WATCH: There’s no shortage of negativity in the real estate sector but Jeff Olin, one of Canada’s top real estate investors, believes there are opportunities to be had. The President & CEO of Vision Capital has built a track record of finding value in real estate when others miss it, and he shares where he’s bullish, where he’s cautious, and why supply and demand is his ultimate “North Star.”
On Wednesdays the kids have a late start which means we can all sleep-in a bit and have a relaxed morning. So naturally I’ve been up since 5am.
Here are 5 things to know today:
Boom, bust, boom: Tech stocks got walloped yesterday taking down the TSX and US markets. Interestingly, while the indices were down there were more stocks that traded UP than down. But because tech stocks are such heavyweights, they have the power to take down the index when they sell-off. The initial enthusiasm around Nvidia’s $100 billion data centre deal with OpenAI gave way to concerns of the lengths they had to go to drive sales for their AI chips. It also raised eyebrows about “circular financing” ie Nvidia giving customers money so they can turn around and buy Nvidia chips. Larry McDonald of the Bear Traps Report warned on the podcast that accounting issues had the potential to burst the AI bubble. The second reason for the sell-off was a speech by Fed Chair Jerome Powell who didn’t offer any hints that another rate cut was coming. He said that while the risk to job growth was to the downside (favouring cuts), the risk to inflation was still to the upside (favouring caution). Also, there is a growing risk of a US government shutdown after President Trump cancelled a meeting with Democrats saying no meeting could be productive right now. However, most economists believe a short shutdown would have minimal impact on the economy with the main consequence for markets being the release of the September jobs report would be delayed. This morning, futures are rebounding forgetting the AI concerns of yesterday and popping on a different set of AI headlines.
AI IRL: Alibaba is soaring 9% in the pre-market and propping up the futures after promising that AI spending will be higher than $50 billion. I’d like to imagine getting a similar positive response from my husband every time I promise to spend over budget when I go shopping. Alibaba is poised to open at a four-year high as the company also announced plans to integrate Nvidia chips into its physical AI platform that would enable developers to use them for building things like robots and self-driving cars. This cements Alibaba’s position as the best AI enabler in China, according to Morgan Stanley’s Gary Yu. Analysts also believe the increased spend means that the company is optimistic it will ultimately drive cloud sales growth.
Baked in: Micron is flat despite better than expected earnings and a robust forecast driven by AI demand. Keep in mind the memory chipmaker has been on a tear and is trading near a record. Under the hood, the results are impressive. Total sales grew 46% while profit tripled from last year. Micron makes a memory chip that feeds data to AI accelerators at extremely fast speeds. Memory chips were primarily used in PCs and mobile phones and Micron’s fortunes rose and fell with demand of those products. But thanks to the billions being poured into AI data centres, sales in that category now make up more than half of Micron’s revenue. Stifel says this is a structural shift that bodes well for their gross margins. “We believe these disclosures will help investors better appreciate the structural shift in Micron’s revenue composition (majority datacenter now, not consumer),” wrote Brian Chin of Stifel.
Stop and go: Stellantis is down 3% this morning after announcing it will halt production at some of its plants in Europe. The maker of the Jeep and Dodge branded vehicles says the halt is temporary and due to lagging demand for its Alfa Romeo Tonale SUV. Shares of General Motors, on the other hand, are up 3% after after UBS upgraded the stock to buy and slapped a street-high $81/share price target. This implies near 40% upside from here and marks the second upgrade in less than two weeks. While tariffs have increased costs and weighed on margins, UBS is confident they have levers to pull to mitigate those issues and is betting that margins can return to 8-10% vs the consensus estimate of 6-6.5%.
Uncle Sam’s portfolio: Shares of Lithium Americas are soaring nearly 70% in the pre-market on reports the US government is seeking an equity stake. You read that right. Lithium Americas is a Vancouver-based lithium miner that has one of the largest lithium deposits in the United States (Thacker Pass in Nevada). Bloomberg says the equity stake is part of renegotiations with the Department of Energy on its $2.3 billion. “We believe a gov’t stake would lend credence to project completion and expansion to multiple phases with perhaps enhanced economic,” wrote TD Cowen’s David Deckelbaum
Don’t miss our next episode out tomorrow morning!
