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Quarterly Activities Report to 31 December 2023
January 30, 2024
SensOre Limited (ASX: S3N or the Company), soon to be renamed Premier1 Lithium (ASX:P1L), is focused on tapping into the potential of Western Australia’s renowned lithium reserves. Its strategic exploration approach in this world-class mining jurisdiction is driven by a commitment to uncover valuable resources efficiently and effectively.
Highlights
- Capital Raising - $3m placement to new and existing institutions and sophisticated investors
- Demerger of technology business unit via in-specie distribution which took effect January 2024 Exploration gathering momentum:
- Abbotts North – Soil results at Abbotts North expanded the potential area of prospectivity
- Heritage survey successfully completed in December 2024 at Abbotts North
- Contract for RC drilling signed with Precision Exploration Drilling Pty Ltd
- Yalgoo – Tenure added with new farm-n signed with Firetail Resources
- Other Li Projects – Advanced data analysis and field programs on all projects Corporate – the SensOre board was reconstituted on 25 January 2024
- Abbotts North – Soil results at Abbotts North expanded the potential area of prospectivity
- Cash balance at 31 December 2023 $0.53m prior to proceeds of $3m raise received January 2024
Exploration
SensOre is working on a pipeline of promising lithium projects with Abbotts North being the premier exploration project hosting outcropping lithium bearing pegmatites.
Safety and Environment
SensOre conducted field exploration activity with no reportable ESG related incidents in the quarter.
Abbotts North Project
All heritage and environmental approvals are on track to facilitate first pass drilling in February 2024 with site mobilisation scheduled for 29 January 2024. Drilling will be undertaken by Precision Drilling Pty Ltd. The RC program is designed to drill test a series of outcropping lithium bearing pegmatite units along ~500-600m of strike length within the main Buttamiah Prospect area. The pegmatites show previously reported grades of up to 1.25% Li2O at surface. Approximately 2,000m of RC drilling is planned to test for lithium mineralisation continuity at depth and assess pegmatite scale, geometry and mineralogy.
Abbotts North Lithium Project
SensOre has also completed the first pass lithium targeted soil geochemistry program at the Abbotts North project for a total of 600 samples. Factor analysis (FA) was employed at Abbotts North with the purpose of identifying multielement signatures within the soil assay samples which may be indicative of Li mineralisation. The work was successful in identifying spatial and geochemical associations between lithium mineralisation and mapped geology. The results from the soil survey highlighted new areas of interest with anomalous responses comparable to the geochemical signature over the main lithium bearing pegmatite field. The soil anomalism also correlates with prominent structural contacts and corridors.
Click here for the full ASX Release
This article includes content from SensOre, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
S3N:AU
28 June
Pointerra Awarded US$1.63 Million US DOE Contract
Pointerra Limited (ASX: 3DP, “Pointerra” or “the Company”) is pleased to announce that it has been awarded a US$1.63 million (A$2.47 million) contract by the US Department of Energy (DOE) for an R&D program (Program), collaborating with select Northeast US region electric utilities and university partners.
Highlights
- The US Department of Energy (DOE) awards Pointerra a US$1.63 million contract for a Program to model a range of electric grid resilience investment scenarios by electric utilities
- The Program will use Pointerra3D to evaluate the impacts of various grid resilience investments under forecasted climate change scenarios, providing a best practice approach to determine optimal resilience investments
- The best practice approach is intended to be scalable across multiple regions throughout North America
Program Details
Pointerra has been selected to collaborate with three electric utilities (Avangrid, Eversource, and National Grid) and three university partners (Cornell University, University at Albany - State University of New York, and the University of Connecticut), to develop a comprehensive risk assessment model and economic analysis that will help electric utilities optimise their resource allocation, reduce the frequency and severity of power outages, and enhance the overall resilience of the power grid.
The purpose of the Program is to help electric utility companies in the Northeast of the US develop a cost-benefit methodology that enables them to assess the long-term resilience value of certain grid resilience investments, including asset hardening, vegetation management, and line undergrounding activities.
Pointerra will acquire and process 2D and 3D data to build digital twins of circuits in the service territories of the utility partners in Pointerra3D. The Program will then use Pointerra3D to develop a dynamic risk assessment model that provides scenario analysis capabilities to evaluate the impacts of various grid resilience investments under forecasted climate change scenarios. Finally, the Program will perform a cost-benefit analysis to evaluate outage reduction efficiency of various resilience investment strategies.
The award of this contract, leading a high-profile group of electric utilities and universities enhances Pointerra's visibility and credibility in the US electric utility sector. The Program results will produce a best practice approach that the DOE intends to be scalable across multiple regions throughout North America.
This will provide Pointerra invaluable exposure and validation of its Pointerra3D digital twin solution for the US electric utility sector, which is collectively engaged in multi-billion dollar, multi-year grid resilience programs.
Click here for the full ASX Release
This article includes content from Pointerra Limited, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
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13 May
Tech Unicorns in Australia (Updated 2024)
Aussies are a pretty tech-savvy bunch, and this business is key to the country's economy.
Australia has created its fair share of tech unicorns in recent years. But what exactly does that mean?
The term "tech unicorn" is thought to have first been coined by a venture capitalist named Aileen Lee in California back in 2013. It refers to a privately held startup company whose value exceeds $1 billion.
There are more than 600 unicorns that have gained entry into this relatively exclusive club, including the likes of the now-public Reddit (NYSE:RDDT), Bytedance, SpaceX, Stripe, SHEIN, Ola Cabs and Patreon.
Australia's tech unicorn landscape
Australia has a reputation for being home to small businesses and startups. Notable examples of Aussie ingenuity include Google Maps, black box flight recorders and cochlear implants. However, while the country has produced successful small to medium enterprises like Atlassian (NASDAQ:TEAM) and buy now, pay later business Zip (ASX:ZIP), experts believe a lack of resources is preventing the country from producing more internationally successful tech firms.
In fact, at the time of publication, a list of more than 1,200 tech unicorns included just nine from Australia. Leaders in the space are the US with roughly 54 percent of the constituents and China with 14 percent, followed by India with nearly 6 percent and the UK with a bit more than 4 percent.
Given that Australia has the 13th largest economy globally, with 2,589,873 actively trading businesses in the nation's economy as of June 2023, there is potential to grow.
What are Australia's noteworthy tech unicorns?
Although Australia is a relatively small market compared to North America and Europe, it currently has eight tech unicorns, as per the CB Insights list mentioned above. They are:
- Canva — A DIY graphic design app created by Melanie Perkins, Cliff Obrecht and Cameron Adams; it debuted as a tech unicorn in January 2018. At the time of publication, Canva was the seventh most valuable company on the CB Insights list with a market worth of AU$25.4 billion. Select investors in the company include Sequoia Capital China, Blackbird Ventures and Matrix Partners.
- Airwallex — Currently based in Sydney, Airwallex was founded in Melbourne and became the fastest Aussie startup to achieve unicorn status when it was added to the list in March 2019. Valued at AU$5.5 billion, it offers competition to the big banks with cheaper solutions for international payments. Investors include DST Global, Sequoia Capital China and Tencent Holdings (OTC Pink:TCTZF,HKEX:0700).
- Immutable — With a market worth of AU$2.5 billion, Sydney-based fintech business Immutable is focused on asset ownership and commerce in the digital gaming world. It utilises ImmutableX, its NFT minting and trading platform. Its investors include Fabric Ventures, AirTree Ventures and Temasek.
- Go1 — Go1 has a market worth of AU$2 billion and operates in the online learning and education sector. It’s based in Brisbane and its investors include Y Combinator, M12 and SEEK.
- SafetyCulture — Founded in Townsville by CEO Luke Anear, SafetyCulture has provided occupational health and safety and compliance documents since 2004. The company has 65,000 customers performing 600 million checks per year and a valuation of AU$1.7 billion. Blackbird Ventures, IndexVentures and Tiger Global Management are a few of the key investors in the company.
- Employment Hero — This tech firm offers online human resources software for enterprises, with functions such as payroll, employee benefits and retirement, employment contracts and accounting. The company has a valuation of AU$1.37 billion, and its biggest backers are OneVentures, AirTree Ventures and AMP New Ventures.
- Culture Amp — Culture Amp describes itself as an “employee experience platform,” helping over 6,000 companies around the world increase employee retention and engagement. Its customers include the aforementioned Canva, as well as Etsy (NASDAQ:ETSY), Oracle (NYSE:ORCL) and McDonald’s (NYSE:MCD). Culture Amp has a valuation of AU$1.5 billion and its investors include Blackbird Ventures, IndexVentures and Felicis Ventures.
- LinkTree — LinkTree has headquarters in both Melbourne and Sydney. It operates as a landing page where a company or individual can insert all of their relevant social media links, rather than having to link to them all individually on their own page. It has a market value of AU$1.3 billion and its investors include AirTree Ventures, Insight Partners and Index Ventures.
- Pet Circle — Finally, Pet Circle, added to the list in December 2021, is the largest online pet shop in Australia. It has a market value of AU$1 billion and Prysm Capital, Baillie Gifford & Co. and TDM Growth Partners are among its investors.
What about Australia's tech "soonicorns"?
Beyond the tech unicorns mentioned above, there are a number of Aussie startups worth keeping an eye on. Dubbed "emerging unicorns" by data business Crunchbase, these businesses are on their way to full unicorn status. Some examples include:
- Zeller — One of Australia’s fastest growing fintech enterprises, the company provides a payments and financial services solution that allows businesses to accept and make payments. Its leading investor is global venture capital firm Headline.
- Cover Genius — This insuretech firm offers an insurance distribution platform designed to protect e-commerce and travel customers. European VC Dawn Capital is one the company’s biggest investors.
How to identify potential Australian tech unicorns?
Tech unicorns tend to fall into four major categories: fintech, e-commerce, artificial intelligence/robotics and health. It is difficult to predict when a new one will emerge, but investors can keep an ear to the ground by researching media coverage and Australian Securities and Investments Commission filings.
Unicorns can also create a new niche. While some seek to solve an existing problem, many are the first to market. Looking at businesses with rapid growt potential and analysing the rate at which a business brings in new users can be useful — high growth is often the path to a high valuation.
What is the future for tech unicorns in Australia?
Australia is still lacking the right "ecosystem" for propelling big startups, according to a report from Startup Genome, which tracks the top 40 cities in a global startup ecosystem ranking.
Only two Australian cities made the list — Sydney ranked the highest at 20th, with Melbourne trailing at 36th. Sydney is Oceania’s biggest ecosystem, according to Genome, with the majority of Australia’s tech startups based in the city. Time will tell whether a post-pandemic Australia strives for new heights or remains low on the tech unicorn totem pole.
This is an updated version of an article first published by the Investing News Network in 2021.
Don't forget to follow @INN_Australia for real-time updates!
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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06 May
Technology Stocks: 10 Biggest Companies in 2024
Technology has become inescapable in everyday life, and the top tech companies are advancing in many sectors, from computer hardware and software to cleantech to artificial intelligence (AI) and more.
Major moves from the tech industry's giants have been reflected in growing stock valuations.
In 2018, Apple (NASDAQ:AAPL) became the first publicly traded company to reach a US$1 trillion valuation, and Microsoft (NASDAQ:MSFT) passed the US$1 trillion mark in 2019. Since then, both of these tech behemoths have gone on to reach further gargantuan valuations, in large part due to their advancements in AI technology.
Apple became the first company to surpass a market cap of US$3 trillion in June 2023, and it was followed by Microsoft in January 2024. As of mid-April, both Amazon (NASDAQ:AMZN) and Google holding company Alphabet (NASDAQ:GOOGL) were on the verge of overtaking US$2 trillion in market valuations as well.
Top technology stocks
Below the Investing News Network takes a look at the 10 largest tech companies globally, according to market capitalization. All numbers and figures for the tech companies listed were correct as of April 17, 2024.
1. Microsoft (NASDAQ:MSFT)
Market cap: US$3.06 trillion
Founded in 1975, Microsoft is well versed in hardware and software. Its hardware lineup consists of its flagship Surface brand, which is a competitor for Microsoft’s archrival Apple and its iPad Pros and MacBooks.
The company’s software portfolio has always been a strong focus. That includes its computer operating system, where Microsoft's Windows 11 debuted in Q4 2021, as well as its Windows Server. Furthermore, Microsoft has been targeting business users with its productivity suite, which includes the Office and Cloud platforms. These, along with its Azure platform, which includes machine learning and AI, have become major revenue generators for the tech giant.
Early last year, Microsoft announced "a multiyear, multibillion dollar investment" in privately held OpenAI to help the AI research lab with ChatGPT, its ultra-powerful AI chatbot. In April, the company announced plans to invest US$1.5 billion in United Arab Emirates-based AI tech holding company G42. The collaboration will see G42 run its AI applications and services on Microsoft Azure so the partners can deliver advanced AI solutions to clients. The partnership also includes establishing advanced AI and digital infrastructure in the Middle Eastern, Central Asian and African regions.
2. Apple (NASDAQ:AAPL)
Market cap: US$2.6 trillion
Next on this top technology stocks list is Apple. Since the company shot to fame with the Macintosh computer in 1984, its hardware portfolio has expanded to include items like the iPhone, iPad, Apple Watch and Apple TV. The company also has a wide range of digital services, such as the App Store, Apple Music, Apple Pay and iCloud.
According to Statista, Apple’s digital services segment raked in all-time high revenues of US$23.12 billion during the first quarter of its 2024 fiscal year; that's compared to US$20.77 billion for the previous year.
3. NVIDIA (NASDAQ:NVDA)
Market cap: US$2.13 trillion
NVIDIA, the inventor of the graphics processing unit (GPU), creates interactive graphics on laptops, workstations, mobile devices, notebooks, PCs and more. Alongside GPUs, NVIDIA offers processing capabilities to scientific researchers with supercomputing sites across the globe. The primary arms of NVIDIA’s business model are in gaming (including its cloud gaming service GeForce Now), automotive electronics, mobile devices and more recently AI.
The company’s major competitors are Advanced Micro Devices (NASDAQ:AMD), Intel (NASDAQ:INTC) and Qualcomm (NASDAQ:QCOM). NVIDIA is working with Meta Platforms (NASDAQ:META) to build the latter’s AI supercomputer, which the former expects will be the largest NVIDIA DGX A100 customer system to date.
The company is also working with Dell Technologies (NYSE:DELL) on more AI offerings for enterprises, including the new Dell AI Factory. "AI factories are central to creating intelligence on an industrial scale," said NVIDIA founder and CEO Jensen Huang in a March press release. "Together, NVIDIA and Dell are helping enterprises create AI factories to turn their proprietary data into powerful insights."
4. Alphabet (NASDAQ:GOOGL)
Market cap: US$1.94 trillion
Alphabet, the holding company of internet search giant Google, operates through multiple brands via a portfolio of companies. Some of the companies under Alphabet are Calico, GV, Capital G, Verily, Waymo, X and Google Fiber.
Founded in 1998 as a search engine, Google quickly became a household name with numerous products under its vertical. The list now includes Google Pay, Google Cloud, Android, Google Maps and YouTube.
In November 2021, Alphabet briefly broke through the US$2 trillion market cap level and the company looks set to do it again soon. Its revenues have been growing steadily for years. The tech firm's revenue for the 12 months ended on December 31, 2023, came to US$307.4 billion, up 8.68 percent year-on-year.
5. Amazon (NASDAQ:AMZN)
Market cap: US$1.88 trillion
Founded in 1994, Amazon has evolved from its start as an online retailer to become a tech monolith through its Amazon Web Services (AWS) platform. While Amazon is still a dominant force in web-based sales, AWS offers a broad range of services for computing, storage, databases, networking, analytics, machine learning and AI, among others. Furthermore, Fire TV, Amazon’s streaming platform, had sold more than 200 million streaming devices worldwide as of March 2023.
Amazon's Internet of Things (IoT) service, called AWS IoT FleetWise, allows automakers to collect, transform and transfer vehicle data to the cloud in near-real time more efficiently and cost effectively than was previously available. The data can then be organized and standardized for analysis in the cloud.
AWS' Q4 2023 revenue was US$24.2 billion, up 13 percent from the same quarter the previous year. This growth pattern over the past few years has allowed AWS to crack an annualized revenue run rate of US$100 billion.
6. Meta Platforms (NASDAQ:META)
Market cap: US$1.25 trillion
Meta Platforms, the parent company of social media giant Facebook, occupies the sixth spot on this list. Its product suite — which also includes Instagram, Messenger, WhatsApp and Meta Quest — connects more than 3.59 billion users.
Meta shared early versions of its Llama 3 AI language model in April, along with a new real-time image generator. Both will be integrated into its Meta AI virtual assistant as the tech company tries to compete with its peers in the generative AI space.
7. Taiwan Semiconductor Manufacturing Company (NYSE:TSM,TPE:2330)
Market cap: US$718.23 billion
Taiwan Semiconductor Manufacturing Company was born in the late 1980s as a semiconductor innovator. Since then, it's spawned a tech division focused on automotive tech, AI and 5G applications, plus wearable tech and mobile platforms.
The company's net revenues for the first quarter of 2024 came in at 592.64 billion New Taiwan dollars (US$18.87 billion at the time of the announcement), up 16.5 percent from the year prior. The increase in net profit was driven by a boom in demand for advanced chips used in AI applications.
8. Broadcom (NASDAQ:AVGO)
Market cap: US$599.96 billion
Broadcom, another global semiconductor giant, offers a number of embedded and mainframe security solutions, including payment authentication software and the Symantec Enterprise Cloud suite of integrated cybersecurity software.
Broadcom bolstered its infrastructure software capabilities with the acquisition of VMWare in late 2023. “Broadcom's focus moving forward is to enable enterprise customers to create and modernize their private and hybrid cloud environments,” states a press release from the company. “At the core, Broadcom will invest in VMware Cloud Foundation, the software stack that serves as the foundation of private and hybrid clouds.”
The company’s Symantec division has a partnership with Google Cloud to embed generative AI into the Symantec Security platform to help customers prevent cyber attacks.
9. Tesla (NASDAQ:TSLA)
Market cap: US$497.24 billion
Tesla is one of the world’s most influential tech companies. Aside from focusing on the electric vehicle (EV) market, the company is also innovating in AI, robotics, autonomous vehicles and energy storage. The company has a partnership with Panasonic (OTC Pink:PCRFF,TSE:6752) to produce lithium-ion batteries for its EVs.
Tesla’s EV sales grew by more than 37 percent in 2023 over the previous year to reach more than 1,808,590 units delivered. Still, Tesla's market cap lost nearly 17 percent of its value from April 17, 2023 to April 17, 2024. Several market factors are responsible for the decline decline, including an expected drop in EV sales as a global recession sets in.
10. Samsung Electronics (KRX:005930)
Market cap: US$379.32 billion
Samsung Electronicsis the 10th largest tech company in the world. Founded in 1938, it originated as a grocery trading store. It then focused on the textiles industry after the Korean War ended in 1953, and 1969 was when it first entered the electronics industry. It is now among the largest electronics manufacturers in the world.
In addition to products such as tablets, smartphones, watches and even appliances, Samsung operates a semiconductor business, developing chips and smartphone application processors.
Its most recent product brought to market is the LPDDR5X DRAM, which it says is optimized for AI application and has the smallest chip size among existing LPDDRs. “As demand for low-power, high-performance memory increases, LPDDR DRAM is expected to expand its applications from mainly mobile to other areas that traditionally require higher performance and reliability such as PCs, accelerators, servers and automobiles,” said YongCheol Bae, executive vice president of memory product planning in Samsung's Memory Business.
Don’t forget to follow us @INN_Technology for real-time news updates!
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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20 March
Reddit Prices IPO at US$34 per Share — What to Know as Trading Begins
Reddit, one of the internet’s most popular discussion forums, is poised to make waves with its much-anticipated initial public offering (IPO) and trading debut, set to happen on Thursday (March 21).
The San Francisco-based company intends to list 22 million shares on the stock market at US$34 each, the high end of its anticipated range of US$31 to US$34. Reddit itself will sell 15.28 million shares, while its existing shareholders will sell 6.72 million shares; the company will not receive proceeds from shares sold by existing shareholders.
Reddit will trade on the New York Stock Exchange under the symbol RDDT.
Leading up to the news, reports suggested that Reddit's IPO was four to five times oversubscribed, indicating strong investor interest and positioning the company to reach the US$6.5 billion valuation it was hoping to achieve.
Founded in 2005, Reddit has evolved into a diverse platform hosting myriad discussions across over 100,000 active forums; called "subreddits," each of these niche areas focuses on its own topic. Reddit’s unique approach to community-driven content distinguishes it from traditional social media platforms.
Reddit has deviated from the usual IPO practice by reserving 8 percent of its shares for board members, employees, users and moderators. Only users, or “Redditors,” with established accounts as of January 1, 2024, will qualify, and shares will be allocated based on contributions and engagement metrics. These shares won’t be subject to lockup.
Despite its prominence, Reddit's IPO journey has been marked by deliberation, and the company's delayed entry into the public market has prompted questions about its strategy and long-term vision.
Reddit's association with events like the GameStop (NYSE:GME) short squeeze in January 2021 has also raised speculation about how the company's IPO will fare. Thousands of Redditors in the WallStreetBets subreddit played an integral role in causing GameStop's share price to skyrocket, leaving short sellers with major losses.
WallStreetBets participants have created volatility for other "meme stocks" as well. For now, it remains to be seen whether the company's own shares will be affected by these dynamics after listing.
However, it's worth noting that some Reddit users aren't thrilled about the IPO, or about the company's 2023 move to begin charging for API access. This decision forced the closure of popular third-party apps — some of which offered important accessibility features — and caused mass protests on the platform.
Jordan Zazzara, a moderator of WallStreetBets, plans to observe Reddit's performance before deciding whether to purchase shares of the company. “Not because I’m not generally optimistic about Reddit as a business, but because I’m sure it’s going to be volatile,” Zazzara told Bloomberg in an email.
There are also concerns regarding the viability of the company as a whole. Since its launch in 2005, Reddit has yet to have a profitable year, as per the Associated Press. This is compounded by the fact that user growth has stalled — IPO papers from Reddit state that its 500 million monthly users have not grown for the past three years.
On the flip side, Reddit CEO Steve Huffman remains optimistic about the future. Reddit recently unveiled a US$60 million partnership with Google focused on providing the tech giant with content it can use to train artificial intelligence models.
“I have never been more excited about Reddit’s future than I am right now,” Huffman wrote in the IPO papers. “... As the world becomes increasingly data-driven, we offer solutions that are human and experience-focused. We expect our data advantage and intellectual property to continue to be a key element in the training of future (large language models).”
Don't forget to follow us @INN_Technology for real-time updates!
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
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14 March
Should You Invest in the Magnificent 7?
The so-called "Magnificent 7" stocks have been a hot topic of discussion among investors and financial professionals, with their market activity and record-breaking performances being closely monitored.
However, amid this unprecedented rally, concerns about a potential market drop or correction are looming large as investors try to assess whether the current conditions are sustainable or a harbinger of future volatility.
In this article, the Investing News Network (INN) will explore the topic of the Magnificent 7 and its impact on the stock market and the broader economy.
Who are the Magnificent 7?
The term "Magnificent 7" was coined in 2023 by Bank of America analyst Michael Hartnett (although some give credit to Mike O'Rourke of Jones Trading), and refers to the seven large-cap tech stocks that came to dominate the markets in the final weeks of 2023 — namely, Apple, Meta Platforms, Nvidia, Tesla, Amazon, Microsoft and Alphabet, the parent company of Google.
The term is now a common moniker in the financial world. Daily reports on the companies' market activity have become a staple in all major news outlets, with analysts often speculating on what their record-breaking performances could mean for the stock market and the economy as a whole. The Magnificent 7 now serve as bellwethers of the tech sector, with their movements closely monitored by investors and financial professionals alike. Their influence seems to extend beyond their individual stock prices and serves as a signal of broader market trends and the health of the tech industry.
How are the Magnificent 7 performing?
Early on, some analysts expressed doubts about the continued relevance of the Magnificent 7. Indeed, as Nvidia blows past the other contenders and Tesla continues to lag farther behind – Tesla’s market cap now lags behind pharmaceutical giant Novo Nordisk – the diverging performance of individual stocks within the group has prompted some experts to now speak of the Fab Five, or even the Fab Four. These shifts have led O’Rourke to suggest that the era of the Magnificent 7 may be over.
Conversely, other analysts remain optimistic about the future of the Magnificent 7, highlighting their competitive advantages and dominant positions within their respective sectors.
“The Magnificent 7 group of leading technology companies is still a must-own, led by huge beats and stock reactions during the month from Facebook and Nvidia. But underneath the surface there are cracks emerging,” said Greg Taylor, chief investment officer at Purpose Investments, in a note on March 1, referring to the modest performances of Apple, Google and Tesla compared to Microsoft, Nvidia and Meta.
Tesla shares fell when Elon Musk failed to appease investor concerns over discouraging Q4 results in January, and dropped a further 7.2 percent on Monday (March 4) as the company reported its lowest sales in China since December 2022. Tesla has also been moved to reduce the price of its electric vehicles (EVs) in the face of competition from local makers like BYD. These events have led to Tesla's value diminishing in 2024. Last week (March 7), following positive early trial data for a new obesity drug, shares of Novo Nordisk surged upwards of 8 percent, bringing its market value above that of Tesla’s. As of writing, Novo Nordisk’s market cap sits at US$598.68 billion, while Tesla is valued at US$539.76 billion.
Meanwhile, Apple, which lost its title as the world’s most valuable company to Microsoft earlier this year, abandoned plans to create its own EV to focus on artificial intelligence (AI) projects to meet growing demand. While the company has been slow to unveil a product with AI capabilities, it has reportedly been working on generative AI tools to rival ChatGPT and Microsoft’s GitHub Copilot. Apple is also facing antitrust lawsuits in the US and Europe and was hit with a 1.8 billion euro fine by the European Commission on March 4.
On the other hand, Google’s Pixel 8 comes with AI features powered by its Tensor G3 chip, and its language model Gemini was chosen to be included in the Samsung Galaxy S24 series. Shares surged above the company’s all-time high on January 24 but fell a week later after fourth-quarter earnings revealed missed ad revenue expectations. The company also chose to pause Gemini’s image generation feature after it presented inaccurate historical depictions, an event that brought the stock down a further 4.4 percent.
On the other end of the spectrum, Meta issued its first-ever dividend to investors and made stock market history with its US$197 billion surge on February 2, and Microsoft claimed US$3 trillion in market capitalization for the first time in company history in January. The latter company is also rumored to be unveiling its first AI PC sometime in March.
However, Nvidia is leading the pack by a wide margin. The company’s fiscal year results, ending January 28, exceeded expectations by over US$2 billion, reflecting a remarkable 265 percent year-over-year growth. Nvidia’s performance drove a 10 percent increase in stock value, according to some analyses. Reuters reported an additional US$129 billion in stock market value after the results, with Nvidia as well as other hardware makers like Super Micro Computer, Broadcom and Arm Holdings being the biggest winners.
Is a bubble brewing?
The Magnificent 7 has had a significant impact on the overall performances of stock market indexes. The S&P 500 closed at a record high for the first time in two years in January and has notched a total of 15 record closes in 2024, most notably breaking the 5,000 level for the first time in its history in February. The Nasdaq also reached a new record high last week (February 29), beating its November 19, 2021 record close of 16,057.44 by 34.48 points. These gains were attributed to the strong performance of tech stocks, fueled by the growing enthusiasm and potential of AI.
However, when Reuters reported that all three of Wall Street's major indexes had retreated upwards of one percent on Tuesday, weakness in mega-cap growth and the chip sector was given as one of the reasons why. This observation suggests high sensitivity to the Magnificent 7’s performance and raises the question of how a significant downturn in their stock prices could impact the broader market.
“Markets have experienced an incredible rally since the end of October when everyone was convinced that Central Bankers had kept rates too high for too long. But as the data is getting better and the ‘soft landing’ seems more likely (at least in the US), markets have celebrated with a record run,” Taylor wrote in his note.
“However, the rally has not been broadly based, and concentration risk is becoming very real in many markets.”
Marko Kolanovic of JP Morgan recently cautioned clients in a note that the rapid ascent of both tech stocks and Bitcoin could indicate increasing “froth in the market”, a market condition where the price of an asset is uncorrelated from its intrinsic value. However, as Nils Pratley from The Guardian notes, the presence of froth does not necessarily signal an imminent end to current market conditions, especially given the sustained demand. Yahoo! Finance reported that Tom Lee of Fundsrat believes it’s premature to label the AI boom a “bubble peak”. Nvidia’s chips are the essential component to the speculative AI revolution that’s been driving the surge, and its customers have deep pockets. But while its role in the AI revolution and strong customer base suggests a positive outlook, it's important to consider the potential impact of all factors on the company's financial performance. Nvidia faces challenges that could impact its future growth prospects, such as political influence affecting sales in China. Further, many of its clients are seeking ways to reduce their reliance on Nvidia’s business, such as by developing their own chips.
While Nvidia's performance is emblematic of the broader success of the Magnificent 7, Yahoo! Finance executive editor Brian Sozzi points out that the connection between Nvidia's technology and the immediate financial success of its clients may not be as straightforward as it seems. “Just because Meta owns and uses some new Nvidia chips, how is that going to positively impact (Meta’s) earnings and cash flow over the next four quarters? Will it at all?” He alludes to economist and former Federal Reserve Chairman Alan Greenspan's term “irrational exuberance”, to describe investors indiscriminately increasing the stock prices of related companies as something that “makes sense until it doesn’t”.
He also argues against Solita Marcelli’s justification of Nvidia’s high price-to-earnings (P/E) ratio when compared against the S&P 500. Sozzi points out that Nvidia's stock price already reflects very optimistic assumptions about the company's future earnings growth, which leaves it with no room for anything other than absolute perfection. Therefore, Nvidia’s P/E may not be as "compelling" a value as the analyst suggests.
Past patterns or a new paradigm?
The current market rally is inviting parallels with the Dot-com Bubble of 2001 and a resurgence of investor optimism seen in 2021. In both 1999 and today, stock markets experienced robust bullish trends driven by investor optimism and excitement about technological advancements. Today, more than half of traders at Charles Schwab report a bullish outlook reminiscent of the sentiment seen in 1999, when the Nasdaq Composite Index, which is heavily influenced by tech stocks, saw significant gains.
However, there are important differences to consider between the economic landscapes of 1999 and today. One notable distinction is the inflationary environment. In 1999, inflation was relatively low and stable. Today’s economy faces higher inflation, which has become a significant concern for investors and policymakers alike.
The January 2024 Consumer Price Index (CPI) Report released on February 13 revealed a higher-than-expected inflation rate, reinforcing the Federal Reserve’s stance on maintaining current interest rates, pushing back estimates of potential rate cuts to June or July instead of March, as some optimistic analysts had previously anticipated. The market reacted with a drop in both stocks and bonds, a far cry from the “wide boost” deVere CEO Nigel Green, who advises against investing exclusively in the Magnificent 7, predicted the week prior. In an address to the House Financial Services Committee on March 6, US Federal Reserve Chair Jerome Powell told lawmakers that rate cuts wouldn’t be merited until further evidence of falling inflation was observed. The March 12 release of the February CPI also revealed that inflation remained relatively high, but the market reaction was considerably more muted.
Beyond inflation, another critical aspect to consider when comparing the market conditions of the past to today is the role of market concentration, as David Kostin of Goldman Sachs pointed out in a note. Further, he emphasized that the investment landscape has evolved since 2021. “In contrast with 2021, the cost of capital is much higher today and investors are focused on margins rather than “growth at any cost.” These tech giants have exhibited robust revenue growth and high-profit margins and are backed with large cash reserves and strong balance sheets, fundamentals that support the continued climb in stocks. And unlike the speculative nature of the crypto boom, for example, the AI boom is built around tangible products like GPUs, which have already demonstrated real-world utility and economic value in gaming, data centers and AI.
Is now a good time to invest?
As the market rally continues to forge ahead, some big tech bosses are seizing the opportunity to cash out while the market is hot. Amazon’s Jeff Bezos recently offloaded a staggering US$8.5 billion worth of shares, while Meta CEO Mark Zuckerberg has sold US$661 million shares of company stock in 2024. Nvidia insiders also sold off US$80 million in stocks soon after the company’s Q4 earnings report. While such moves might raise concerns about a potential market correction, finance analysts like Tobi Opeyemi Amure argue that these executives are simply capitalizing on their gains. "These founders and CEOs often wait until shares hit all-time highs before locking in profits or diversifying their wealth," said Amure in correspondence obtained by INN.
Moreover, the current rally is not limited to tech stocks; other assets such as gold are also on the rise. There are indications that the bullish sentiment is being felt globally, with stock markets in countries like Japan and Germany experiencing similar upward trends.
However, it’s important to recognize the potential challenges and risks that may arise. Tim Bray alludes to the macroeconomic factors that could eventually cause the bubble to pop, ranging from the environmental cost to the massive expense of data centers that power it. There is also the risk that AI might not live up to its hype for years, and progress in the field could stall as humans grapple with the challenges of regulating and implementing it at scale.
Furthermore, over-concentration in a few high-performing stocks, as highlighted by Orbis in their report “The Magnificent Middle” can increase the risk of a market correction. The authors advocate diversification and stress that midcap stocks should not be so quickly overlooked.
Taylor agrees. “The dream for investors would be a pause in the large-cap technology names and a catch-up rally for the lagging sectors. Presently, the rally is only held up by a few names, and the risk of a correction increases,” he said.
As the Magnificent 7's individual performances continue to fluctuate, their influence on the tech sector and the stock market as a whole remains a topic of interest for investors and analysts alike.
Don't forget to follow us @INN_Technology for real-time news updates!
Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
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06 March
How to Invest in Technology (Updated 2024)
The evolution of technology has undoubtedly grabbed the interest of the general public and investors alike as innovation in diverse categories continues to move forward at a remarkable speed.
Overall, the technology sector has come a long way in the last two decades. In March 2000, the S&P 500's (INDEXSP:.INX) technology index hit its peak of 988.49 points, rising by almost 500 points in the five years leading up to the dotcom bubble. Similarly, the NASDAQ reached an all-time high of 5,000 points during this milestone period.
As of March 2024, the S&P 500's technology index had grown by more than 500 percent, while the NASDAQ had more than tripled. The tech market is now dominated by large players, with companies like Meta Platforms (NASDAQ:META), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL) creating vast monopolies.
With so much growth in the technology sector over the last two decades, tech developments are disrupting and shaping our cultural fabric at unprecedented speeds. Industries such as finance, real estate, transportation and healthcare are transforming with current technological advancements. Here's a breakdown of why investors should pay attention.
What should investors know about the tech market?
The past decade or so has seen the evolution of countless tech-related industries.
Take, for example, the cable industry, which has been transformed by video streaming. As of Q4 2023, Netflix (NASDAQ:NFLX) had expanded to over 190 countries worldwide with a subscriber base of 260 million. The streaming service giant generated US$33.7 billion revenue in 2023, a 6.6 percent increase on the previous year. Amazon Prime Video has also exploded in recent years, with over 230 million subscribers and revenues of US$40.2 billion in 2023.
Apple's Apple TV Plus and Disney's (NYSE:DIS) Disney Plus have joined the ranks of video-streaming service companies as well. While Apple has withheld the number of users it has garnered since launching in 2019, estimates put at upwards of 25 million for 2023. Disney Plus, which debuted the same year, had amassed more than 150 million subscribers as of February 2024.
Gaming is another industry benefiting from advancements in streaming technology. The mobile gaming market is growing faster than any other gaming segment in the world, according to market intelligence firm Precedence Research, which estimates that the segment brought in US$184.4 billion in 2022, equivalent to about half of global gaming revenue. In the years ahead, growth in global smartphone sales, cloud gaming, 5G and mobile infrastructure are expected to sustain growth in the mobile gaming sector.
The "fourth industrial revolution" has been tied to various disruptive technologies, including artificial intelligence (AI), 3D printing, and blockchain. The global AI market was worth US$196.63 billion in 2023, according to a Grand View Research report, with research and innovation spurring activity in verticals like the automotive, healthcare and finance industries. These segments are adopting solutions like machine learning, robotics, neurolinguistic programming and querying methods.
3D printing, valued at US$20.37 billion in 2023, may be a niche market, but it's growing rapidly based on a number of factors including the technology’s variety of benefits, such as mass customization, the production of complex parts and the ability to improve efficiencies in the manufacturing process.
Blockchain has, of course, also garnered interest in the tech sector; the size of the global market hit US$17.46 billion in 2023. Within this tech space, Grand View Research highlights “DeFi as an emerging financial technology based on blockchain, which reduces the control banks have on financial services and money.”
Which tech sectors have the most potential?
When looking at the technology market worldwide, its reach is almost untouchable — the 10 largest tech firms have a massive combined market capitalization of more than US$27 trillion.
Deloitte posits that the drive by enterprises to embrace digital transformation is pushing the growth of emerging technologies such as cloud computing, artificial intelligence and cybersecurity. “Analysts estimate that public cloud spending will grow by more than 20%, and they foresee stronger demand for cybersecurity. AI investment (not specifically generative AI) is also seen as contributing to overall spending growth. Economists have projected that AI-related investments could reach $200 billion globally by 2025, led by the United States,” Deloitte notes in its technology industry outlook.
With exciting and profound advancements in natural language processing and prediction, AI adoption is beginning to pick up, particularly with the advent of OpenAI's ChatGPT. The evolution of AI is projected to influence and shape society, and analysts estimate that revenues from AI will grow at a CAGR of 37.3 percent to reach more than US$1.81 trillion in 2030.
The mobile gaming market will also see growth in the years ahead, rising at a CAGR of 10.39 percent to reach an estimated US$164.81 billion by 2029. “The development of mobile games has resulted in scalability for the gaming industry. Platforms like Facebook and Instagram have also started to develop innovative mobile games to ensure high product differentiation and benefit from engaging games to enhance their advertisement strategies," states Mordor Intelligence in a recent report on the industry.
As for the future of 3D printing, Grand View Research projects a CAGR of 23.5 percent, which would create a market worth US$88.28 billion by 2030. According to the firm, that growth will be driven by increasing prototyping applications from industries like healthcare, aerospace and defense, as well as "aggressive research and development" on 3D printing.
Blockchain is another of the most promising sectors in the future of the tech space. Grand View Research is forecasting a CAGR of 87.7 percent between 2023 and 2030 to reach a market value of more than US$1.43 trillion. Blockchain's use for the healthcare sector is expected to experience the fastest growth during the period mentioned, driven by the demand for digitization in the industry and an increasing number of regulations aimed at protecting patient data.
How to invest in the tech industry?
Within the broad scope and magnitude of the tech industry, there are countless ways investors can gain exposure to transformative and disruptive technologies.
Exchange-traded funds (ETFs) provide exposure to a basket of securities and are a popular and often inexpensive method for investing. Here’s a brief overview of a few technology ETFs for consideration:
- iShares US Technology ETF (ARCA:IYW): This ETF began on November 12, 2001, and has 138 holdings. It covers big tech names such as Microsoft (NASDAQ:MSFT), Apple, Meta Platforms and Alphabet.
- Technology Select Sector SPDR (ARCA:XLK): This fund has 66 holdings and was started on December 16, 1998. It also holds major names, including NVIDIA (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO) and Cisco (NASDAQ:CSCO), along with Apple, Microsoft and Alphabet.
- iShares Global Tech ETF (ARCA:IXN): Unlike the iShares US Technology ETF, this iShares fund focuses on technology companies from around the world. Founded in 2001, it provides exposure to Japan, Korea, Taiwan and Germany, but also offers a percentage of exposure to US companies. Its international holdings include Samsung Electronics (KRX:005930) and Taiwan Semiconductor Manufacturing Company (NYSE:TSM,TPE:2330).
More advanced investors or those willing to do their research may want to look at stocks in the tech space. Large-cap technology stocks are a good place to start, but it's possible to get specific as well — AI, robotics, esports, virtual reality and blockchain are just a few niche sectors those interested in tech may want to look into.
This is an updated version of an article originally published by the Investing News Network in 2016.
Don't forget to follow us @INN_Technology for real-time news updates!
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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