Lunch on Wall Street: Super Micro makes big strides

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The AI ​​server company says it ships more than 100,000 GPUs per quarter. (0:16) Apple gets a rare downgrade. (2:21) Google faces new threats to its search dominance. (3:37)

This is an abridged transcript of the podcast.

Super Micro Computer (NASDAQ:SMCI) rallied after the AI ​​server company revealed some positive shipping data.

SMCI says it currently ships more than 100,000 GPUs per quarter, has shipped 2,000 liquid-cooled racks since June, and “recently deployed more than 100,000 GPUs with a liquid cooling solution for some of the largest fabs of AIs ever built.”

CEO Charles Liang says, “Supermicro continues to innovate, providing complete liquid cooling solutions for plug-and-play rack-scale data centers. Our complete liquid cooling solutions, including SuperCloud Composer for full lifecycle management of all components, are now cooling. massive state-of-the-art AI factories, reducing costs and improving performance.

“Because Supermicro supplies all the components, time to deployment and online is measured in weeks, not months.”

In today’s trades. The normalized yield curve was good while it lasted.

Following September’s strong payrolls numbers, rates continued to rise and the 2-year and 10-year Treasury yield curve briefly inverted again. Both yields are around 4%.

The inverted yield curve has been considered a strong predictor of recession. But after a reversal that lasted from July 2022 to September 2024, GDP continues to hum. Even more interestingly, the yield curve has inverted on a strong jobs figure, which lends more support to the soft landing camp.

As rates rise, we’re back to the good news is bad news scenario, with stocks under pressure.

James Demmert, chief investment officer at Main Street Research, says “Thursday’s CPI report should show continued moderation in inflation – validating the Fed’s recent rate cuts.”

“In our view, market expectations for future rate cuts are too optimistic given the strength of the economy, and this mismatch in expectations may cause volatility, which we believe should be used as a buying opportunity.”

“Our message to investors is that we are in the early stages of an economic cycle and a growth market, with the benefits of an AI tailwind, which should result in above-average stock returns going forward. Markets going forward will be driven by economic growth and corporate profits and less by Fed policy,” he added.

Among the active stocks today. Apple ( AAPL ) posted a rare brokerage downgrade as Jefferies cut the stock to Hold from Buy.

Says analyst Edison Lee: “We like Apple Intelligence (long-term) because AAPL is the only integrated hardware-software player that can leverage proprietary data to deliver customized AI services at low cost.”

“But smartphone hardware needs to be reworked before it’s capable of serious AI, with the likely timeline of 2026/27. High expectations for the iPhone 16/17 are premature, in our opinion.”

Lee downgraded Apple to Hold from Buy and has a $205 price target on the stock.

Wells Fargo cut Amazon ( AMZN ) to Equal Weight from Overweight, citing pressure on earnings revisions.

“We remain confident that retail margins in NA will eventually reach double digits,” the analysts said. “But as Amazon management has said multiple times, margin expansion will not be linear.”

“We and the market consensus probably got a little exuberant in extrapolating margin expansion trends into 2023 and early ’24 to ’25 and beyond.”

And JP Morgan downgraded Lamb Weston (LW) to neutral due to overweight, saying visibility remains limited.

Analysts said they have three main concerns about the fundamentals, which include slow restaurant demand, a more difficult-than-usual forecast for demand now, and even if demand starts to improve, there’s no guarantee it will expand at the same pace as global supply.

In other news of note. Google’s ( GOOG ) ( GOOGL ) years-long dominance of the $300 billion search advertising market is facing growing threats from newer rivals like AI and social video.

ByteDance’s ( BDNCE ) TikTok, which says it has 170 million users in the United States, recently gave brands a way to target consumers based on their search queries, directly challenging Google’s biggest source of revenue. That’s according to The Wall Street Journal.

Another threat comes from Perplexity AI, a search business backed by Amazon ( AMZN ) founder Jeff Bezos. The platform this month will display ads alongside AI-generated responses. Previously, Perplexity relied on subscription revenue for its higher-powered AI capabilities.

Microsoft ( MSFT ), which is a big supporter of Open AI, has inserted ads into AI-generated responses on a limited basis and introduced sponsored links and comparison shopping ads for a Bing chatbot. Meta (META) could benefit from Meta AI in the Facebook search bar and through its WhatsApp and Instagram apps. Apple ( AAPL ) could also turn to advertising within Apple Intelligence, which is a feature of the iPhone 16 lineup.

And in the Wall Street Research Corner. Hedge funds continued to buy the dip in Healthcare (XLV). Goldman Prime Services says it “was among the sectors with the most net buying” last week and “posted its biggest net buying in five months, driven entirely by long buying, which outpaced short selling by 2.3 to 1″.

Healthcare stocks as a group are down 3.5% over the past four weeks.

Pharmaceuticals, biotech and healthcare providers and services were the most popular subsectors of the healthcare industry for hedge funds to buy during the week. Every geographic region, led by North America and Europe, saw net acquisitions, Goldman said.

The top healthcare stocks according to our Quant Rating System are Clover Health (CLOV), CareDX (CDNA), Personalis (PSNL), GeneDX (WGS), and CorMedix (CRMD).