AI Stays Red-Hot

Earn While You Learn! ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, AI Stays Red-Hot The AI demand shows no signs of cooling down. Google parent Alphabet crushed top and bottom lines, sending its shares higher by 4%. Its cloud business remains unstoppable, posting a breathtaking growth rate of 35% from a year ago. Its AI offerings sold like hotcakes with enterprise clients. CEO Sundar Pichai said in the earnings call that Google’s “full-stack” of AI products is now operating at scale, “creating a virtuous cycle.” However, the supply chain is having troubles to catch up. Shares of Advanced Micro Devices plunged yesterday by about 7%, despite reporting earnings in line with forecasts and revenue that beat expectations. Why? The company missed the expectations for revenue outlook for the fourth quarter due to supply chain constraints. TSMC, the world’s largest contract chip manufacturer, said the capacity for the production of AI chips will remain tight going into 2025. Other earnings reports: Reddit, a newcomer on the stock market, skyrocketed more than 16% after beating sales estimates and gave a strong outlook. Chipotle Mexican Grill didn’t have the same luck. The stock plunged 7% after missing revenue estimates before recovering to a modest decline of ~3%. Same-store sales rose 6% — short of Wall Street’s estimates of 6.3%. Yesterday’s data showed that job openings fell to the lowest since early 2021. However, consumer confidence surged to the highest level since the start of the year. The ratio of job vacancies to available workers is now at 1.1 to 1. Lots of mixed signals: Are we due for a rally after Alphabet’s strong beat? Maybe, maybe not. We will need to hear from other Big Tech companies to see if they are performing well. Microsoft might do well since Alphabet delivered a blockbuster result for its cloud business. Maybe Amazon too. What’s more, there are several small-cap stocks that broke out from key technical patterns. Take $GLW as an example. It broke out from a cup-and-handle pattern after reporting a strong earnings result. Other stocks showed similar moves. (Source: IBD) The Nasdaq just penetrated its resistance line from its previous all-time high in July 2024. It might be the breakout that begins a new rally. It can also be a “fake” breakout before heading lower. It remains too early to tell, but the next few trading days will be critical. (Source: IBD) Bears might argue that valuations are getting too high. Prices have surged at a quicker pace than the change in the S&P 500’s forward 12-month EPS, as you can see in the graphic below: (Source: FactSet) Yardeni Research shared a chart of the consumer confidence survey for current conditions and jobs availability. Notably, a prolonged decline in both variables led to a recession since 1970s. There was an outlier — the decline during the 1985-87 period avoided a recession. While the economy avoided a recession, the market experienced a fatal crash in 1987, called Black Monday. (Source: Yardeni Research) This is the reason why the Federal Reserve decided to cut interest rates early. Fed officials want to get ahead of the curve. So far, it is working. The recent rate cut led to a surge in consumer confidence. The next chart revealed that we are living in an unusual time. S&P 500 LargeCap stocks typically traded at smaller multiples than MidCap and SmallCap. Why? The growth rate tends to be slower for a big company. Not this time. Big Tech companies are crushing it, while other companies struggle. As a result, the forward P/E for LargeCap stocks (red line) is at 22 which is close to its 2021 high. (Source: Yardeni Research) Do you see it now? There are strong arguments from bulls and bears. Big Tech companies remain red-hot. Consumer confidence is rising after the Federal Reserve’s interest rate cut. Stocks look poised to break out from their key technical setups. At the same time, valuations are expensive. The economy typically experiences a recession once consumer confidence has declined for a length of time. Non-tech companies still struggle to grow at the pace that would justify lofty valuations. Who will win? We will find out over the next few weeks. Invest in the Future of Marketing Today’s Stock Pick: Braze, Inc. (BRZE) The future of marketing is here. Consumers want hyper-personalized experience. It’s for a good reason. We are flooded with marketing messages every day. So, we filter everything out except for those that truly speak to our desires. Braze builds the software to help marketers do just that. Through three key technologies, Braze helps marketers to become a better companion to the customer’s journey. These include Cloud and Mobile, Big Data and Machine Learning, and Transformers, GenAI, and Agents. (Source: Braze) Let’s begin with data. Companies have an insane amount of data. They know that data could lead to more personalized messaging, but the problem is cleaning them up and turning them into actionable insights. Braze offers a simple way through its data offerings. It integrates with big data providers like AWS, Azure, and Snowflake. And it makes it easier for marketers to centralize key data. (Source: Braze) The next step would be Orchestration. Using data, marketers will design a mind-blowing journey that guides a customer from point A to point C, making their experience even more amazing. Everything can be built in journey builders, like the screenshot below: (Source: Braze) Lastly, Braze enables marketers to reach their customers through several channels — YouTube, Instagram, emails, SMS, Facebook, and so on. This is the new baseline for modern marketing. Those who can’t adapt by using these technologies will certainly fall behind. Why? They won’t be able to offer experiences as personalized as other marketers using Braze. Sure enough, thousands of major brands use Braze. Those names include Equinox, Fanfuel, DraftKings, Shake Shack, Burger King, Canva, Yelp, and TurboTax. (Source: Braze) To cultivate its growth, Braze as a strong partnership program with 1,600+ services partners. Basically, those partners recommend their clients to use Braze. For example, Accenture might analyze its client’s business and inform executives that they should use Braze to accelerate their marketing results. (Source: Braze) The next powerful growth catalyst is its global expansion. Braze is only starting to expand in the LATAM market. It just opened a new office location in Brazil. It is also winning clients in GCC and Korea markets. (Source: Braze) To tighten its relationship with customers, Braze has been building a strong community — Bonfire Community, Braze Learning, Certification, and Advocacy. Take Braze Learning as an example. There has been 68,000 course enrollments to this date. Once marketers invest time in learning a platform, they are more likely to recommend it to their employers. (Source: Braze) Now, let’s talk financials. Revenue grew 40% CAGR since FY’21. Impressive, right? It expects to deliver a first positive non-GAAP net income for FY’25, marking the milestone of turning profitable. Free cash flow is poised to turn positive, too. (Source: Braze) Operating margins are expected to improve, as well. The company expects operating income losses to shrink to -2.1% for the first half of 2025. For its long-term target, the company wants to post more than 20% of operating income. (Source: Braze) Better yet, the company has some flexibility. For the 3-year period between FY’26 to FY’28, the company expects to expand its operating margin if annual revenue growth is modest at <15%. What if revenue grew faster? Braze expects operating margins to be smaller. In other words, Braze expects to be more profitable if revenue growth is lower and less profitable if revenue growth is higher. Either way, it might be good news for Wall Street. (Source: Braze) Bottom line: Braze represents the future of marketing with its innovative tech stack. It has built a strong business foundation with a partnership program, an international expansion and a community. Finally, its financial results are poised to turn profitable next year.   [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](     © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](