ChatGPT’s win is Microsoft’s win 🤖

Hey Superheroes,

This week saw the S&P 500 record its longest winning streak in two years after eight straight days of green. 📈 Woohoo! 

Oh and the RBA has restarted its rate hiking cycle, increasing the cash rate by 0.25% to 4.35%. The decision follows persistent inflation – with the central bank only expecting inflation to get back in the target 2-3% range by the end of 2025. 

Here’s the week’s biggest stories. 

Microsoft’s AI-generated milestone

Not many companies stay listed on the stock exchange for 37 years. And much less continue to hit record highs.

But Microsoft just closed above US$360 for the first time in its history!

The price gain followed strong investor optimism for one of its major partners, OpenAI.

🤖 Microsoft x OpenAI 

Microsoft first invested US$1 billion into OpenAI in 2019 with the goal of advancing AI enough to democratise it as a new technology platform. 

The company clearly backed what OpenAI was doing and reportedly invested a further US$12 billion in the AI startup – leading to the much talked about birth of ChatGPT – everyone’s (arguably) favourite email composer/essay writer/resume editor. ✍️

And unsurprisingly, Microsoft gets first dibs on the shiny new tech.

🖥️ Now that’s a good investment

Microsoft’s share price lifted after OpenAI shared a bunch of business updates that included price cuts and advances in tech. 

ChatGPT will now be updated to include information up to April 2023 (it used to be just September 2021, and no one likes old news), will have higher attention to detail and will make it easier for users to build AI-generated images. 

For Microsoft – which is integrating the AI tool into several of its products including Azure and Microsoft 360 – ChatGPT is estimated to bring over US$30 billion in new annual revenue. 

No wonder why investors got excited!

💡 Fact of the week:

Did you know that Tesla’s car models spell out to be S-3-X-Y? 

As expected from Elon Musk’s sense of humour. Have a read on why he used “3” instead of “E”.

Net income is not good enough for Xero’s investors

Markets are hard to understand sometimes and Xero’s share price is proof of that.

Despite recording a net profit of NZ$54 million (A$50 million) for the first half of FY2024, Xero’s share slid 14% yesterday. 

P.S. Xero’s fiscal year runs from April to March, so its first half ended in September. 

😵‍💫 The long story short

You might have seen a lot of these lately with U.S. earnings season happening, but when shares drop despite objectively good earnings results, it’s usually due to one main reason: high expectations.

Xero’s share price was up 60% year-to-date (before the news), as investors seemed excited about what Xero’s new CEO could bring to the table. Ms. Singh Cassidy promised to improve returns through higher prices and cost cuts.

But despite going from net loss to net income, Xero missed revenue expectations by 2% and operating income by 4%. 

Whether or not that warrants a 14% slide in share price seems debatable. It might just be the case of investors seeking faster growth.

🔦  Some other things we’re shining the Spotlight on:

THE EPILOGUE OF HOLLYWOOD STRIKE: On the back of Hollywood’s writers’ strike ending in September, the actors’ strike has now also reached its finale. This means that movies such as Disney’s Deadpool 3 and TV shows like Warner Bros’ The Last of Us can finally get back into production.

WE (DID NOT) WORK: Following on from speculation last week, the news is finally official – WeWork has declared bankruptcy. NYSE:WE was suspended from further trading following the announcement on Wednesday.

LITHIUM ANOMALY: TG Metals (ASX:TG6) is up 825% month-on-month after finding high-grade lithium in one of its drilling projects. Investor sentiment shows it might be a lithium gold mine.

“OOP”-TUS: Telstra enjoyed a 2% bounce in share price on the day that rival telecom firm Optus experienced a nationwide outage. While Optus is now back online, Telstra has largely sustained the price bump.

That’s all for this week’s Spotlight! 

If you’d like to keep up to date with market news and company results, chuck us a follow on our Instagram page, @superheroau!