Bank Aftershocks, Earnings and Jobs: May Begins for Tech
Bank Aftershocks, Earnings and Jobs: May Begins for Tech
Ali Ghodsi of Databricks, Pat Gelsinger of Intel, Mike Mahoney of Boston Scientific
Top of Mind
FIRST REPUBLIC BANK, whose stock plummeted in the aftermath of the failure of Silicon Valley Bank and Signature Bank, was seized by regulators Sunday and sold to J.P. Morgan Chase. Even though First Republic ranks as the second largest bank failure ever, it's likely to elicit the equivalent of a shrug when the stock market finishes trading today. Why? The sense of panic that peaked with the first bank failures in March has faded now that the bulk of the regional banks have reported quarterly earnings, and revealed deposits and risk-taking that isn't so scary after all. First Republic looks more like the slowest gazelle at the pond than the canary in the coal mine. CNBC
ARM, THE CHIP DESIGN POWERHOUSE, filed confidentially for a U.S. initial public offering over the weekend, bringing hope to a stock market devoid of big deals and preparing to argue that it can thrive in the artificial intelligence era as it did in the mobile era. Can it, though? Some of tech's most powerful companies have staked out computing independence using Arm's architecture, including Apple, Amazon and Qualcomm. Meanwhile Arm itself has suffered the indignity of losing its independence, first in a $32 billion buyout by SoftBank seven years ago and then in SoftBank's failed attempt to sell Arm to Nvidia for $40 billion, which fell apart last year. Can Arm reclaim its story with this IPO? Reuters
On the Radar
CDW: This information technology reseller pre-announced a bad quarter two weeks ago ($5.1B sales vs. $5.56 expected), echoing Infosys's warning of an enterprise spending slowdown. On Wednesday, 5/3 listen for color on customer behavior, especially given Microsoft's relatively strong quarter.
QCOM: While it's been diversifying into autos and industrial IoT, Qualcomm still gets the bulk of sales from the smartphone business, which had been struggling on weaker consumer spending and China COVID woes. On Wednesday, 5/3 listen for whether the consumer tech resurgence reflected in Microsoft and Intel's PC numbers and the China rebound have combined to make the company's results and guide any more buoyant.
FED MEETING: Now that the banking scare is largely behind us, most everyone expects the Federal Reserve to raise the benchmark rate on Wednesday, 5/3; the question is what Powell might signal comes next. While some in the market cling to hope that the Fed will pivot and start cutting rates by the end of the year, persistent inflation and a relatively strong batch of earnings so far suggest that would be a tough turn for the Fed to justify at this point.
AAPL: The Big Kahuna reports Thursday after the bell, and the most important questions are (a) How much Apple had to restrain shipments into the channel to keep inventory low ahead of new device launches in the second half and (b) Whether a China reopening feels durable enough for Tim Cook and his team to sound positive about it. Cook won't give any hints about Apple's rumored augmented reality headset, but Qualcomm's results the night before might hint at global demand for premium phones.
JOBS REPORT: On Friday we get the data on April's employment picture, including how many jobs were added (expectation is 160,000), the unemployment rate (expected to be 3.6%), the labor force participation rate (expected to be 62.5%) and wage increases. It matters because if the labor market's cooling quickly enough, it helps the case for the Fed to pause with interest rate hikes after Wednesday.
It's been a while — I took a spring break trip with the family that knocked out a couple of weeks worth of newsletters, then I came back to drinking from a firehose of news. Took a minute to catch my breath.
Last week I spent quality time with leaders including IBM CEO Arvind Krishna, who had me on stage at his leaders meeting talking AI, enterprise tech trends and transitions. I also spoke with Intel CEO Pat Gelsinger and Boston Scientific CEO Mike Mahoney after their respective earnings reports. Very different circumstances there. Intel is fighting its way through an attempted turnaround, and it appears brighter days might be ahead on the inventory front, if the economy holds up. No turnaround needed at Boston Scientific, which is seeing strength in the return of elective procedures, and delivered a beat-and-raise quarter with hints of M&A to come.
In my latest Working Lunch segment I featured Databricks CEO Ali Ghodsi, who joined me for a Fortt Knox 1:1 earlier in April. Databricks is positioning itself as a key ingredient in the artificial intelligence kitchen, helping customers get their data safely organized and centralized so that they can start learning from it and putting it to work. Ghodsi himself has a fascinating story of adaptation. In his youth he moved with his family from Iran to Sweden, seeking safety and a better life. As an adult he moved from Europe to California as a researcher, and ended up becoming an entrepreneur. Databricks is one of the hottest private companies in tech right now, bringing us back to the Arm IPO story: Ghodsi said he's in no rush to join the public markets, which have shifted their favor away from top-line growth and toward profitability. He told me he has plenty of capital in reserve, and Databricks continues to grow so fast that he wants to lean into it.
VIDEO
Databricks CEO Ali Ghodsi on the budding AI opportunity
See our full 1:1 conversation below and the Working Lunch here.
Intel CEO Pat Gelsinger on Q1 2023 earnings, and the turnaround effort
He outlined Intel's trajectory on margins and the journey to regaining customer trust
Boston Scientific CEO Mike Mahoney on strength in elective procedures
The company's approach to treating irregular heartbeat issues shows particular promise
HoneyBook CEO Oz Alon on small business resilience
He started the company with his wife and a third cofounder — a frequent customer of the bar he owned