Meta’s latest move in the AI talent war, plus Cramer’s 4 quick hits
Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch, an actionable afternoon update just in time for the final hour of trading on Wall Street. Stocks pulled back on Friday, ending another volatile week. Weakness in hyperscalers (Amazon, Alphabet, Meta Platforms, and Microsoft) impacted the major averages. The S&P 500 is down more than 1% while the Nasdaq is headed for a decline of more than 2%. The Dow has been nearly flat throughout the week. Semiconductors and AI infrastructure stocks took the brunt of the early selling pressure, although many names, including Micron, Sandisk, GE Vernova, Eaton and Qnity Electronics, recovered as dip buyers stepped in. 4 quick hits from Jim: Because people are catching offers everywhere, they are expanding their tech niche into aviation. GE Aerospace was up nearly 3%, while Honeywell Aerospace, the Club name, was up more than 2%. You can pick a tech stock, but don’t buy until the end of the day because I’m afraid those on the margin will panic or have to leave. Health care will be in good shape for a while. In fact, I think stocks like Abbott Labs should also be examined. But Johnson & Johnson is the way to go, because I think it can really break out here because it was a stellar quarter. We raised our club share price target. Industrial sectors will be challenged due to exposure to data centres. Go with shipping stocks instead. Choose FedEx and FedEx Freight. (Simply put, transportation is companies that move stocks, goods, and people.) Another sign of the intensifying AI talent war: Longtime Amazon Web Services executive Dave Brown is leaving after 19 years and is in talks to join Meta, according to multiple reports. Brown led AWS’s computing and machine learning services division, overseeing key AI infrastructure offerings, including Amazon’s custom Trainium AI chips. When the Investment Club interviewed him earlier this year, he argued that the future of AI infrastructure will be won by improving “price performance,” delivering more computing power at lower cost through custom silicon. “If customers can find a chip and processor that allows them to get more performance for less money, that’s a very strategic advantage for their business,” Brown said. That philosophy has become even more important as AI models become more computationally intensive and power-hungry. If Brown brings that expertise to Meta, it could strengthen the company’s ambition to eventually build a cloud computing business, a strategy CEO Mark Zuckerberg said was “definitely on the table” at the company’s shareholders meeting in May. Jim earlier this month told Meta that it was “definitely on the table.” In related news, the New York Times reported on Friday that Anthropic is working on a deal to lease up to $10 billion worth of computing power from Meta over two years, while CNBC’s Kate Rooney confirmed the report, noting that the two companies are in preliminary talks, according to a person familiar with the matter, and about 80 companies in the S&P 500 and six companies in the portfolio are scheduled to report over the past few days. After reviewing it, we thought Goldman Sachs was the best, and Wells Fargo also showed solid improvement, and the market rewarded that a bit later. Next week will be more of an industrials, auto, and defense-focused week, but Alphabet is the first out of the gate among hyperscalers on the horizon, with both Alphabet and Intel slated to report, and it’ll be interesting to hear what management has to say about capital spending and its decision to raise $84.75 billion via stock offerings in June (Jim Cramer’s Charitable). See here for a full list of stocks in the trust.) When you subscribe to CNBC Investment Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. If Jim talked about a stock on CNBC TV, he waits 72 hours after sending the trade alert before executing the trade. THE INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, WITH ITS DISCLAIMERS. NO FINAL OBLIGATIONS OR DUTIES SHALL EXIST OR ARISE BY RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO RESULTS OR PROFIT CAN BE GUARANTEED.
