Interactive Investor

Must read: look ahead to Autumn Statement, OpenAI, Nvidia

Our head of investment rounds up the morning's big news.

22nd November 2023 09:20

Victoria Scholar from interactive investor

    GLOBAL MARKETS

    European markets have opened higher, with the FTSE 100 trading just shy of resistance at 7,500.

    Sage Group (The) (LSE:SGE) has soared to the top of the UK index, up around 10% after the software business reported an 18% jump in full-year underlying operating profit, landing shares up almost 50% year-to-date.

    Meanwhile, Kingfisher (LSE:KGF) has slumped to the bottom of the FTSE 100 after downgrading its profit outlook for the second time lately, weighed down by weakness in France.

    In global developments, Israel and Hamas have agreed to a hostage deal and a humanitarian pause in Gaza of at least four days. In the US, minutes from the latest Federal Reserve meeting pointed to a low likelihood of another imminent rate hike, with the central bank planning to tread ‘carefully’, paying close attention to the economic data ahead to inform its next move.

    However, it signalled that a rate cut doesn’t appear to be on the cards anytime soon. The S&P 500 and the Nasdaq Composite snapped a five-day winning streak, with shares in NVIDIA Corp (NASDAQ:NVDA) falling in after-hours trade amid lofting expectations for this year’s AI winner.

    AUTUMN STATEMENT 

    All eyes are on Chancellor Jeremy Hunt today as he prepares to deliver the Autumn Statement. With the Conservatives lagging in the polls, a looming general election, Rishi Sunak achieving his goal of halving inflation ahead of schedule, and the UK’s public finances in a better position than expected, the Treasury is anticipated to unveil some vote-winning tax cuts today. This marks a change from recent fiscal policy with the government until now refraining from tax cuts and keeping a lid on spending where possible in order to support the Bank of England in its attempts to tame inflation. 

    We could see a one-year extension to tax breaks for business investment as well as a cut to national insurance contributions and business taxes. It has already been revealed that the minimum wage will go up and expand to cover 21- and 22-year-olds for the first time. The Chancellor will also announce a back to work plan to boost employment and help those with long-term health conditions. Other areas to watch out for include a ‘pot for life’ in major pensions reforms as well as possible changes to ISAs, inheritance tax and stamp duty. Focus will also be on the Office for Budget Responsibility's independent economic forecasts for clues into the outlook for growth and inflation.

    OPENAI 

    In a rollercoaster sequence of events, Sam Altman is returning to the company he co-founded, OpenAI just days after he was sacked by the board and hired by Microsoft Corp (NASDAQ:MSFT) instead, which was a major surprise move that sparked upset among most OpenAI’s employees. OpenAI’s other co-founder Greg Brockman is also heading back to artificial intelligence start-up behind ChatGPT. 

    There will be a new board of directors instated, replacing some of those who ousted Altman. New members include Larry Summers, former US Treasury secretary, and former Salesforce CEO Bret Taylor. It is understood that scientists on the board wanted Altman removed because they were concerned about the company’s pace of expansion and the risks associated with AI. 

    However, they were ultimately overruled by 95% of OpenAI employees who signed a letter, threatening to quit after Altman was fired, sparking existential concerns about the future of the business.  

    Altman tweeted “I am looking forward to returning to OpenAI.” Microsoft’s CEO Satya Nadella said he’s encouraged by the changes to the OpenAI board. While he’ll no doubt be pleased about the fact that order has been restored at OpenAI, in which Microsoft is a major investor, there might be an element of disappointment that Microsoft hasn’t snapped up the Silicon Valley superstar Altman after all.

    NVIDIA 

    Nvidia reported fiscal third-quarter revenue growth of 206% to $18.12 billion, surpassing analysts’ expectations with data centre revenue up 41% and gaming revenue up 15%. It expects current quarter revenue of $20 billion plus or minus 2%, also beating forecasts for $17.86 billion. Earnings per share hit $4.02 outpacing estimates for $3.37. 

    But the company, which produces graphics processing units critical in the AI market, warned that it anticipates softness in China in the fourth quarter because of US export controls. It also warned about a potential impact to its business from the Israel-Hamas conflict.

    These two factors combined with lofty expectations for the stellar stock market winner this year, sent shares in Nvidia lower by 1.7% after hours, extending a near 1% drop in Tuesday’s session. But that downside move is a mere drop in the ocean compared to this year’s triple digit surge of almost 250%, with Nvidia the proxy play for this year’s investor hysteria around artificial intelligence.

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