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Download this episode on Apple Podcasts, Spotify, or listen below:
- Market reaction to SpaceX earnings and Tesla merger rumors
- Starlink restrictions and Ukraine military operations
- Cost considerations for new gaming consoles
- Microsoft earnings preview: gaming and cloud growth
- Importance of Azure and Microsoft 365 monetization
- Market outlook and investor sentiment for AI stocks
Transcript
Rena Sherbill: Hi, everybody, wanted to let you know about today’s episode, something a little bit different.
For those of you that may not know, I have been doing morning episodes on YouTube with Steve Cress, our head of quant at Seeking Alpha, who has been on Investing Experts many times, who has shared his stock picks and rationale behind those picks many times and we have been doing morning shows on YouTube, it’s @CressTopStocks, we’ve been going over that morning’s market movers, what’s happening in the market, the stocks that are moving the markets.
We’re taking a look at them from a quant perspective. Steve is off this week, so I have been doing the shows with Chris Ciaccia, who is our senior tech editor on Seeking Alpha’s news team. And I wanted to share today’s episode. I thought it extremely valuable, even though brief.
Much ado this morning about SpaceX (SPCX) earnings, will they merge with Tesla (TSLA)? Will Elon Musk take over the world? No, we don’t talk about that, but we do talk about the implications of Starlink restrictions vis-a-vis Ukraine and Russia.
We talk Microsoft (MSFT), some new Xbox news. Microsoft earnings also coming up next week. We get into that.
The future of AI, the future of tech, all in under 10 minutes. Anyways, hope you enjoy this episode. Check us out on YouTube. The videos that we’ve been doing with Chris, with Steve especially, have been really making their move, we’re also on TikTok. We are also on X/Twitter.
I hope you enjoy this episode. Let us know in the comments what you think.
Good morning, everybody. It is Wednesday, October 21st. I am here once again for this week with Chris Ciaccia, our tech editor on our vaunted news team.
Chris, what would you say, US stocks have risen after SpaceX jumped on an earnings beat. SpaceX earnings, that’s a new thing. What would you share about this morning’s market?
Chris Ciaccia: I think SpaceX, like you mentioned, is the big driver here.
Elon Musk kind of dropped a hint, or maybe a little bit more than a hint, maybe a little bit of a bomb, last night when he said that the boards of Tesla (TSLA) and SpaceX (SPCX) have formed committees to see whether a merger is feasible and whether it’d be a good idea. He’s come out and said that he thinks it’s a good idea.
Most investors kind of anticipated that this was gonna happen at some point, but the timing is what’s new here and if SpaceX and Tesla do merge, it just makes them an even more formidable competitor in AI against companies like Microsoft (MSFT) and Google (GOOG) (GOOGL) and Amazon (AMZN) and those guys.
So that’s really kind of what’s driving the market right now is that sentiment and then we had some better than expected results from SpaceX, which I think we’re investors pleasantly surprised with and that’s really what’s driving the the sentiment right now.
Rena Sherbill: What else would you share about what would happen in the tech landscape if SpaceX did you know, merge with Tesla?
Chris Ciaccia: Like I said, I think it makes them a more formidable competitor to get access to chips.
Elon Musk has come out and said that they have a great relationship with NVIDIA (NVDA). And I think when you get the fact that now that that company could potentially be worth three and a half trillion dollars or so, that puts them in the landscape with Microsoft and Google and Meta (META) and Amazon in terms of size and scale.
So it puts them at the front of the table when they need to get access to NVIDIA’s chips as opposed to being like a second rung player there.
Rena Sherbill: We also had news from Elon Musk vis-a-vis Starlink that he had ordered restrictions on SpaceX’s Starlink that disrupted Ukrainian military operations. Thoughts about that piece of news?
Chris Ciaccia: I think there’s been a lot of back and forth on this. reporters asked President Trump the other day whether he was responsible for it. He came out and said no. Elon Musk said he didn’t do it, and if there was any kind of degradation to s the satellites, that it would come from the Trump administration. So it’s kind of a he said, she said kind of thing here with Ukraine President Zelensky, Trump, and Musk. So we don’t really have a clear answer on this right now.
But all we know is that Ukraine’s operations in the war against Russia are heavily reliant on Starlink’s satellites, so they’re at a disadvantage here and they need to get this situation resolved one way or another.
Rena Sherbill: Our third piece of news today relates to Microsoft (MSFT), which is reportedly planning to launch a next gen Xbox handheld device for the 2027 holiday season and for the 2028 holiday season, according to Fortune. And for those lucky few, it will cost between $1,200 – $1,800 unless some subsidies arise. Thoughts about this piece of news?
Chris Ciaccia: Generally what happens is when you when companies come out with consoles, they tend to sell them at a loss or they do subsidize them at least initially because they are so expensive to create.
We’ve seen that with Microsoft and Sony (SONY). Nintendo (NTDOY) hasn’t really done that a lot, especially now with the Switch two, which is priced at about five hundred dollars. They’re still making a profit on every Switch two console that they sell.
But in the past, Microsoft and Sony have done that while they’ve worked down to bring down costs in the supply chain.
But $1,200 to $1,800 is still a expensive console. That’s more expensive than some computers, some laptops. So I would not be surprised to see if Microsoft works to continue to get the costs down or makes it a little bit less of powerful machine or machines.
Because that’s a big pill to swallow even for a company with Microsoft’s balance sheet.
Rena Sherbill: Anything to note their earnings come out next week. Anything to note ahead of earnings there?
Chris Ciaccia: In the gaming space, I think investors want to see if there’s any kind of turnaround with Activision and with Xbox. That’s been kind of a drag for Microsoft over the past few quarters.
And then the big thing that investors really pay attention to is their Azure Cloud Unit. Anything less than mid-40s growth, given where the stock is right now, is probably gonna hit the stock.
If Microsoft is able to show mid-40s growth for Azure, then I think you see the shares continue to rise.
And the other issue that I would call out too is Microsoft 365 and Copilot. We need to see some sort of increase in monetization there.
Microsoft started to turn that ship around a little bit, but not nearly to the point where competitors like Google with Gemini or ChatGPT or Anthropic (ANTHRO) with Claude are doing. So we need to see some of that otherwise you could see some sell off after the print.
Rena Sherbill: Any final thoughts or points to make?
Chris Ciaccia: I think just what we talked about before with SpaceX kind of bringing back a little bit of euphoria to the AI trade.
We’ve got some earnings over the next couple of days with Tesla, Meta, Western Digital (WDC), Seagate (STX). We need to see continued strength there, or we’re back to square one with that.
We’re starting to see yields come down a little bit for whatever reason, maybe the trade got extended, but yields have come down.
Oil’s back now near a hundred dollars so that’s kind of a the push and pull there.
But in terms of the AI trade, these results from Meta, Tesla, and the other big companies that report this week are paramount for investors to bring back that hope and optimism going into the rest of the year.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
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