Alphabet and Microsoft saved the week of big tech, Trump is against dedollarization, Anglo American asks for a raise

Alphabet and Microsoft Reports Show Investors Tangible Benefits from Artificial Intelligence

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Big tech reporting week ends with a big exclamation point. Unlike Meta, which failed to convince investors of the return on investment in AI, Alphabet and Microsoft did .

• The report from Google's parent company was especially stellar - it showed results above expectations and announced not only a traditional buyback ($70 billion), but also its first-ever quarterly dividend ($2.5 billion) and its intention to pay them in the future.
• Alphabet's quarterly revenue grew by 15%, to $80.5 billion, profit - by 57%, to $23.7 billion. But more important for investors were the details: the first-ever quarterly profit of the Google Cloud cloud division ($900 million) on sales of $9, 6 billion (+29%). The growth was facilitated by artificial intelligence in search and beyond, the company indicated, and against this background, investors did not find fault with capital investments that almost doubled to $12 billion.
• Analysts also pay attention to Alphabet’s increased operating profitability - 32% versus 25% a year ago. This is a consequence of smart optimization and confirms the correctness of “our efforts to sustainably restructure our cost base,” said the company’s chief financial officer, Ruth Porath.
• Microsoft showed a profit of $21.9 billion (+20%) on revenue of $61.9 billion (+17%) and especially outstanding results of the Azure cloud platform - sales growth of 31%. Artificial intelligence contributed 7% of this growth, the company writes. Its office suite's Copilot AI tool is used by nearly 60% of Fortune 500 companies, and it adds $30 per month to the price of each monthly subscription.
• Quotes of Alphabet and Microsoft in the post-market grew by 17% and 6.3%, respectively. This, among other things, means Alphabet’s return to the club of companies with capitalizations above $2 billion, notes the Financial Times.

What's in it for me?

The results of leading AI companies seem to have convinced investors that this area is turning from a bottomless well into a bonanza. However, simply “investing in AI” without a detailed analysis cannot be a reasonable strategy, as demonstrated by yesterday’s fall of Meta, and before that by the rise of the promised robotaxi, but poorly reported Tesla. We wrote about the market context of big tech reporting week here .

INVESTMENTS

Stagflation on the horizon

The risks of stagflation - the worst-case scenario for markets - are becoming increasingly clear: data released yesterday showed US GDP growth slowing in the first quarter by almost half compared to the previous quarter (to 1.6% in annual terms, worse than forecast), while the core inflation rose by 3.7%. Yields on 10-year Treasuries jumped above 4.7% for the first time since November last year, when the Fed signaled that rate hikes were over. Markets now only price 30 bp. n. rate reductions this year.

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SANCTIONS

Trump wants sanctions for abandoning dollar

American business has an additional reason to fear the new presidency of Donald Trump: his advisers are developing countermeasures against the de-dollarization of the global economy, Bloomberg has learned . In fact, sanctions are proposed against economic agents “actively looking for ways to abandon the dollar in mutual trade.” The mechanism is supposed to be purely regulatory: export restrictions, fines for currency manipulation and new duties.

The movement for de-dollarization, at least in words, is led by Russia and the BRICS countries, the agency notes. Now Trump at least does not see the need for a forced weakening of the dollar (inflated by Fed rates relative to other currencies) and has made this issue more of a part of the election campaign. He said that losing the dollar standard would be tantamount to "losing the biggest war in our history" and that this is where Joe Biden is leading the country.

China has entered 7 nanometers

China has industrially mastered 7-nm microchip technology: this is definitely not a demonstration, as follows from an analysis of the latest Pura 70 smartphone from Huawei, which is under US sanctions. China's breakthrough in this area was recorded by the Mate 60 Pro smartphone last year, and the new device is equipped with an already improved version of the processor - Kirin 9010. The United States intends to work more closely with its allies so that they block exports to China of everything related to the production of chips.

At the same time, US Secretary of State Antony Blinken, who met in Beijing with his Chinese counterpart Wang Yi, announced the beginning of stabilization of relations and the mutual need to avoid “misunderstandings.” Wang Yi called on the United States “not to cross China’s red lines” in the areas of sovereignty, security and development interests.

WAR

Tanks are not for the front

Ukraine has withdrawn Abrams tanks from the front line due to the activity of Russian FPV drones, AP writes , citing the US military. This is yet another confirmation of irreversible changes on the battlefield: a tank with sharply differentiated armor, created on the concepts of the 1970s, is now inevitably detected several kilometers from the contact line and hit by drones in weakly protected places. According to Western data, the Ukrainian Armed Forces lost five of the 31 delivered vehicles. The cost of each is $10 million.

What else is going on

• Anglo American has rejected BHP Group's $39 billion takeover bid as "materially undervaluing" the company. For the industry's biggest deal in a decade to go through, a significant raise is required.
• The Bank of Japan decided to leave the short-term interest rate unchanged at 0.0–0.1%. Following this decision, the yen dropped against the dollar to the 1990 level of 156 yen per dollar. Investors are uncertain about the next steps of the authorities, who promised not to allow too sharp a weakening. Since the beginning of the year, the yen has been the worst currency among the top 10: minus 9% against the dollar.
• Leonid Goldort, founder and general director of one of the largest logistics companies in Russia - SDEK - has found a buyer for his share, is leaving management and leaving for Israel. The share will be purchased by a fund managed by the management company “Modern Real Estate Funds” (formerly “Sber Real Estate Funds”). Sovcombank, Tinkoff Bank, AFK Sistema and the delivery service 5post X5 Group showed interest in the asset. Goldort's share was estimated at 11–19 billion rubles.