Finimize - 😡 AMD made investors MAD

What’s going on here?

Carmaker Stellantis reported strong results on Wednesday – but it could soon be spinning its wheels.

What does this mean?

Let’s start with the good news: Stellantis, the auto giant behind brands like Fiat, Peugeot, and Jeep, managed to shift last year’s supply shortages into reverse last quarter, reporting a healthy 14% revenue boost that beat estimates. And the bad? The firm’s inventories have swelled to about 1.3 million cars, with production on the up just as a grim economic outlook’s dampening demand. In fact, Stellantis’ biggest market, North America, is facing a particularly bad inventory crunch, and that’s knocked its average selling prices in the region down for the first time in ten years. Clued-investors realized that spells trouble for the firm’s profit margins – and even Stellantis’ new share buyback program, worth almost $2 billion, couldn’t stop them speeding away.

Why should I care?

Zooming in: Pushing down and Porsching up.

Ford warned this week that carmakers might be forced to continue slashing prices. Higher production is one factor in that – and mid-range manufacturers seem to face the most risk now that Tesla’s price-cutting is snatching away their customers. For luxury players, that’s all hunky dory: with Tesla shifting downmarket, they can focus on the high-rollers whose deep pockets make price cuts less important. Just look at Aston Martin, whose average selling prices jumped 20% last quarter, or Porsche, which is raising prices after seeing red-hot demand for its fanciest models.

Zooming out: Less hiking, more driving.

Higher interest rates have been one of the things putting the squeeze on car purchases, but it looks like the hikes could now be reaching their final destination. See, the Federal Reserve hinted that Wednesday’s 0.25-percentage-point hike could be the final shot in its 14-month attack on inflation. And that might create fewer potholes for drivers’ demand to slip into.

What’s going on here?

AMD’s watery results suggested the firm has sprung a leak.

What does this mean?

Things are looking pretty grim for the chip industry, what with the economy sliding and demand for tech products on the ebb. And even the gizmos that are being built aren’t much help: after all, many manufacturers have store-rooms chock-full of chips, so they’re wisely working through those instead of ordering more. That makes for a pretty hard-hitting punch, and it left AMD’s results seriously bruised. The damage included a 65% plunge in sales for the firm’s PC business compared to the first quarter last year. And there was little to soothe the pain: AMD’s sluggish data center and gaming segments barely budged – meaning the beat-up firm saw its first drop in quarterly revenue since 2019. That news, plus AMD’s equally underwhelming outlook, meant that shares took a dive of 6%.

Why should I care?

The bigger picture: Better late than never.

AMD's not alone in feeling the burn: rival Intel also had a pretty rough go of it last week. But both firms reckon the chip market's just about bottomed out, and they're expecting a rebound in the second half of the year. In the meantime, AI is where the action is: Nvidia’s leading the pack in producing those chips, and its stock's been outperforming both AMD and Intel this year. And sure, AMD might be late to the party – but it’s betting its new AI chips will start making waves by the end of 2023.

Zooming out: Getting schooled.

Nobody loves AI as much as lazy students, so it’s no surprise the education sector's getting a shakeup. US firm Chegg – which offers on-demand homework solutions – warned that ChatGPT's been stealing its thunder lately. That sent its shares plunging this week, and the ripple effect meant that shares in Pearson, Duolingo, and Udemy were rattled too.