Markets juggle on AI growth
Technology and artificial intelligence (AI) related stocks had a rollercoaster ride over the past days as investors were tossed between optimism and concerns that included AI developments, renewed Middle East hostilities and the impact of rising inflation. Next to the kick-off of the FIFA World Cup in North America, the initial public offering of SpaceX was also one of the most anticipated events.
The main corporate news this week focussed on AI developments. During its Worldwide Developers Conference, Apple previewed a significantly upgraded version of Siri, its voice-assistant. The company wants to roll out Siri as a deeply contextual AI companion, with its core technology likely rebuilt using Google's technology and a large language model with over 1 trillion parameters. A breakthrough Siri experience is expected to drive the next iPhone upgrade cycle, as approximately 52% of Apple’s 950 million globally installed iPhones are not AI-ready.
AI hyperscaler Oracle reported its fourth-quarter earnings on Wednesday. Cloud infrastructure revenue topped estimates, and the adjusted earnings per share were USD 2.11, above the consensus estimate of USD 1.97. However, Oracle’s plans to invest approximately USD 70 billion in the current fiscal year also exceeded estimates. This massive amount of capital expenditure raised concerns about the future profitability of the AI infrastructure business. The company also announced plans to raise around USD 40 billion in equity and debt to fund the massive expansion in data centres for OpenAI and other customers.
Turning to Europe, there was a new chapter in mergers and acquisitions in the financials sector. In Italy, Intesa Sanpaolo SpA offered to buy Banca Monte dei Paschi di Siena SpA for EUR 30.6 billion. This move could spur a new phase of dealmaking in Italian finance. If successful, this merger will create the eurozone’s second largest lender by market value, right behind Spain’s Banco Santander.