Trump's AI-powered 'Stargate' venture, company news and geopolitics
Stock market news
• Day two of Donald Trump’s second presidency ended with the announcement that OpenAI, SoftBank Group and Oracle will form a venture called Stargate and invest $500 billion in AI infrastructure across the United States, though how much of that has been planned for some time is anyone’s guess. The name comes from the 1994 sci-fi film and TV series in which a “Stargate” is a device that allows instantaneous travel between distant planets.
While its goals are likely more modest than interstellar teleportation, the project could help cement America’s lead over China in the AI race. Investors were not shy about agreeing, pushing SoftBank shares up 10% in Asia, helping lift the Nikkei 1.7%. Taiwan shares rose 1.3%.
• A 3% drop in AAPL stocks left the Nasdaq stock index lagging behind. Small-cap companies took the lead.
But in the morning, good reports from tech companies and news of a new AI center are bringing interest back to the Nasdaq.
Under Trump, the bull market in stocks has received a new boost.
However, volatility is not falling - investors understand Trump's unpredictability.
The US dollar has weakened slightly, but it is too early to talk about a trend reversal.
Bitcoin has risen to $106,000.
• China and Hong Kong fared the worst, with the former's blue-chip index down 1% and the latter's Hang Seng index down 1.6%. Of course, that's partly due to Trump's announcement that a 10% tariff on Chinese goods would go into effect on February 1. Still, that's well below the 60% he promised during the campaign. And it remains to be seen whether the 10% tariff will be implemented at all, now that Trump needs to negotiate with Beijing over selling parts of TikTok to either Tesla CEO Elon Musk or Oracle Chairman Larry Ellison.
• In Europe, stock markets are set to open slightly higher, with futures on the pan-European STOXX 50 index up 0.2% and futures on the UK’s FTSE index up 0.1%. European Central Bank President Christine Lagarde will be at the World Economic Forum in Davos, Switzerland. Other ECB officials scheduled to speak include Governing Council member Francois Villeroy de Galhau, who will talk interest rates. Market participants see the bank as almost certain to cut its interest rate by 25 basis points next week, but for many the question is how low it might go. Predicting the final rate will be difficult, with inflation still above the ECB’s target, but growth headwinds are strengthening as Trump puts friends and foes alike in the firing line of his “America First” message. Swaps currently imply four rate cuts this year to 2%.
• On Wall Street, Nasdaq futures <NQc1> rose 0.7 percent, helped by a 14 percent gain in Netflix shares, which posted record subscriber growth last quarter. However, with Stargate becoming a reality in some form, there may be less appetite for streaming sci-fi movies in the coming years.
• OpenAI, SoftBank and Oracle are creating a joint venture The Stargate Project to build a network of data centers for AI in the United States.
The initial investment will be $100 billion, and it is planned to invest up to $500 billion over four years. The facility will consume almost a gigawatt of electricity. Microsoft, Arm, Nvidia and the Middle East AI fund MGX are also participating in the project.
ORCL shares are up 5% in premarket trading on the news. MSFT shares are up 1.5%, ARM is up 5%, NVDA is up 1.7%.
• WEF 2025: 74% of companies are trying to scale AI, and only 16% are ready to reinvent it. According to experts, the main barriers are the lack of appropriate infrastructure, a shortage of qualified personnel and poor data quality.
• Oil Companies Flirt With Electricity - WSJ As power generators like Vistra (VST) grow rapidly, oil and gas giants are dipping their toes into a business where they have some natural advantages.
• The market is beginning to speculate that the Fed will begin to raise rates - Bloomberg. The likelihood of a rate hike has begun to grow after a strong report on the labor market and expectations of inflationary measures from the new US president.
• Apple has once again become the world's most valuable brand, valued at $574 billion, according to the annual Brand Finance Global 500.
Four of the world's five most valuable brands are technology brands. In addition to Apple, they are Microsoft ($461 billion), Google ($413 billion) and Amazon ($356 billion).
• Shares of developer DR Horton (DHI) initially rose 4% but ended down 3%. The company increased share buyback plans for fiscal 2025 and maintained its revenue outlook despite challenges from higher mortgage rates and a limited supply of affordable housing.
• 3M (MMM) shares rose 4% after the company reported better-than-expected quarterly profit and forecast sales growth for 2025.
• MicroStrategy (MSTR) bought about 11,000 bitcoins for $1.1 billion. The company now owns 461,000 bitcoins. The purchases were financed through a recent stock offering. MicroStrategy (MSTR) shareholders voted to increase the authorized number of Class A common shares by 30 times to finance the bitcoin purchase - Bloomberg.
• Prologis (PLD) reported strong fourth-quarter results, beating earnings and revenue expectations.
• The industrial REIT set optimistic growth targets for 2025, with significant acquisitions and developments planned, reflecting the strong post-election market environment.
• PLD shares rose 7%.
• Charles Schwab (SCHW) shares rose 6% after strong fourth-quarter earnings. The company benefited from higher underlying net new assets and lower bank add-on funding, showing strong client engagement and transaction growth.
• Meta (META) Will Soon Let You Link Your WhatsApp Account to Instagram and Facebook. Meta announced Tuesday that users will soon be able to add their WhatsApp account to the Account Center, a hub where users can manage their connected experiences across their social networks. The company was previously wary of corruption allegations. But under Trump, American businesses will be making more money.
• Hedge funds are positioning Donald Trump's presidency for the U.S. to have the highest level of borrowing since 2010 while betting the dollar will continue to rise, according to bank research and industry data.
• Banks could be hurt by SRT leverage ban, hedge fund says - Bloomberg A ban on using leverage to transfer significant risks could have a knock-on effect on the cost of credit for consumers and businesses, according to Seer Capital Management LP, a hedge fund that has been investing in such deals since 2010.
• BofA CEO hails Trump's economic policies as 'good' for business
• Portuguese airline TAP's passenger traffic grew in 2024, with America leading the growth.
• Trump's influence on cryptocurrency is undeniable and will attract investment, Coinbase CEO said in Davos.
• DR Horton beats first-quarter forecasts as tight housing supply drives demand for new homes.
• China's non-financial outward direct investment grew by 10.5% year on year in 2024.
• Birkenstock CFO Eric Massmann is stepping down.
• Smithfield Foods aims to achieve a $10.7 billion valuation in its U.S. IPO.
• German automakers say Trump tariffs will hurt U.S. consumers and industry
• ISS's Guerra leaves consulting firm, joins Strategic Governance Advisors
• Pakistan said it had agreed a $1 billion loan with two Middle Eastern banks.
• Indian company ICICI Prudential Life's profit in the third quarter rose sharply thanks to sales of new policies.
• KeyCorp's fourth-quarter profit beat expectations on deal boom
• Goldman Sachs reshuffles management to strengthen Wall Street business
• Charles Schwab's fourth-quarter profit rose sharply on higher asset management fees.
• Fifth Third Bancorp's quarterly profit rose on higher fee and commission income.
• Standard Chartered appoints Sal Vitale as head of US coverage.
Key events that could impact markets on Wednesday:
- ECB President Christine Lagarde to attend a dialogue at the World Economic Forum in Davos.
- ECB Governing Council member and Banque de France governor Francois Villeroy de Galhau to speak at the Davos Interest Rate Commission; ECB policymaker Klaas Knot to speak in Davos.
- Earnings from Johnson & Johnson, Halliburton.
Fundamental news
• Trump has suspended almost all US aid programs to other countries. This only concerns development assistance funds (does NOT concern aid to Ukraine). Suspension of aid programs to other countries for 90 days. During this period, it is planned to check them for compliance with the political goals of the new US administration.
• Trump confirmed his readiness to introduce 100% tariffs against BRICS countries.
• Trump puts Cuba back on list of state sponsors of terrorism a week after Joe Biden removed it - Politico
NATO should pay at least 5% more money.
• The US spent $200 billion more on the war in Ukraine than the entire Alliance - Trump.
• Elon Musk has placed the DOGE headquarters in the White House.
• Trump signed an executive order renaming the US Digital Service, which currently exists as the president's internal technology think tank, to the US DOGE Service. The new agency will be led by Elon Musk.
• The Senate has overwhelmingly approved the nomination of Marco Rubio for the post of US Secretary of State.
• Bessent's nomination for Treasury Secretary has cleared the Senate Finance Committee, which voted 16-11 to forward the nomination to the Senate for a final vote.
• The US share of global cross-border investment projects has reached a record high - FT, highlighting the country's stronger economic momentum compared with Europe or China as Donald Trump begins his second term in the Oval Office.
• Israel has launched the counter-terrorism operation “Iron Wall” on the West Bank of the Jordan River, says Israeli Prime Minister Benjamin Netanyahu.
• In Slovakia, the opposition force “Progressive Slovakia” is ahead of the Smer-SD party of the country’s Prime Minister Robert Fico in the polls.
Data from a poll conducted by Ipsos, cited by Aktuality.
• French President Emmanuel Macron has announced a project aimed at attracting more young people to military service - Le Monde.