Weekly Market Update - 13 May 2024

EV Slowdown

A slowdown in the demand for electric cars has sparked such a brutal price war that even industry behemoth Tesla is struggling to cope with. But for the newer entrants in the race, the struggle is fast turning into a battle for survival. Lackluster quarterly reports from once-promising EV startups made clear what analysts and investors have worried about for a while now: Rapidly dropping prices on EVs will hit the smaller, unprofitable carmakers the hardest. Two of the most prominent in that group — Rivian and Lucid — reported wider losses than expected, after burning through a staggering amount of money for every vehicle they sold. The pair have been on a downward spiral ever since they went public in the EV heyday during the Covid-19 pandemic era. Both stocks now trade more than 90% below record highs. For the rest of the group, the picture is strikingly similar.

Source: Bloomberg

UK China

Rishi Sunak’s government faces pressure from banks including HSBC Holdings and Standard Chartered, as well as other major UK firms, to tone down proposed restrictions on doing business with China. Their target is part of new British national security legislation, which aims to boost transparency of any dealings with nations posing a “potential risk to UK safety.” Executives are lobbying ministers not to include China in the strictest risk category, arguing that would impede business and trigger negative publicity if they’re forced to declare it, according to people familiar with the matter. Even though the government has not made a final decision on how to designate China, there has already been a significant backlash among financial and other firms. The question of how close to let businesses get to China is part of a major political tussle in the UK.

Source: Bloomberg

Tepid Forecast

Arm Holdings slipped after the chip designer gave a lukewarm revenue forecast for the fiscal year, raising concerns that the tech industry’s AI spending spree is slowing. For fiscal 2025, revenue will be $3.8 billion to $4.1 billion while profit will be $1.45 to $1.65 a share, the company said. Analysts were predicting sales of $4.01 billion — representing a gain of 26% — and a profit of $1.53 a share. Three months ago, an upbeat forecast sent Arm shares soaring and helped turn the company into an AI darling on Wall Street. The stock had climbed 41% this year through Wednesday’s close. Arm’s chip designs and licensed standards already serve as critical technology for most smartphones. Under CEO Rene Haas, the company has been trying to parlay that position into a bigger presence in data-center hardware — where AI demands are spurring major upgrades. As part of that push, Arm is offering more complete blueprints to companies such as Amazon’s AWS.

Source: Bloomberg