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Today's big stories

US chipmaker Broadcom is thinking about buying software firm VMware
You may think you're buying the dip, but there's reason to believe this dip will dip even more – Read Now
Chinese EV maker Xpeng's quarterly earnings came in weaker than expected

Sliding Doors

What’s Going On Here?

US chipmaker Broadcom is reportedly in talks to buy software company VMware, in a deal analysts reckon could be worth more than $50 billion.

What Does This Mean?

Broadcom’s sliding doors moment came in 2018, when its big-money bid to buy fellow chipmaker Qualcomm was thwarted by regulators’ national security concerns. The letdown motivated the company to shift its strategy, in view of transforming itself into a diversified tech company that offers everything from chips to cloud computing. It kicked things off by buying Symantec’s cybersecurity division and CA Technologies for $11 billion and $19 billion respectively, and now VMware – one of the cloud industry’s key players – seems to have caught its eye. That stands to reason: data centers and the cloud have become critical areas of growth for the company.

Why Should I Care?

The bigger picture: What goes up…
It’s no surprise that Broadcom has been trying to reduce its reliance on chips over the past few years. Like other chipmakers, the company’s sales have boomed as semiconductors have become both more vital and harder to get hold of, with its chip segment growing around 20% last year alone. But the company has been vocal about the fact that the industry’s growth simply isn’t sustainable, admitting that it’s expecting to go back to its historical average of 5% a year sooner or later.

For markets: Who said dealmaking was dead?
It’s also no surprise that Broadcom thinks now’s the time to make this bid: VMware’s market value is now around half that of its peak in 2019, and Broadcom’s has more than doubled in the same period. That just goes to show that there’s still very much a market for big tech deals, as inflation and interest rate hikes bring down valuations and encourage cash-rich buyers to snag a bargain.

You might also like: Is VMware worth that sort of money?

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Analyst Take

You Call This A Dip?

Stéphane Renevier, Analyst

In the last few weeks, we’ve seen the S&P 500 lose around 20% of its value.

That’s got the market speculating that we’ve finally hit “capitulation” – the moment when investors decide to give up trying to claw back their gains and just cut their losses.

But here’s the thing: there are ways to tell when investors capitulate, and this ain’t it.

There’s actually no evidence that we’ve hit capitulation yet, which suggests this dip could dip even further.

So that’s today’s Insight: what you’d see if investors had capitulated, and how that impacts your dip-buying.

Read or listen to the Insight here

Old dogs, new tricks

The stock market’s been ruled by young bucks like Amazon, Apple, and Tesla recently.

But it looks like the old-timers are back to show them how it’s done: utilities and commodities stocks have been catching investors’ attention this year, according to a new TradeStation report.

Check it out for yourself: the chart above – created with TradeStation’s TradingView tool – shows insurance stock Traveler reached new highs earlier this month.

There’s more where that came from, and you can spot them all using TradeStation’s market-scanning tools.

Now sounds like a good time to get started: claim a $150 bonus when you sign up with TradeStation.

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