People All Over AI

In today’s Morning Lineup post, we compared Chat GPT’s rapid emergence into the mainstream to the rise of a number of other products.  While Artificial Intelligence, or AI, has been a buzzword for some time now, this year it certainly has been in the spotlight more than in the past.  Given the popularity of Chat GPT, some mega-caps like Alphabet (GOOGL) and Baidu (BIDU) have jumped in on the opportunity to announce their own versions.  To quantify how in focus AI has become, below we show the Google Trends scores for a handful of related terms.  Readings of 100 would indicate the peak in searches for a given topic globally.

Searches for “Artificial Intelligence” or its abbreviation have reached a new record while the field of “Machine Learning” has similarly seen searches rip higher and remain elevated in the past year.  One interesting area which has not seen searches rise much is in regards to the automotive industry.  Searches for “self-driving” have not picked up much within the range of the past few years. That is also well below the record from March 2018 when searches spiked due to a fatal incident involving Uber’s self-driving car. That being said, it is worth noting that even before the Chat GPT craze, these searches had been moving higher quite rapidly.

As we discussed earlier, although the broad topic of AI is in vogue, related stocks have not gotten much of a boost in reaction to this news.  For those having made announcements regarding AI in recent days like Alphabet (GOOGL), Microsoft (MSFT), and Baidu (BIDU), relative strength versus tech more broadly (proxied by the Nasdaq 100 ETF (QQQ)) has not done anything too notable in terms of long term trends. For MSFT and GOOGL, relative strength has been sideways at best over the past year, and BIDU has been moving higher in recent months, but that follows a few rough years for the stock relative to US tech. The same can be said for a more encapsulating basket of AI-related stocks proxied by the Global X Robotics and Artificial Intelligence ETF (BOTZ). While the relative strength has been trending lower (meaning underperformance versus tech more broadly) the past few months have seen a rebound. Click here to learn more about Bespoke’s premium stock market research service.

$2.9 Trillion in Market Cap Added

After seeing the total market cap for the Russell 1,000 fall by $10.9 trillion in 2022, we’ve seen a rebound of $2.9 trillion in market cap so far in 2023.  Below is a look at the total change in market cap by sector across the Russell 1,000 so far in 2023 and for all of 2022.  The Tech sector saw its market cap fall $4.35 trillion last year, and it has seen its market cap rise by $1.176 trillion to start 2023.  Consumer Discretionary’s market cap has risen by $701 billion, followed by Communication Services at $516.9 billion and Financials at $373 billion.

Four sectors have actually seen their market caps fall this year.  Health Care’s market cap has fallen the most at -$141 billion, while Energy has fallen $57 billion, Consumer Staples has declined $32.2 billion, and Utilities has fallen $29.9 billion.

Below is a look at the biggest gainers in market cap so far this year at the individual stock level.  Seven stocks have already gained more than $100 billion in market cap this year.  Apple (AAPL) has jumped the most at $333.7 billion, followed by Tesla (TSLA) at +$227 billion, Amazon (AMZN) at +$190 billion, Alphabet (GOOGL) at +$176 billion, and Meta (META) at +$166.8 billion.

While the seven biggest gainers to start 2023 have added a combined $1.377 trillion in market cap, they lost a combined $4.86 trillion in market cap in 2022. Click here to start a two-week trial to Bespoke Premium.

Bespoke’s Morning Lineup – 2/7/23 – The “Chat AI” Invasion

See what’s driving market performance around the world in today’s Morning Lineup.  Bespoke’s Morning Lineup is the best way to start your trading day.  Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“As long as we enjoy it, we’ll do it. ‘Cause we enjoyed it before we made any money.” – George Harrison, 2/7/1964

Morning stock market summary

Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members.  Start a two-week trial to Bespoke Premium now to access the full report.

Much like Chat GPT has rocked the way people gather and consume information, 59 years ago today, the music scene in the United States was changed forever as John, Paul, George, and Ringo touched down at Kennedy airport for the first time.  The rest is history.  When the Beatles appeared on the Ed Sullivan Show less than two weeks later, around 40% of the US population watched.  Everywhere the band went they were swarmed by screaming (nearly all female teens) fans. For the imprint the Beatles made on both the music industry and pop culture, it’s hard to believe that within six years of first setting foot on US soil the band was no more.  The Beatles’ candle may not have burned for long, but the movement they sparked still shines today.

A single event watched simultaneously on TV by 40% of the US population will never be duplicated again, but the stampede of Chat GPT into the mainstream is an event unrivaled by any other product in history. According to a study by UBS, Chat GPT reached 100 million monthly active users in the span of two months putting it years ahead of Google Translate (78 months), Uber (70 months), Spotify (55 months), and Instagram (30 months).  Even TikTok took nine months to reach that milestone!  Chat GPT is to consumer tech what the Beatles were to music.  It will leave a permanent impact on society in terms of how people gather, produce, and consume information and who knows what else.  The only question is whether it will be the AI tool we’re still talking about years from now, or will it burn out and allow others to fill the void?  Just yesterday, Google launched its own AI technology called Bard to public testing, and according to Bloomberg, Baidu (BIDU) will launch its own service similar to Chat GPT by March.

These Chat tools may be the next big thing, but the stocks of the three companies launching them haven’t been particularly impressive. Shares of BIDU may be trading right near six-month highs, but the stock is still down over the last year and is trading for less than half of what it traded for at its peak in early 2021.  Last week, it closed above its 200-day moving average for the first time in more than 200 trading days ending its second-longest streak of trading below that level in its history as a public company. Its time above the 200-DMA didn’t last long, though, as it closed back below that level the following day and is down over 15% in the last six months.  Finally, Microsoft (MSFT) has the most direct exposure to OpenAI’s Chat GPT tool, but it too has been sucking wind. Like GOOGL, it only just recently traded above its 200-DMA and is still down more than 10% in the last six months.

Chat AI tools may be changing the world and there will be big winners, but the ones with the most immediate and direct exposure haven’t seen a big change in their fortunes. Maybe the fact that ‘everyone’ seems to be launching their own versions of these tools suggests that they don’t have a lot of scarcity value after all.

Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals.  We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!

Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.

The Closer – Bostic Pumps the Brakes – 2/6/23

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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with some commentary regarding what Fed President Bostic had to say about last week’s jobs report followed by a recap of tonight’s notable earnings reports (page 1).  We then pivot over to the performance of the semiconductors (page 2) before finishing with a look at the latest delinquency data (page 3) and a preview of upcoming Treasury auctions (page 4). Tonight there is no update on the latest CFTC’s Commitments of Traders report due to the release’s delay given the cyber security incident at ION Cleared Derivatives.

See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!

FANG Index Has Best One-Month Rally on Record

“Big Tech” stocks like Apple (AAPL), Amazon (AMZN), and Alphabet (GOOGL) have taken a breather over the past few days after reporting earnings last week.  It’s important to note, however, just how much these stocks had rallied leading up to their near-term highs last week.  Through last Thursday, the NYSE FANG+ had rallied 34.44% over the prior month.  That was actually its biggest month-over-month rally in the index’s history dating back to 2014!  As shown below, the index managed to make a “higher low” in early January just before it took off, and it just barely took out its highs from last August when it peaked last week before pulling back slightly.

While last week’s earnings results provided some negative fundamental catalysts (some of which we highlight in our most recent Conference Call Recaps), there is also the technical aspect that this group of stocks had gotten historically overbought.  At last week’s highs, the 14-day RSI reached 77.4.  Normally, any reading above 70 would be considered overbought.  At 77.4, the RSI reading for the NYSE FANG+ index was the most elevated since June 2021 and ranked in the 97th percentile of all days since 2014.  After further declines to start out this week, the RSI is still elevated, but back below 70. Click here to learn more about Bespoke’s premium stock market research service.

Bespoke’s Morning Lineup – 2/6/23 – Dispersion

See what’s driving market performance around the world in today’s Morning Lineup.  Bespoke’s Morning Lineup is the best way to start your trading day.  Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“The greatest leader is not necessarily the one who does the greatest things. He is the one that gets the people to do the greatest things.” – Ronald Reagan

Morning stock market summary

Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members.  Start a two-week trial to Bespoke Premium now to access the full report.

There’s very little data to speak of this morning, or for that matter, the entire week, so investors will have to focus primarily on earnings and Fed Chair Powell’s speech at noon tomorrow.  Last week was the peak for earnings season in terms of the market cap of companies reporting, but in terms of quantity, it will be just as busy this week.  Markets are starting off on a negative footing as US Treasury yields continue their climb following last Friday’s jobs report.  After touching its 200-day moving average on Thursday at 3.29%, the 10-year yield is more than 30 bps higher this morning at 3.60%.  Even after the volatility of the last year, that’s quite a big move in a short period of time. Crude oil and natural gas, meanwhile, are both trading up over 1%.

Last week’s market word of the week was dispersion.  As shown in the snapshot from our Trend Analyzer, performance was all over the map with Communication Services leading the way higher with a gain of over 5% while Energy trailed falling nearly 6%. As a result of the moves, we finished off the week with two sectors at ‘extreme’ overbought levels (Communication Services and Technology) while Utilities, with its 1.4% decline, finished the week at ‘extreme’ oversold levels.

Energy and Utilities were the only two sectors down over 1% last week, and both of their price charts have been showing signs of deterioration.  After stalling out at a lower high earlier this year, Energy stocks have been under pretty significant pressure as both crude oil and especially natural gas have been weak.  If the declines continue this week, chart watchers will be focusing on support at the lows from late 2022 which also corresponds to highs from late in the Summer. The picture for Utilities has been even weaker.  That sector is now in a well-defined downtrend and last week’s decline resulted in a potential breakdown below support.

It seems strange to say after a year like 2022 but a number of sectors have also been breaking out to six-month highs.  Last week, Financials, Industrials, and Materials all managed to trade above multi-month resistance levels and trade to six-month highs.

Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals.  We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!

Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.

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