Mid-Week Wrap-Up - October 16th, 2024

Earnings season is off to a strong start

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CMG Venture & Mark Roussin
October 16, 2024

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Good morning investors!

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Every Wednesday we publish “The Mid-Week Wrap-Up” — your ticket to being well informed and staying ahead in the investment game!

This report is designed to help investors of all skill levels break down important stories/topics within the stock market. And best of all, we cut through all of the BS and give you exactly what you need to know in easy to digest, bite sized pieces of content.

This article is designed to truly give you that EDGE in the day ahead!

Grab your afternoon pick me up and let’s dive in.

Market Talk

The markets are mixed to start the week. The S&P 500 made new all-time highs earlier this week, though the index has cooled in the past day. In crypto, Bitcoin is +7% this week.

3 Stories Moving the Market

These are some of the biggest stories so far this week that are having an influence on market action.

UnitedHealth forecasts 2025 profit below Street estimates, shares fall

UnitedHealth Group provided a 2025 profit forecast below Wall Street expectations, causing its shares to drop this week.

The company reported earnings of $7.15 per share, better than the $7.00 estimates, and revenue of $100.8 billion, beating estimates of $99.1.

The UnitedHealth segment saw revenue increase 7% from last year to $74.9 billion while the Optum segment saw revenue increase 13% to $63.9 billion.

However, the company’s overall medical care costs were higher than expected, with a medical care ratio of 85.2%, compared to the anticipated 84.4% and well above last year’s 82.3%.

UnitedHealth's 2025 profit forecast of up to $30 per share fell short of analysts' $31.18 estimate, and it also lowered the higher end of its 2024 adjusted profit forecast by 25 cents to $27.75 per share. CEO Andrew Witty noted the conservative forecast was due to reduced government payments for Medicare and low Medicaid rates.

👉 EDGE ALERT: While UnitedHealth’s revenue grew by 9% YoY and EPS exceeded forecasts, rising costs are…upgrade to Edge+ to read the full Edge Alert.

Amazon goes nuclear, to invest more than $500 million to develop small modular reactors

Amazon Web Services (AWS) is investing over $500 million in nuclear power across three projects in Virginia and Washington State.

AWS, needing more clean energy to support its growing services, including generative AI, is also working towards Amazon's net-zero carbon goal.

It has partnered with Dominion Energy in Virginia to explore building a small modular nuclear reactor (SMR) near the North Anna nuclear power station. Virginia, home to 50% of U.S. data centers, plays a critical role in global internet traffic.

Amazon joins other tech giants like Google and Microsoft, who are also investing in nuclear energy to meet the increasing energy demands of data centers.

📚 EDGE-UCATION: What is nuclear power, what are SMRs and why is nuclear being used by tech giants to power its data centers?

Nuclear Power: Nuclear power is a method of generating electricity through the process of nuclear fission, where atoms—typically uranium or plutonium—are split, releasing a tremendous amount of energy in the form of heat. This heat is used to produce steam, which drives turbines connected to generators that produce electricity. Nuclear power plants can generate large amounts of electricity with very low greenhouse gas emissions, making it a clean energy source compared to fossil fuels.

Small Modular Reactors (SMRs): SMRs are a newer, more compact form of nuclear reactors. Unlike traditional, large-scale reactors, SMRs are smaller in size and can be built in factories and transported to sites, making them more scalable and cost-effective. They are designed to be safer with advanced cooling systems, use less fuel, and can be deployed in remote or specific locations to meet local energy demands. Because of their modular nature, they can be combined to create larger energy outputs if needed.

Why Tech Giants Use Nuclear Power for Data Centers: Tech companies like Amazon, Google, and Microsoft are investing in nuclear energy, especially SMRs, to meet the massive energy demands of their data centers. Here’s why:

  1. Sustainability Goals: These companies have committed to reducing their carbon footprints, aiming for net-zero emissions. Nuclear power offers a reliable, low-carbon alternative to fossil fuels, helping them meet sustainability targets.

  2. High Energy Demand: Data centers, which store and process vast amounts of data, require continuous, high levels of electricity. As companies expand their use of energy-intensive technologies like artificial intelligence, these needs will only grow. Nuclear power can provide consistent, round-the-clock energy without the variability issues associated with renewable sources like solar or wind.

  3. Reliable, Long-Term Power: Unlike renewables, nuclear power isn’t affected by weather conditions or daylight hours, offering a stable energy source. This is critical for data centers, which need continuous, uninterrupted power to function.

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ASML just gave us a first glimpse into how U.S. chip export curbs will dent China sales

Shares of ASML, a leading semiconductor equipment maker, have dropped over 20% this week after the company released disappointing sales forecasts earlier than expected. This sharp decline caused ASML to lose $56 billion in market value so far.

The report also dragged down other chip stocks, including Nvidia, AMD, and Broadcom.

ASML now expects 2025 net sales to be between €30 billion and €35 billion, at the lower end of its previous forecast. Additionally, its net bookings for Q3 were just €2.6 billion, far below the €5.6 billion consensus estimate.

The company faces a challenging outlook in China due to U.S. and Dutch export restrictions on advanced chipmaking tools, further complicating its business prospects.

In Other News

In this section we'll be curating a selection of news headlines we think you'll find interesting. If a topic catches your eye, click the provided links to read more about it.

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The Second Half

There are several major companies still to report earnings this week, while retail sales, jobless claims and several housing reports will be in focus on the economic news front.

Earnings Reports

There are still some major earnings this week. At the Investor’s Edge we will be watching Taiwan Semiconductor, Netflix, and Procter & Gamble.

Here is the calendar of earnings releases scheduled for the rest of the week:

Source: Earnings Whisper

Economic Reports

The retail sales report will be the main focus as we close the week, though there will also be the latest initial jobless claims data, a few housing reports and several Fed speeches.

Here is the full calendar of events scheduled for the remainder of the week:

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Thank you for reading this edition of the Mid-Week Wrap-Up.

Until next time investors!

Mark & Chris

The Investor’s Edge

Disclosure

This is not investing advice. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.

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