Apple, Snap, Palantir Show the Divide Between the AI Haves and Have-Nots, and 5 Other Things to Know Before the Market Opens

Compare those tech leaders with the big names that are yet to fully embrace AI. Apple is trying to generate excitement for its Vision Pro headset, its first new product in almost a decade. Along with forecasts for poor iPhone sales this year, those efforts are falling flat so far.

Snap, apparently still living in the world where phone apps are all the rage, couldn’t even get a bump in its share price when it announced plans to lay off 10% of its workforce. Intel, one of the biggest chipmakers, hasn’t been able to get on the AI bandwagon. Its shares are down 15% this year.

It’s still possible to get back on track. Intel, for example, is due to launch AI-focused chips later this year.
Meta
managed to shift emphasis from the metaverse to its AI benefits, and its shares are up almost 30% this year, also aided by a surprise dividend.

In the meantime, the Federal Reserve may not be doing as much as hoped to help the tech industry that usually thrives when interest rates are lower. Missing this AI wave is likely to become more harmful as the year marches on.

—Brian Swint

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Palantir
Outlook Cites Surging AI Demand, Continued Political Tensions

Palantir Technologies
is seeing surging demand from companies for artificial intelligence products, helping lift it to better-than-expected fourth-quarter results and raise its 2024 outlook. CEO Alex Karp told shareholders AI demand is “unrelenting” and significantly contributes revenue and new customers.

• Fourth-quarter revenue for the software and analytics company rose 20%, to $608 million, accelerating from 17% growth in the third quarter. Commercial revenue rose 32% from a year ago, to $284 million. Karp said in a letter that every part of the organization is focused on the AI rollout.

• Karp noted that the fourth quarter was the fifth consecutive profitable quarter. Palantir ended 2023 with $210 million in net income, its first profitable year since its founding. He toldBarron’s Palantir was built “around the assumption that the world was not stable, that prejudices were not disappearing.”

• While the commercial operations are growing the fastest, Palantir still makes more revenue from the government sector, up 11% to $324 million and slightly lower than expected. Karp has also been open with his support of the Israeli military—a Palantir customer—in its current war with Hamas in Gaza.

• The current geopolitical landscape—with unrest in the Middle East, war in Ukraine, and the U.S.’s contentious relationship with China—will benefit Palantir, he said. “The parts of the government that are preparing to go to war are either using Palantir or are about to use Palantir,” he said.

What’s Next: Palantir’s March-quarter revenue forecast of $612 million to $616 million is slightly below expectations, but its full-year revenue projection of $2.65 billion to $2.67 billion is above the current consensus estimate.

—Eric J. Savitz and Janet H. Cho

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Fed Speakers Want More Data to Confirm Inflation Trend

Fed speakers on Monday appeared to support what Chair Jerome Powell said during a television interview on Sunday night. The economy is making progress toward the central bank’s 2% target for inflation but they want to continue to see data that supports the trend before settling on a firm time to begin cutting interest rates.

• Fed Gov. Michelle Bowman sees inflation continuing to drop with interest rates at their current level. Should the data indicate inflation is moving toward the 2% target, it will eventually be appropriate to gradually lower rates. But she said the conditions aren’t there yet, and inflation risks persist.

• Speaking in Hawaii over the weekend, Bowman said those risks include possible shocks to food and energy markets from geopolitical conflicts, or a reacceleration of inflation spurred by demand. High core services inflation and a pick up in wage inflation are also a concern, she said.

• Chicago Fed President Austan Goolsbee told Bloomberg Television he’d like to see more of the favorable inflation data that has been coming out, but he didn’t explicitly rule out a March rate cut. More data confirming the trend would indicate the U.S. was on the path to normalization, he said.

• Bowman is scheduled to make a speech on Wednesday this week, while Cleveland Fed President Loretta Mester is expected to speak today. Richmond Fed President Thomas Barkin is slated to speak Wednesday and Thursday.

What’s Next: In addition to the lineup of Fed speakers this week, Treasury Secretary Janet Yellen pays a visit to Capitol Hill, where she will testify in the House today and the Senate on Thursday to give the Financial Stability Oversight Council’s annual report to Congress.

—Liz Moyer

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Snap Joins Tech Industry Job Culling as Earnings Loom

Snapchat
parent
Snap
is cutting about 10% of its workforce, or more than 500 jobs, becoming the latest tech company forced to adjust for a changing environment. The disappearing-message platform portrayed the cuts as aimed at ensuring it has the capacity to invest in growth over time.

• The announcement came just a day before Snap reports earnings, due out after tonight’s closing bell. Snap’s forecast calls for revenue to rise 2% to 6%, between $1.32 billion and $1.375 billion. Investors have been watching its new partnership with
  Amazon
  and an advertising rebound.

• Snap’s job cuts follow those announced by other tech companies, including
  Microsoft,
  Amazon,
  PayPal,

  eBay,
  and
  Okta.
  The site Layoffs.fyi says 123 tech companies have cut more than 32,000 jobs in 2024.

• Snap cut 20% of its workers in August 2022, amid weaker-than-expected revenue growth, and about 3% last year after winding down an enterprise business. Its stock has risen 39% over the past year as the market has turned more positive on its cost control and advertising trends.

• The changes
  Apple
  made to its operating system to enhance user privacy made it harder for advertisers to track the effectiveness of online ads for platforms like Snap. The company said last year that it was adapting to slowing revenue growth amid increased ad competition.

What’s Next: Snap will record charges of $55 million to $75 million for severance and other costs, mostly in the first quarter. For the fourth quarter, analysts expect Snap to report adjusted earnings of 6 cents a share on revenue of $1.38 billion, and 822 million monthly active users.

—Janet H. Cho and Adam Clark

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Beaten-Down China Stocks Surge on Stimulus Hopes

Chinese stocks surged Tuesday, rebounding after days of volatile and brutal trading driven by continued fears over an economic slowdown. A bounce higher has come after signs of support from Beijing, but Chinese names are still heavily beaten-down and it remains to be seen whether this rally has staying power.

• Widely-held U.S.-listed Chinese names soared, with Alibaba and NIO among the stocks jumping early Tuesday. Hong Kong’s Hang Seng Index rallied 4% with the Shanghai Composite gaining 3.2%, after the latter closed Monday at its lowest level since early 2020 following a six-day losing streak.

• Central Huijin Investment, a sovereign fund, said Tuesday that it would increase purchases of exchange-traded funds, the latest signal that Beijing is stepping up support for stocks. China’s securities regulator said Monday that it would work to maintain market stability, and there was a report that President Xi Jinping would meet with regulators to discuss the situation.

• The force behind declines in Chinese stocks in recent months is deep concerns about stagnation in the world’s second-largest economy. China faces structural economic problems, including stresses from its sprawling and indebted property sector, and a base of domestic investors that looks increasingly unwilling to sink more money into markets.

What’s Next: The latest measures are helping stocks stage a rally—but investors should take heed, because this isn’t the first time Chinese equities have whipsawed on hopes of stimulus, which have so far mostly disappointed.

—Jack Denton

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Natural Gas Prices Down Sharply, and Not Just for Weather

Natural gas futures are down 40% in three months. Unseasonably warm temperatures across much of the U.S., apart from a cold snap in January, are only one factor. Oil production is boosting natural gas supply, even though natural gas producers are reining in output. That might not change for some time.

• Forecasters see a warmer-than-usual February in most of the U.S. because of the El Niño weather pattern, which brings warmer temperatures inland. February is the second-most important month for natural gas demand, Roth MKM analyst Leo Mariani wrote.

• Natural gas production in the U.S. has continued to grow, but demand isn’t keeping up. The amount of natural gas in storage is 5% above normal, which is weighing on prices. Natural gas producers reduced the number of rigs by 20% over the past year.

• “Associated gas” from oil wells has increased as oil production rises, the biggest reason why natural gas production keeps rising despite fewer production rigs. Associated gas could account for an average of 20% of production through 2050, the Energy Information Administration said.

• Nearly 400,000 customers in California were without power as of Monday, according to poweroutage.us, after severe storms brought hurricane-force winds and heavy rain. Officials warned of potential flooding, mudslides, and snowfall at higher elevations.

What’s Next: Liquefied natural gas (LNG) export capacity is expected to grow by 85% in the next four years, potentially lifting demand for U.S. gas and boosting producers such as
EQT
and
Chesapeake Energy.

—Avi Salzman and Janet H. Cho

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—Newsletter edited by Liz Moyer, Callum Keown, Rupert Steiner