Stocks Pick of The Week - US Inflation Fears Shake Markets as Tesla, AMD, and Microsoft Make Bold Moves

October 14, 2024

| Fullerton Research

Last week, US stock indices experienced some fluctuations. On Thursday, the S&P 500 slipped by 0.2%, closing at 5,780, while the Dow Jones Industrial Average and the Nasdaq also fell by 0.1% each. The drop in stock prices was largely attributed to a higher-than-expected Consumer Price Index (CPI) report for September, which indicated that inflation remains persistent. The CPI rose 2.4% year-over-year, slightly above forecasts of 2.3%. This situation has led to concerns about a "no landing" scenario, where strong economic growth continues to fuel inflation, complicating the Federal Reserve's ability to cut interest rates as anticipated. Despite these concerns, traders are still pricing in the likelihood of a 25 basis-point rate cut at the Fed's next meeting.

TESLA

Tesla’s highly anticipated “We, Robot” event will showcase its long-awaited robotaxi, the CyberCab. Despite a decade of unfulfilled promises on autonomous vehicles, scepticism remains about when Tesla can deliver a true self-driving car. Tesla has lagged behind competitors like Waymo in launching commercial robotaxi services. Analysts are cautiously optimistic, with some predicting a limited rollout by 2025. However, safety concerns, phantom braking, and operational challenges in adverse weather remain unresolved. Investors are also curious about Tesla’s business model and liability stance for robotaxis. Tesla’s stock has dropped nearly 4% for the year, and expectations are mixed ahead of the event.

TSLA (Weekly). After failing to break through the resistance at 250.00, the stock has returned to its trading range. Despite being propelled by several innovations, we believe that Tesla needs to experience a pullback to around 160.00 before it can gain new momentum.

AMD

AMD launched its new Instinct MI325X AI chip to challenge Nvidia’s dominance in the data centre GPU market. The chip, set for production by the end of 2024, targets a growing AI market that could reach $500 billion by 2028. Nvidia currently holds over 90% of the market, bolstered by its proprietary CUDA software, but AMD is improving its ROCm platform to compete. AMD claims the MI325X delivers 40% better performance on Meta’s Llama AI model than some Nvidia chips. It also announced new EPYC 5^th Gen CPUs, targeting Intel’s data centre share.

AMD (H4). After a significant decline of nearly 20% in August and September, the stock has regained momentum and is trading close to its highest level from July. While the pace may slow down, prices are expected to consolidate between 165.00 and 175.00 before continuing their upward movement.

MICROSOFT

Microsoft will allow Android users to buy and play Xbox games directly through its Xbox app from November onwards. This move follows a US court ruling that forces Google to offer alternatives to its Google Play app store after losing a lawsuit to Epic Games. By bypassing Google’s store, Microsoft avoids sharing in-app purchase revenues with Google. The announcement highlights Microsoft’s growing focus on mobile gaming, especially after its $75.4 billion acquisition of Activision Blizzard. However, there are no plans yet for similar support on Apple’s iOS, where restrictions remain due to ongoing antitrust cases.