Equities report: Amazon to invest in OpenAI, as the self-funding circle continues

Phaedros Pantelides Independent Analyst

US equities moved lower since last week. In today’s report we are to have a look at the recent US employment data release, the newest developments in the bidding war for Warner Bros and Amazon’s newest investment in OpenAI. We are to conclude the report with a technical analysis of S&P 500’s daily chart.

Amazon to invest in OpenAI as the AI self-funding circle continues

Amazon is apparently preparing to invest $10bn in OpenAI and sell it chips and computing power, with the deal anticipated to include OpenAI using Amazon’s Trainium series of AI chips and renting more data center capacity in order to run its models. In theory, Amazon is giving OpenAI money who will then be using that money to purchase data center capacity from Amazon and their Trainium series of AI chips, essentially returning the money back to Amazon. This appears to benefit OpenAI by essentially providing them with funding to increase their cloud capacity, whilst Amazon benefits from OpenAI using their services, so our real question is when will this stop. In our view, Amazon is essentially giving OpenAI money in return for OpenAI to use Amazon’s cloud computing storage and AI chips, so essentially giving back a portion of the deal. Overall, the true winner here may be Amazon who may see increased artificial demand for their AI chips and cloud services, whilst receiving feedback and data from OpenAI. On a personal level, this analyst begs to ask the question as to when this circular investment cycle will stop, as a failure to produce tangible returns and results in the coming year after so much investment could lead to the dominoes falling, possibly unravelling the AI bubble.

Mixed employment data

We highlight the US’s employment data for November which was released yesterday.The data showed that the labour market remained soft, leaving investors on edge about when the next rate cut from the Federal Reserve may occur. While the U.S. economy added 64,000 jobs in November, surpassing an estimate from economists polled by Reuters, the unemployment rate ticked upwards from 4.4% to 4.6% which may be the bigger issue here, as even though the NFP figure exceeded expectations, it is still at relatively low levels. However, the 43-day government shutdown distorted the data thus clouding the waters surrounding the actual state of the US Employment market. Nonetheless, the implications of a loosening labour market could increase pressure on the Fed to remain on their rate cutting path, thus easing the financial conditions surrounding the US economy, which in turn could aid the US Equities markets. Yet, we should note that the US CPI rates for November are due out tomorrow and could change the narrative and thus could weigh on the US stockmarkets should the data showcase an acceleration of inflationary pressures and vice versa.

Warner Bros to recommend to investors to reject Paramount’s offer and accept Netflix’s

According to Bloomberg, Warner Bros is planning to reject Paramounts takeover bid, citing concerns about financing an other terms. In particular, Warner Bros Board will urge stakeholders to reject the tender offer, as the board still views the company’s existing agreement with Netflix as offering greater value.Now attention turns as to whether Paramount will submit an improved bid or if the shareholders will opt for Nvidia and follow the board’s advice. Nonetheless, the possibility of Netflix being in the lead could provide support for the company’s stock price in the long run.

Technical analysis

US500 daily chart

Support: 6788 (S1), 6635 (S2), 6515 (S3).
Resistance: 6925 (R1), 7065 (R2), 7200 (R3).

On a technical level, we note that the index appears to be moving in a sideways fashion. We opt for a sideways bias for the index and supporting our case is the RSI indicator below our chart which currently registers a figure near 50, implying a neutral market sentiment. For our sideways bias to be maintained we would require the index to remain confined between our 6788 (S1) support level and our 6925 (R1) resistance line. On the other hand, for a bullish outlook we would require a clear break above our 6925 (R1) resistance line with the next possible target for the bulls being our 7065 (R2) resistance level. Lastly, for a bearish outlook we would require a clear break below our 6788 (S1) support level with the next possible target for the bears being our 6635 (S2) support line.

Author

Phaedros Pantelides

Independent Analyst

Mr Pantelides has graduated from the University of Reading with a degree in BSc Business Economics, where he discovered his passion for trading and analyzing global geopolitics.

AUD/USD consolidates above 0.7000/two-month low; bearish potential intact

The AUD/USD pair oscillates in a narrow range during the Asian session, and moves little following the release of mixed inflation figures from China. Spot prices currently trade around the 0.7025 region, nearly unchanged for the day, and remain within striking distance of a nearly two-month low set on Tuesday. Renewed hostilities between the US and Iran temper hopes for a deal to end the over three-month-old war.

Japanese Yen languishes despite wholesale inflation accelerates in May

USD/JPY flatlines after experiencing volatility, trading around 160.40 during the Asian hours on Wednesday. The pair continues to hold its ground, reflecting a struggling Japanese Yen that has failed to find support despite a massive acceleration in wholesale inflation. Driven by surging energy costs linked to the ongoing Middle East conflict, Japan’s Producer Price Index jumped 6.3% year-over-year in May. This hot printing comfortably outpaced April’s upwardly revised 5.3% figure and surpassed market consensus of 5.5%, marking the fastest pace of wholesale price growth in three years.

$4,200: Gold retains bearish bias near March low ahead of US CPI

Gold recovers slightly after touching a fresh low since March 23, though it retains a bearish bias near the $4,200 mark through the early European session. Renewed hostilities between the US and Iran fuel inflationary concerns and bolster bets for more hawkish central banks, which is seen as a key factor driving flows away from the non-yielding yellow metal. Furthermore, the decline could be attributed to technical selling following the recent breakdown below the very important 200-day SMA.

Cardano's downtrend deepens despite on-chain bottoming signals

Cardano edges lower to $0.1600 signaling a potential extension of the 30% loss from last week. The altcoin remains under intense selling pressure, weighing on its retail support. Still, a spike in dormant supply re-entering circulation signals that the selling pressure has run its course, a pattern that often precedes a rebound.

US CPI data set to show inflation at three-year high in May, backing Fed hawkish tilt

The US Bureau of Labor Statistics will publish the May Consumer Price Index (CPI) data on Wednesday. The report is expected to show another step up in consumer inflation, driven by the persistently high Oil prices due to the ongoing crisis in the Middle East.

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.