Good morning, Opening Bell crew. Senior reporter Phil Rosen here.
Yesterday, Fed Chair Jerome Powell gave a speech at the Economic Club of Washington, saying the stronger-than-expected labor market is going to make the inflation fight difficult.
“It kind of shows you why we think this will be a process that takes a significant period of time,” Powell said, adding that the path forward is “probably going to be bumpy.”
“Tuesday’s comments do nothing to undermine the recent strength in the market,” David Russell, VP of market intelligence at TradeStation, said. “They also seem to keep us on track for another 25 basis points in March, with possibly no more increases after that. It’s a potential Goldilocks environment for the bulls and a very tough spot for the bears.”
That’s that for the latest Fed talk — but today, we’re taking a closer look at the AI hype train passing through the stock market.
Those names have been on a rollercoaster — and now artificial-intelligence stocks have emerged as a hot trade to kick off the year.
A smattering of companies with exposure to AI technology have seen their shares surge in recent weeks, largely due to the popularity of OpenAI’s language tool, ChatGPT, which launched in November.
Microsoft last month poured $10 billion into OpenAI, which only generated more enthusiasm.
The hype surrounding the bots has pushed well-known chip stocks like Nvidia, Mobileye, and Ambarella higher to start 2023. But more obscure names are enjoying the wave, too.
Staffing 360, a little-known staff-recruitment company, saw its stock jump 25% immediately following news of an AI deal before paring gains. Meanwhile, shares of education-tech firm Chegg crashed as the company found itself on the defensive over the threat posed by AI.
ChatGPT’s competition is still heating up. With players like Google and Chinese tech giant Baidu announcing their own language tools this week, more rivals are sure to follow.
But similar to 2021’s meme-stock mania, the AI hubbub makes it hard to separate the more viable projects from ones just cashing in on the hype.
Still, according to Shark Tank star Kevin O’Leary, backing first-movers like OpenAI is a good bet.
While OpenAI isn’t publicly traded, O’Leary told me on a video call yesterday that he’s in talks to make an equity investment in the company, and hopes to solidify a deal within 90 days.
“AI’s sort of the new, hot kid on the block,” the veteran investor said. “Like the internet was 20 years ago. This is the next thing. And what you learn with next things, it’s often best to just invest in the first mover, and sit back and watch.”
In other news:
2. US stock futures fall early Wednesday, as investors pick over Jerome Powell’s latest comments for hints of an easing in Fed rate hikes. Meanwhile, Turkey’s stock exchange has suspended trading amid a big selloff triggered by the huge earthquakes. Here are the latest market moves.
3. On the docket:, Disney, Uber, and Dominion Energy, all reporting.
4. This stock fund has nearly doubled its benchmark since 2020. James Abate runs one of the most successful stock funds of the last several years. Here’s how he says investors should get ready for potential black swan events that could shape 2023.
5. These are the top 10 holdings of the AI-driven investment fund powered by Watson. Equbot’s ETF has been beating the market to start the new year, and DataTrek Research expects more gains to come. See the portfolio here.
6. Tech stocks have come back with a “vengeance,” Fundstrat’s Mark Newton said. In his view, investors are piling back into a bull market right now — and it looks poised to continue.
7. The International Monetary Fund said central banks need to push back against investor optimism to ensure price stability. It’s a necessary step for policymakers to take, the group said, even if it means declines in stock market returns. If not, there could be a heightened risk for an inflation rebound.
8. These are the real estate strategies that make sense to follow right now, according to a housing industry guru. The investor recommended looking into “hybrid cities” and “buying deep,” among other approaches, to best tackle the current home-buying landscape. Get the 10 strategies that can work as home prices keep falling.
9. Wall Street’s biggest firms are warning their clients not to trust the stock market rally. Strategists are still watching out for trouble ahead in the US economy and corporate earnings — and that could spell doom for equities.
10. BP stock rallied Tuesday as the energy giant vowed to spend more on oil and gas. The company reported record earnings, and stepped back from previous renewable energy targets in favor of producing more fossil fuels — and investors cheered the announcement.
Edited by Max Adams (@maxradams) in New York.