Market Briefing For Tuesday, Nov. 21st

Institutional participation is typically limited this week, so is ‘retail’ interest for days ahead of Turkey Day. So amplified moves get impacted accordingly. In today’s case it was mostly Microsoft (MSFT), with Boeing (BA) as well, not much else.Unsplash OpenAI is basically built on Microsoft Azure so it makes sense and Microsoft almost has control of the software already, well perhaps. Other AI plays ‘less reliant’ on other platforms ‘may’ not be concerned, as their share prices today (generally up), like Adobe, Nvidia, Alphabet etc. gained as well.Also Ilya Sutskever, the OpenAI chief scientist who co-founded the business 7 years ago with Sam Altman, now regrets his role in arranging Altman’s ouster. (Ilya by the way was born in Russia, emigrated with parents to Israel at age 5, and wound his way to MIT and Stanford…he is the pivotal brains in this effort.)This clearly would delve into ‘inside baseball’ drama, since even Elon Musk is involved (having helped the funding). Variations of ‘AI’ have been around for a number of years (despite the image of being ‘new’ and it is more crucial as the capabilities get ‘smarter’) and these guys have been involved all along. Lest I forget, Greg Brockman was also in the early ‘club’ of assembling OpenAI. This all matters as ‘this afternoon’ there was scuttlebutt that Microsoft’s ‘deal or bid’ to get Altman weren’t ‘carved in stone’ yet (possibly meaning intricate details), but Microsoft stock doesn’t remotely hint at that, nor Altman’s move itself. It’s not a done deal, but Microsoft could offer the resources to manage all of this.At this point Microsoft’s almost achieved representation parity with Apple, as far as weighting in the S&P. So, a threat of ‘most’ key employees of OpenAI to move to Microsoft, was all it took to thrust MSFT to yet-another high, even as it was the market’s bias to nudge higher ‘anyway’ ahead of Thanksgiving. In a sense this eases the concern of the overpriced mega-caps fading as of ‘yet’.Valuation-wise, there have been ‘some’ fears about mega-caps easing a bit, as smaller-caps catch-up and I think that’s sort of premature anyway. It’s that time of year when you have shuffles in stocks way down for the year, splitting interest between tax-sellers (especially in under-performers) and buyers that are seeking value for next year on a speculative basis (in those perceived as able to outperform, though in ‘tech’ that’s always a bit risky, even if financially stable and/or with adequate liquidity going into a new year). A bit of turmoil.It’s not very clear what caused the OpenAI Board to cast-aside Altman, so this could be a ‘game-in-motion’, clearly with flux remaining to be sorted-out, might even see Altman back at the helm…lots of chatter but this is in-flux. So we will see whether Microsoft can really leapfrog most others, or is Nadella on-edge.Aside that we’re going to see (probably regardless) a new panting for AI firms with market-cap levels that make them attainable. It’s extraordinary, and I’d be pleased to see it expand into the ‘Defense / Space’ realm where most ‘major’ contractors have a solid software team(s), but contracting outside firms for AI capabilities (so far). Some of those players are eventual merge candidates. Market X-ray: There is relatively thin pre-holiday activity which can exaggerate moves up or down, in this case elevating the AI-related Microsoft move. All fine, as we anticipated overall S&P continuation pattern, as this reflects. As a matter of fact, on an hourly basis, it helps ~4500 (prior resistance) become a bit of near-term support as the market tone continues to sort of ‘heal’ a bit.There are other concerns for markets, beyond ‘war’ or other existential risks. One of those has been the small/regional bank issues, but on the other hand, to me, that’s a plus since it helps keep Treasury and Fed at-bay knowing they didn’t do an adequate job of factoring in ‘reserve’ moves before prior hikes (at the same time some of those banks did not do proper risk/hedge managing).There is almost zero geopolitical risk element in Oil prices now and that’s the position I’ve maintained through the war so far, believing only an expansion of the war (which results in some blockade or new sanctions on Iran) would hike the risks of higher prices related to the Middle East conflict.The U.S. has overwhelming power there now, any strategist who suggests taking that on doesn’t have a nickel’s worth of tactical smarts. I better add that some of them are trying it (Houti’s and Iraqi islamists just as a for-instance, or somewhat Hezbollah). So far they’re not getting our message to back-off or else. If there’s an ‘or-else’ coming, the impact on Oil markets will depend on what it is and whether it bites hard enough to be respected.For the moment the spotlight in on AI and Microsoft but many areas stable to firm and expecting that to persist, barring geopolitical shock, or some shuffles ‘if’ anyone takes-up Benihoff’s offer to attract workers to SalesForce. Stakes, in a sense, might be higher not lower, and you have the ‘presumption’ that it’s all to the benefit of Microsoft.. might find it’s a lot broader than that. A feeding frenzy’ in AI is back on, and well, if they persist/succeed with this coup, then it foreshadows Microsoft replacing Apple as mega-tech/market-cap leader. If we now see a bigger chess game, on-boarding of people from Google or even Apple, well, these aren’t the only guys in AI ‘or’ quantum computing (relates in a way, but let’s not talk about 2025 yet, or non-compete agreements etc.).More By This Author:Market Briefing For Monday, Nov. 20thMarket Briefing For Thursday, Nov. 16thMarket Briefing For Wednesday, Nov. 15th


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