Finimize - 📆 Beware of 2024

What’s going on here?

British chip design firm Arm is reaching for a valuation somewhere between $50 and $55 billion, according to recent news.

What does this mean?

The market for initial public offerings (IPOs) has been dead as a dodo recently, so the upcoming listing of semiconductor mega-firm Arm is hotly anticipated. And the price – or the valuation – is just the start. Whether the newly listed shares pop or drop depends on other things too. Timing, for example, is a biggie. If Arm's Japanese owner SoftBank floats it at just the right time, when investors are bullish on all things semiconductors, then the stock could start moving at full sail. But if the company misses that tide, then Arm's maiden voyage could see it stuck in relatively shallow waters.

Why should I care?

Zooming in: Let’s talk numbers.

If Arm does clock up a valuation between $50 and $55 billion, it’d be worth roughly 19 times its recently disclosed annual revenue. To put that into perspective, that kind of figure’s in the same ballpark as AI wunderkind Nvidia. And working out if that’s a bargain or not depends almost entirely on whether Arm’s poised for an AI-centric future. Up to now, Arm’s chip designs have been the backbone of standard semiconductors in phones and computers – but they’ve not been weaved into the AI-powering tech. Naturally, then, Arm’s gearing up to argue that a change is on the horizon.

For markets: Titillating the titans.

If you’re thinking of snagging some Arm shares post-listing, then you’ll probably find yourself in good company. Remember, Nvidia once tried to buy Arm lock, stock, and barrel from SoftBank – and while regulatory hurdles ultimately thwarted that deal, it still revealed Nvidia’s keen interest. Now, with the IPO in sight, it looks as though other tech behemoths like Apple and AMD might be mulling over a piece of the Arm pie too.

What’s going on here?

Economists now expect more sluggish growth in 2024, according to Consensus Economics.

What does this mean?

Economists, it seems, have a penchant for playing the party pooper. Despite central banks seemingly getting a handle on inflation and economies steadily progressing, a recent survey by the consulting firm Consensus Economics paints a less rosy picture. The naysaying pundits project the global economy to grow by a mere 2.1% next year, a dip from their earlier 2.4% estimate. All in all, then, it looks like 2024 might have more in its arsenal than just the Paris Olympics, record temperatures, and a no-holds-barred US presidential race…

Why should I care?

For markets: In this year’s shadow.

The crux of the economists’ argument is that 2023 might outperform expectations, making it challenging for 2024 to match up. After all, this year’s robustness could prompt central banks to keep interest rates high, potentially slowing global economies next year. But before you start tearing up, let’s be frank: the risks are real, true, but economists have made a habit of being Debbie Downers lately – so you’d forgive some glass-half-full folk for taking these gloomy predictions with a grain of salt.

The bigger picture: Stay alert.

All jokes aside, cautious observers might have a point. For one, economies have held up far better than anyone expected, so it’s only natural to worry that this momentum can’t last. And while heightened interest rates haven’t wreaked much havoc yet – sorry, Silicon Valley Bank – the real impact might just be biding its time. Worrywarts will point out that it takes time for the pain from higher borrowing costs to filter through to the real economy: just ask nervous homeowners in countries where mortgage rates generally aren’t locked in long-term, who are already biting their nails about upcoming refinancing.