Wednesday afternoon. If the bank is correct, this will be one of the index's best years in the past 20 years.
Investors attention will be focused on big tech earnings in the upcoming week as Amazon (AMZN), Alphabet (GOOGL), Meta (META), and Microsoft (MSFT) are scheduled to release their earnings reports.
Earnings Date: 24 October, 2023 (Tuesday)
Earnings Date: 24 October, 2023 (Tuesday)
Earnings Date: 25 October, 2023 (Wednesday)
Earnings Date: 26 October, 2023 (Thursday)
Tesla Megapack will power the open-source, solar-powered Bitcoin mining facility with Blockstream and Jack Dorsey's Block.
Block (previously Square) and Blockstream, a Bitcoin infrastructure business, are partnering with Tesla (TSLA) to build a Bitcoin mining operation that will demonstrate that BTC can be used to fund zero-emission power infrastructure.
The facility will be powered by Tesla's 3.8-megawatt solar PV array and its 12-megawatt-hour Megapack, and work on it has begun.
The facility's 30 petahashes per second mining hardware will be powered entirely by solar energy, thanks to a mix of Tesla photovoltaics and Megapack battery storage. The Bitcoin mining facility will be finished later this year, with Blockstream supplying the mining technology and expertise to design and operate the operation.
According to a press statement shared with Yahoo Finance, the $12 million project would generate 3.8 megawatts of renewable energy and display a publicly accessible performance dashboard once finished.
Climate activists, ESG investors, and Bitcoin miners continue to discuss the energy intensity of Bitcoin mining in the political realm. Part of the issue is that most of the data on mining energy use is still too fresh to offer historical context and is frequently self-reported.
The Cambridge Bitcoin Electricity Consumption Index found that Bitcoin's overall energy consumption (143 terawatt hours per year) is more than that of Ukraine, but it also admitted that comparing Bitcoin's energy consumption to a nation without extra context can be difficult.
Blockstream co-founder and CEO Adam Back, a British cryptographer and a cypherpunk crew member, told CNBC on the sidelines of the Bitcoin 2022 conference in Miami that the mining operation is intended to be a proof of concept for 100% renewable energy bitcoin mining at scale.
In a news statement, Adam Back, CEO and co-founder of Blockstream, said, "We are very happy to begin building this facility utilizing Tesla Solar and Megapack." "This is a step toward validating our premise that Bitcoin mining can support zero-emission power infrastructure while also fostering future economic growth."
The facility is expected to be finished "later this year." When it's up and running, a public dashboard will provide "real-time measures of the project's success, such as electricity generation and Bitcoin mined." The dashboard will be accessible "24 hours a day, seven days a week, from any browser, presenting the industry with a real-world, real-time case study of a zero-emission energy Bitcoin mine," according to the plan.
In an interview with CNBC, Back noted, "People like to dispute the numerous issues that have to do with Bitcoin mining." "Let's just prove it," we reasoned. Have an open dashboard so that anybody can play along, and perhaps it will alert more gamers to join in. "
The dashboard will be open to the public and will provide real-time information about the project's success, such as electricity generation and total bitcoin mined. According to the business, a future version of the dashboard would incorporate solar and storage performance data points.
Blockstream and Block, formerly known as Square, announced in June that they would work together to establish an open-source, solar-powered bitcoin mining facility in the United States.
A bitcoin is produced when powerful computers compete against one another to solve complicated mathematical riddles, a time-consuming process that presently relies heavily on fossil fuels.
In early 2021, Tesla spent $1.5 billion on Bitcoin. Shortly after, the company began accepting bitcoin as payment for new automobiles.
On the other hand, Tesla, on the other hand, took a step back with cryptocurrency a few days later by deleting the Bitcoin payment option. The businesses expressed worry about the Bitcoin network's energy requirements:
This was a worry echoed by many Tesla community members when Tesla originally revealed its Bitcoin investment, and many were outraged that the corporation hadn't considered it in the first place.
Tesla stated at the time that they were not selling their Bitcoin holdings and that they intended to begin accepting Bitcoin payments once the network had a larger proportion of renewable energy. Elon Musk, Tesla's CEO, stated last summer that he hoped the company would begin accepting Bitcoin payments if the energy mix of Bitcoin mining improved. That has yet to materialize, but Tesla is already actively involved in using sustainable energy to fuel Bitcoin mining.
The project is already under development, according to the firms. Once completed, they want to share performance data on a monthly basis to demonstrate the economics of powering crypto mining with renewable energy. In the United States, West Texas is a renewable energy powerhouse. However, much of the wind and solar energy in the state is located in isolated areas. There is no motive to invest in renewable infrastructure to harness this energy if there is no financial incentive.
Bitcoin miners are the people who create bitcoins. When these energy consumers co-locate with renewables, it generates a financial incentive for buildout while also improving the underlying economics of renewable power production, which has been volatile.
According to Castle Island Venture's Nic Carter, miners offer demand for these semi-stranded assets, making renewables in Texas commercially viable.
The restriction is that West Texas has around 34 gigatonnes of electricity, five gigatonnes of demand, and only 12 gigatonnes of transmission. Consider bitcoin miners to be short-term purchasers who keep energy assets operating until the grid can absorb them completely. Back stated that the off-grid mine, which is anticipated to be finished later this year, exemplifies another essential aspect of the bitcoin network: miners are location agnostic and can "perform it from anyplace without local infrastructure." Back stated that if the project is lucrative in its pilot stage, the firms would add wind power to the mix and grow the entire project.
"You're calculating the ideal economic mix of solar and storage," Back explained. "There are 3.8 megawatts of solar and one megawatt of mining, so you can see you need to overprovision since peak solar input changes over the day and, of course, it's not there at night."
Adding wind to the mix, on the other hand, would lower total expenses and help balance out the downtime caused by solar.
Sen. Elizabeth Warren (D-MA) is one of the most outspoken critics of the Bitcoin mining sector in the United States. Warren and other senators addressed a letter to several prominent Bitcoin-mining businesses in late January, voicing concerns about their energy use and highlighting how Bitcoin's overall energy consumption increased between 2019 and 2021.
According to Ark Invest research, the mining sector generates 76 percent of its electricity from renewable sources, making it significantly more renewable than the overall US energy system and beneficial for recovering otherwise squandered natural gas.
Block's global ESG lead and project lead for Block's Bitcoin Clean Energy Initiative, said Neil Jorgensen. "By partnering on this full-stack, 100 percent solar-powered bitcoin mining initiative with Blockstream, we want to further accelerate bitcoin's synergy with renewables.".
Tesla had a strong first quarter of 2022, setting a new all-time record for deliveries and beating the previous peak.
Tesla stated earlier today that it manufactured over 305,000 vehicles and delivered over 310,000 vehicles in the first quarter of 2022, despite continued supply chain problems and production shutdowns.
Tesla will release its fiscal results for the first quarter of 2022 after the market closes on Wednesday, April 20, 2022.
Tesla produced more all-electric vehicles in the first quarter than any of the twelve analysts polled by Bloomberg yesterday. According to estimates, Tesla would deliver 309,158 automobiles globally from its three operational manufacturing locations. Tesla's Model S, 3, X, and Y are now manufactured in Fremont, California. Internationally, Tesla's Shanghai factory manufactures the Model 3 and Model Y, while its newest unit in Germany, known as Gigafactory Berlin, manufactures the Model Y.
Tesla Model 3 and Model Y car deliveries accounted for 95 percent, or 295,324, of total deliveries in the first quarter of 2022, according to Tesla. Tesla manufactured 14,218 Model S and X automobiles and delivered 14,724. The total number of cars manufactured and delivered was 305,407 and 310,048 respectively.
The automaker cited "ongoing supply chain problems and facility shutdowns" for producing 4,641 fewer cars than it shipped during the quarter.
According to FactSet projections as of March 31, analysts predicted 317,000 car deliveries in the first three months of 2022. The forecasts varied from a low of 278,000 to a high of 357,000 car deliveries.
Tesla shipped 184,800 electric vehicles and built 180,338 units over the same period last year.
Despite a sluggish automobile industry, Tesla defied all expectations and achieved significant year-over-year growth. Tesla experienced a 93.2 percent increase in car sales during this time period, while the other major manufacturers all experienced losses of at least 5.9 percent. suffered a significant loss of 27.6 percent, GM suffered a loss of 16.5 percent, and Volkswagen suffered the greatest loss of 44.3 percent.
Despite rising vehicle costs owing to "inflation pressure," Tesla reported a strong first-quarter performance. Elon Musk, CEO of Tesla, stated that both Tesla and SpaceX were suffering from the effects of inflation, which would affect the cost of their products. Tesla raised the prices of its automobiles by up to $12,500, but buyers were unable to resist. Indeed, as a result of rising gasoline prices, Tesla reported a 100 percent increase in order volume in some areas of the United States.
For the first time in its history, Tesla is on track to deliver 1,000,000 automobiles in a single year. With over 936,000 deliveries between Fremont and Shanghai in 2021, Tesla is almost one-third of the way there in 2022. With Gigafactory Berlin starting deliveries and Gigafactory Texas getting closer to turning over its first cars to customers, Tesla is well-positioned to deliver 1,000,000 vehicles with the four operating factories. However, there may be some unanticipated complications linked to production halts since the Shanghai facility took a temporary break from manufacturing activities. The company was scheduled to resume production on April 2.
Deliveries are the closest approximation to Tesla's reported sales figures. On March 22, the firm held a ribbon-cutting event to commemorate the opening of a new facility in Brandenburg, Germany. On April 7, Tesla plans to hold a grand opening and "cyber rodeo" event at another new vehicle assembly factory it is developing in Austin, Texas. Tesla formally relocated its headquarters to Austin on December 1, although it continues to run its first electric car manufacturing facility in Fremont, California.
As a result of the Ukraine conflict, gas prices are likely to increase, boosting demand for electric cars. However, economists say that a scarcity of inventory and increased vehicle pricing would limit sales.
After Musk warned the US electric automaker was suffering from considerable inflationary pressure in raw materials and logistics as a result of Russia's invasion of Ukraine, Tesla hiked prices in China and the United States in March.
"Impressive (delivery) given all the challenges," said Gene Munster, managing partner at Loup Ventures, who added that Tesla will continue to outpace other manufacturers in terms of sales growth.
Colin Langan, an auto analyst at Wells Fargo, told Yahoo! Finance in January 2022 that he was a little short of Tesla's projection of 50% growth.
I'm a little short of their 50% growth prediction. By the second half of the year, I expect it to be difficult. It's possible that they won't be tested if there isn't enough up semi supply for them to produce 50% growth. "
He went on to say that he doubted Tesla's ability to sell cars, and his model mirrored that sentiment. Morgan Stanley was also worried, particularly about Giga Berlin. Tesla, on the other hand, has proven itself once again, and once Giga Austin begins production, Tesla will have four facilities producing entirely electric automobiles throughout the world.
In October, Musk said that Shanghai had surpassed the production of the company's original facility in Fremont, California. Because production at Tesla's new facilities is projected to ramp up slowly in their first year, the two factories are key to the company's objective of increasing deliveries by 50% this year.
Tesla began shipping cars built at its Gruenheide, Germany, facility in March, and deliveries of cars made at its Austin, Texas, plant are expected to begin soon.
Tesla's stock jumped after the firm said this week that it would seek investor permission to expand its share count in order to allow for a stock split. So far this year, Tesla's stock has climbed around 3%, while GM and Ford's stock have fallen.
Tesla's operations were hampered globally during the quarter, which ended March 31, by a COVID spike and new health regulations in China, which necessitated temporary production halts at its Shanghai factory. Tesla delivered 308,600 electric vehicles in the fourth quarter, a new high for the firm.
Tesla, like the rest of the car industry, has been harmed by widespread parts shortages and rising prices. After Russia invaded Ukraine in February, critical components like semiconductors are still in limited supply, and prices for raw materials like nickel and aluminum have risen. Tesla has been keeping consumers waiting for months in the United States before fulfilling their automobile purchases.
According to some analysts, Tesla might sell 2 million vehicles in 2022, now that a facility near Berlin has begun producing the Model Y for European consumers, posing a threat to German carmakers that now dominate the luxury market. Tesla sells many more electric vehicles than any other automaker, and battery-powered vehicles are outpacing all other vehicle categories. As fuel costs rise and remain high, sales of those automobiles may rise much more. According to Wall Street, Tesla's $1 trillion market cap indicates that it is on course to dominate the industry, too.
Tesla intends to split its stock in order to pay a stock dividend to investors.
According to a filing with the Securities and Exchange Commission, Tesla, Inc. the electric vehicle manufacturer will request at its annual shareholders meeting to split its stock so that it may pay a stock dividend to stockholders. For the second time in two years, the corporation is seeking its shareholders' approval to split its stock.
This split would take the form of a dividend, with stockholders receiving more shares. Shareholders would essentially get a special dividend of extra shares for each share they already possess. The majority of dividends are paid in cash to investors. Stock dividends are significantly more similar to stock splits than cash dividends. The electric vehicle manufacturer did not specify how many shares investors would receive. Its previous split in August 2020 awarded stockholders five shares for every share owned.
A stock dividend is a dividend paid to shareholders in the form of extra business shares rather than cash. Dividends have no effect on a company's worth, but they dilute its share price. In other words, if there is a 6-for-1 split, investors will get a stock dividend of five shares for every share of Tesla they own. This would be a one-time occurrence.
The date of this year's shareholders meeting, at which the proposal will be voted on, has yet to be announced. Therefore, the timing of the Tesla split remains unknown. The shareholders' meeting was conducted on October 7 last year.
Stock splits do not have a significant impact on a company's value. However, by lowering the price at which shareholders must pay to purchase a single share, they may actually raise demand and therefore the price. When Tesla announced its first stock split in August 2020, it was a 5 to 1 deal. At this moment, it's unclear what kind of split would be suggested for shareholders. The annual meeting of Tesla is normally held in June.
Tesla's stock rose 12.6 percent on the day that its last five-for-one split went into effect. Since then, the stock has more than doubled in value. However, the split occurred in the midst of Tesla's record run, which saw the stock rise 743 percent in 2020.
“Given how well the stock has performed since the previous split, "given how well the stock has performed since the previous split,” said Dan Ives, a Wedbush Securities tech analyst.
Tesla is still a small company compared to other well-known automakers. However, Tesla's quick development the firm expects yearly sales to soar by 50% or more and the expectation that the company would profit from an industry-wide move away from internal combustion engines and toward electric vehicles have spurred remarkable market value gains. Tesla's stock has risen 1884 percent through Friday's closing since October 2019, when the company went from a string of quarterly losses to an unexpected profit. Tesla is currently worth more than the total market capitalization of the world's top 13 manufacturers.
Wedbush Securities analyst Dan Ives has approved the fresh split plan. "We regard Tesla's plan to join the likes of Amazon, Google, and Apple in commencing its second stock split in two years as a wise strategic move that will be a positive driver for shares moving ahead," he said.
In theory, a stock split should not cause shares to rise prior to the split because the company's value has not changed. However, there are other hypotheses as to why a stock split could increase its value. For one thing, if the shares were cheaper, more individual investors would be able to purchase and own shares of the stock, broadening the base of ownership.
Another hypothesis is that when a stock divides, such as when Tesla's stock splits, it is more readily added to various indexes such as the S&P 500 or Nasdaq 100, resulting in more shares being acquired by fund managers who model their portfolios on these indexes. Another idea holds that lower share prices enable lower option pricing in the thriving derivatives market, where retail traders and the Wall Street Bets community are active participants.
When stocks split, the markets quickly react, adjusting the stock price so that investors have the same total amount of value despite holding additional shares, each of which is less valuable. However, whether the same holds true for stock dividends is dependent on the market's efficiency. If the market reacts precisely to changes in supply, prices should adjust proportionately, making a stock dividend equivalent to a tiny stock split, with no actual value flowing to investors, unlike a cash dividend. However, if the market reacts differently to a smaller increase in share supply than to a bigger rise in share supply, owners may be better off. It will be interesting to see if these stock dividends genuinely assist investors.
Tesla acknowledged in a tweet earlier Monday that it was seeking authorization from shareholders to split the stock
Tesla supercharging station will take Dogecoin as payment.
On Saturday, Elon Musk, CEO of Tesla and SpaceX, revealed on Twitter that the company's supercharging station will take Dogecoin as payment.
Elon Musk has not specified what users will be able to pay for with the cryptocurrency. Some speculate that Tesla supercharger stations would take dogecoin, while others view Musk's post as referring specifically to the forthcoming Hollywood café and drive-in cinema.
However, this news has had little impact on the price of dogecoin. Dogecoin was trading around $0.1416 at the time of Musk's post. While the price rose slightly to $0.1452, it then dropped to $0.1412.
Nonetheless, advocates of Dogecoin applaud Musk's effort to expand the parody cryptocurrency's popularity. Musk, a strong supporter of both Doge and Bitcoin, has long hinted about using Doge as a payment mechanism across several aspects of Tesla's operations. Doge is accepted at the company's online store, and there have been rumors that Tesla would accept the cryptocurrency as a means of payment for its automobiles in the future.
Last year, Musk stated that because Bitcoin mining is "moving towards sustainable energy," his business would likely begin taking Bitcoin as payment for its electric vehicles. Musk claims that if he determines that Bitcoin mining uses 50% or more renewable energy, Tesla will resume accepting payments.
Due to worries over the usage of fossil fuels in mining, the digital currency was halted in May 2021 due to worries over the digital currency's plummet.
In a tweet on Thursday, he expressed concern about the "huge usage" of coal and other carbon-intensive energies to create the electricity needed to mine digital currency. Tesla said in February of last year that it had acquired $1.5 billion in Bitcoin and planned to accept it as payment, sparking a spike in both the company's stock and the currency.
In a recent interview, he also backed Dogecoin over any other crypto currency.
"The transaction value of Bitcoin is low, and the cost per transaction is high. At least on a spatial level, it is appropriate as a value-storage medium. But, at its core, Bitcoin is not a good alternative for transactional currency, "he added, adding that, despite its origins as a joke, Dogecoin is better suited for transactions.
Musk tweeted in January saying that Tesla would take Dogecoin as payment for some Tesla merchandise.
Musk then attempted to persuade McDonald's to embrace DOGE by eating a Happy Meal on television. Read more here.
Musk also acknowledged that, in addition to Tesla's investment, he has a sizable personal bitcoin position, as well as lesser Ethereum and Dogecoin holdings.