The China-U.S. race to lead in artificial intelligence is back in the spotlight. Chinese AI stocks look to be in demand again after e-commerce and cloud-computing giant Alibaba’s earnings beat.
Ryan Cohen, the activist investor who helped trigger the GameStop meme-stock craze, apparently thinks so. He raised his stake in Alibaba to $1 billion according to The Wall Street Journal, which could have plenty of his retail investor followers wondering whether to emulate him.
There are tailwinds. Tech looks to be back in favor with Beijing after Alibaba founder Jack Ma was pictured at a recent meeting with President Xi Jinping, suggesting the regulatory crackdown on the sector is a thing of
the past. AI start-up DeepSeek demonstrated Chinese models can compete with Western rivals. And China has a strong record of innovation—look at the growth of “superapps” such as WeChat, or the rise of TikTok.
However, a more durable run might be tough. Alibaba’s quarterly revenue growth might have been its quickest since late 2023 but a 13% increase in cloud-computing revenue isn’t that impressive compared with Microsoft’s Azure or Google Cloud, which are growing at 30% rates.
What about future growth? Alibaba said in the next three years its investment in cloud computing and AI infrastructure is expected to exceed that of the past decade. Analysts at Jefferies put that at more than $40 billion over the period.
By comparison, Amazon intends to spend $105 billion this year alone. Plenty of that money will be going on Nvidia’s next-generation chips—to which Chinese companies won’t have access. Next week’s earnings from the chip maker should show the pace of AI innovation in the U.S. isn’t slowing down and China might have a hard
time keeping up, even if its tech leaders can meet the changing demands of the ruling Communist Party.
—Adam Clark
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Walmart’s Outlook Stokes Worries About Consumer Spending
Walmart’s softer-than-expected full-year outlook sparked worries of a slowdown in consumer spending and weighed down other retail stocks. Walmart sees current-year sales increasing by 3% to 4%
from the prior year, and the low end of that range is below what Wall Street has forecast.
- Walmart executives said that while wallets have been stretched, consumers are still resilient and looking for value. Higher-income households account for most of its recent market share gains. CEO Doug McMillon said they see a
continued shift in demand toward lower-profit products such as groceries and pharmacy items.
- Fourth-quarter revenue rose 4.1% from a year ago to $180.6 billion, and adjusted earnings of 66 cents a share was also a touch above expectations. But Walmart’s full-year adjusted earnings of $2.50 to $2.60 a share fell short of estimates.
- Online furnishings retailer Wayfair reported a larger-than-expected fourth-quarter loss of 25 cents a share, but revenue of $3.12 billion beat projections. Management said current-quarter revenue is steady and its gross margin forecast of 30.5% nearly matches expectations. Demand is weak amid economic uncertainty.
- Procter & Gamble CFO Andre Schulten said the company expects the environment will be “volatile and challenging,” noting slower consumption and tariff-related volatility and higher costs. P&G maintained its full-year guidance but said external factors could contribute to a “slightly below guidance” outcome.
What’s Next: Weight-loss drugs could help
Walmart offset weaker sales in general merchandise. CFO John David Rainey cited health and wellness sales growth in the mid-teens percentages thanks to GLP-1 medications, the type sold under brands by Novo Nordisk and Eli Lilly.
—Sabrina Escobar, Karishma Vanjani, and Janet H. Cho
Buffett to Address Key Berkshire Questions in Annual Letter
Berkshire Hathaway CEO Warren Buffett is due to release his eagerly awaited annual shareholder letter on Saturday morning and investors may be looking for a road map for the post-Buffett era. The letter will be issued in conjunction with the company’s annual report and fourth-quarter earnings.
- This year is Buffett’s 60th at Berkshire’s helm and the company is operating from a position of strength with record operating earnings in the first nine months of 2024 and a record stock price.
- There are several things Buffett may address including succession, the
company’s huge cash position, investment opportunities, buybacks and dividends, and the role of Berkshire’s investment managers.
- Berkshire was sitting on about $310 billion in cash at the end of the third quarter, up from $167 billion at the end of 2023. And the 2024 year-end figure could approach $325 billion. Buffett wrote last year that the cash was “far in excess of what conventional wisdom deems necessary.”
What’s Next: Buffett turns 95 in August and his designated successor, Berkshire executive Greg Abel, is “ready to be CEO tomorrow,” Buffett wrote in his
letter a year ago. One possibility would be for Buffett to give up the chief executive job while remaining chairman, however he has given no indication he wants to take that step.
—Andrew Bary
FTC Inquiry on Censorship Weighs on Social Media Stocks
The Federal Trade Commission is seeking public comments about how consumers might have been harmed by technology platforms that limited their ability to share ideas and affiliations. The move weighed on social media
stocks like Reddit, where users have complained about censorship. Reddit’s growth depends on new users.
- Last week, Reddit reported
slower-than-expected growth in new users. Its stock sank 7.5% on Thursday, the worst one-day percentage drop since March 2024, Dow Jones Market Data said. FTC Chair Andrew Ferguson, appointed by President Donald Trump, is looking at how Big Tech companies may be violating the law.
- Other social media stocks also
declined. Meta Platforms, owner of Facebook and Instagram, closed down 1.3%,
