Bloomberg Daybreak: US Edition
Memory Chip Squeeze Widens Gap; Alphabet's Global Debt Binge
· Summarized
Key takeaways
- The memory chip market is witnessing a significant divide where memory producers are thriving while consumer electronics companies are struggling.
- Alphabet's entry into the debt market with a 100-year bond demonstrates confidence in its future growth despite heavy investments in AI.
- Expectations for the U.S. economy's growth remain cautiously optimistic, with President Trump asserting that the new Fed chair could achieve historically high growth rates.
Summary
Memory Chip Market Dynamics
The episode opens with a discussion about the persistent rise in memory chip prices and its impact on the stock market. A divide is growing between companies that are adapting well to the memory chip squeeze, like memory producers, and those struggling, such as traditional consumer electronics manufacturers. Notably, a Bloomberg gauge indicates that while global consumer electronics makers have declined by 10% since September, memory manufacturers, including Samsung, have surged approximately 160%. Analysts are considering which firms can best adapt to this changing landscape.
Alphabet's Debt Market Moves
In a significant financial move, Alphabet, Google's parent company, is venturing into the bond market by selling sterling and Swiss Franc-denominated bonds. This includes an unprecedented 100-year note, marking a unique departure from the tech industry's typical financing strategies. The offering has received remarkable demand, showcasing investor confidence in Alphabet's growth, especially in light of its substantial investments in AI. The deal reinforces the shifting landscape of corporate debt, where tech firms are increasingly participating.
Economic Perspectives and Fed Leadership
The podcast also covers comments from President Trump regarding his pick for the Federal Reserve chair, Kevin Warsh. Trump suggested that Warsh could facilitate unprecedented economic growth, claiming a target growth rate of 15%. Such expectations underscore the pressure Warsh would face if confirmed. Current projections suggest the economy is expected to expand by 2.4% this year, highlighting the ambitious nature of Trump's expectations and the long-term challenges facing the Fed.
Sponsors
- Eyeshares · With Bolly from Eyeshares, you get access to both monthly income and growth potential in one simple ETF. It's the best of both worlds. Discover Bolly, Eyeshares Large Cap Premium Income Active ETF, Eyeshares, the market is yours. Visit www.eyeshares.com to view perspectives for investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. Risks include principal loss in the use of derivatives which could increase risk and volatility. Monthly income is not guaranteed prepared by BlackRock Investments LLC.
- Public · Support for the show comes from public. On public, you can build a multi-asset portfolio of stocks, bonds, options, crypto, and now, generated assets, which allow you to turn any idea into an investible index with AI. Go to public.com slash market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com slash market. Paid for by public investing. Brokerage services by open to the Public Investing Inc, Member Finra and SIPC. Advisory services by Public Advisors LLC, SEC Registered Advisors.
- Chase · Small businesses are the pulse of every community. They bring people together, create opportunities, and drive growth. Chase for Business helps business owners like you, with personalized guidance and convenient digital tools all in one place. Learn more at Chase.com slash business.
Show notes
Today's top stories, with context, in just 15 minutes.
On today's podcast:
1) The relentless surge in memory chip prices over the past few months has driven a vast divide between winners and losers in the stock market, and investors don’t see any end in sight. Companies from game console maker Nintendo Co. to big PC brands and Apple Inc. suppliers are seeing shares slump on profitability concerns. Memory producers, meanwhile, are soaring to unprecedented heights. Money managers and analysts are now assessing which firms can best navigate the squeeze by locking in supplies, raising product prices or redesigning to use less memory. A Bloomberg gauge of global consumer electronics makers is down 10% since the end of September while a basket of memory makers including Samsung Electronics Co. has surged roughly 160%. The question now is how much is priced in.
2) Alphabet Inc. is selling sterling and Swiss franc-denominated bonds for the first time, including an ultra-rare issue of a 100-year note, following a bumper $20 billion deal in the US. Google’s parent company is offering five tranches each of sterling and Swiss franc notes, according to people familiar with the matter, who asked not to be identified. The 100-year sterling bond is the first sale of such long-dated debt by a technology firm since the dot-com era. The sterling issue includes tenors of three to 32 years as well as the 100 year bond. The Swiss franc deal includes maturities of three, six, 10, 15 and 25-year bonds. Both deals are expected to price later today, the people said.
3) President Trump said his pick to lead the Federal Reserve can stoke the economy to grow at a rate of 15%, an exceedingly rosy target that nonetheless underscores the pressure that Kevin Warsh will face if confirmed to the role. Trump, speaking in an interview with Fox Business, said Warsh was the “runner up” in his last search and that it was a big mistake to pick Fed chair Jerome Powell. It was not fully clear if Trump was referring to year-over-year growth or some other metric. The US economy, which is seen expanding 2.4% this year, has grown at an average annual rate of 2.8% over the past five decades. Gross domestic product has only risen at a 15%-plus pace a few times since the 1950s, including in the third quarter of 2020 as businesses reopened following pandemic-related closures.
See omnystudio.com/listener for privacy information.
Follow this show on AudioBrevity and new episodes get summarized for you. Create a free account