Four versions of "Solarpunk" artwork, created by the AI Midjourney, as prompted by Sean Ellul...Sean Ellul via Midjourney
Think of your dream house. Maybe it has high, arching ceilings, a roaring fireplace and expansive windows that look out onto a placid lake. Or maybe it’s a breathing metallic dome that sits on a fiery planet and is filled with alien butlers. What if you could write a paragraph about those houses, and then immediately enter virtual versions of them and bring all your friends?
Thanks to recent developments in AI like ChatGPT and DALL-E, a future in which users will be able to create their own strange, immersive worlds is not far off. In the fall, three new text-to-3D generators were announced: GET3D from Nvidia, Make-a-Video from Meta and DreamFusion from Google.
And metaverse builders are already using text generators like ChatGPT—which responds to text prompts with startling poise and intelligence—and visual generators like DALL-E—which creates images out of text prompts—to ideate new worlds and designs.
Metaverse industry insiders say that these AI technologies will be crucial toward building virtual worlds that are detail-rich and customizable—that they hold the key toward creating metaverses that regular people will actually want to spend time in.
“We’re able to fill the internet with interesting stuff because everybody is capable of taking a picture, recording a video, or writing words,” says Rev Lebaredian, VP for Omniverse and simulation technology at the chipmaker Nvidia. “If we are going to create a 3-D internet, then you absolutely have to have the people who are participating in it creating content as well—and the only hope we have of making that happen is if AI can help us.”
Changing workflows
While the use of AI tools in metaverse creation isn’t quite there yet, it is already playing a crucial, if slightly mundate role. ChatGPT, for example, is being used by metaverse builders to brainstorm ideas, write code, and compose texts of decks and emails.
In researching for this story, I emailed Sean Ellul, the co-founder of the 3D development studio Metaverse Architects, to ask him if he’s been impacted by ChatGPT. He responded with a well-written five-paragraph email about how he’s been using the technology. But there was a catch: in the fourth paragraph, the e-mail revealed that it had actually been written by ChatGPT itself. Ellul had punched in the following prompt into the service and then sent it over (with minimal editing):
“Write an email to Andrew, from TIME, about how at the company Metaverse Architects we are using chat GPT to brainstorm code, prepare articles and ideate new projects. We even use it to write emails, such as this one!”
The ensuing email was staid, yet completely believable and informative. It was proof of the baseline powers of ChatGPT and the ways in which Ellul has implemented it into his daily processes. Ellul says he uses ChatGPT to tweak design ideas, solicit marketing techniques, create architectural blueprints, and many tasks in between….Continue reading….
From the outside looking in, it seems like a hard life earning a crust on the bitcoin mining breadline. Last year, when China imposed a blanket ban on the practice within its borders, a small army of miners hastily scrambled into action, powering down their machines, closing shop and redeploying their equipment overseas. Within a matter of months, China went from controlling two-thirds of all bitcoin mining worldwide to effectively exiting stage left.
Cryptocurrency miners are nothing if not resilient, but in few other industries would one have to up sticks and move country just to keep the lights on. It isn’t a case of hopping across a land border either. At considerable expense, ousted miners had to ship many tonnes of equipment from mainland China to far-flung territories such as the United States, Russia, Kazakhstan and Canada. If China left a gaping void it has been hurriedly filled, with Kazakhstan in particular cultivating a reputation as a mining hub.
Of course, things move fast in the much-maligned mining world. In recent weeks, Kazakh authorities have talked up significant tax increases for miners, some of whom are “severely damaging” the country’s energy system according to minister of digital development Bagdat Musin. The intrepid miners who made a home in the Central Asian Republic after being banished from China may soon be dusting off their passports, again.
Sandra Ro, the CEO of the Global Blockchain Business Council, speaking at the Senate Agriculture Hearing into cryptocurrencies in February addressed climate concerns related to bitcoin mining saying, “What we have today is actually an opportunity… mining has shifted to the U.S., Canada, and Nordic countries… [so, Congress] should encourage crypto mining firms to set up in an environment with (global) oversight, [to] champion the increase in renewables for the industry.”
Against this chaotic backdrop, it’s worth asking where is bitcoin mining headed? Will more countries join China and others in imposing outright bans? Or will stances soften thanks to the efforts of the Bitcoin Mining Council and eco-friendly innovations like Bitmain’s liquid-cooled rig?
Nothing less than the future of bitcoin is at stake, and with it the chance to exercise financial self-sovereignty via a decentralized cryptocurrency revered as digital gold. This, more that ever, in the current state of global political and economic volatility, is increasingly seen as a human right in the free world.
Bitcoin Mining: The Origin Story
Mining, of course, is the process that brings fresh bitcoin into being. The eponymous blockchain, which recently celebrated its 13th anniversary, depends on a Proof-of-Work (PoW) consensus algorithm that compels miners to solve mathematical problems that are difficult to solve but easy to verify.
Amid fierce competition from rival miners, PoW math problems are tackled and deciphered in exchange for a set quantity of bitcoin known as a block subsidy. This subsidy is then added to the sum of the transaction fees held in the block that is being mined to make up the block reward.
Just as gold-mining is the only way to increase the supply of the world’s most valuable precious metal, bitcoin mining is the only way to increase the supply of bitcoin. Of course, the currency does have a hard cap of 21 million bitcoins – so nodes can’t go on “producing” new bitcoin ad infinitum. Based on bitcoin’s predictable issuance model, the final coin will be mined some time around 2140.
Against all odds, Proof-of-Work has kept bitcoin ticking along for 13 years now with no recorded instances of double-spending. Those who expend electricity to verify transactions have a strong incentive to maintain the ledger’s integrity, and because PoW makes the cost of writing a block punishingly high, the security of the bitcoin network is more robust than it’s ever been. In fact, even if an attacker were to marshal 100 percent of the network hash rate, he would need over two years to completely rewrite the ledger dating back to January 3, 2009.
The Proof-of-Work PR War
Proof-of-Work is considered a marvel by bitcoin maximalists. As inventions go, they put it up there with the lightbulb and telephone. PoW has continued to attract criticism however, with many deeming the industrial-scale use of computing and electrical power wasteful. This has become the great bitcoin energy debate.
Such censure is not, on the face of it, unmerited. According to the Cambridge Bitcoin Electricity Consumption Index, the bitcoin network consumes 125.1 Terawatt Hours (TWh) per year, a little more than Ukraine (124.5) and a bit less than Egypt (149), a country that has banned bitcoin, along with Iraq, Qatar, Oman, Morocco, Algeria, Tunisia and Bangladesh. In the CBECI’s country rankings, bitcoin currently occupies 27th place.
Should a borderless cryptocurrency really consume more electricity than nation states? That depends on your perspective. If you’re a net-zero energy campaigner, the answer is probably no. If you believe the people of the world need a self-sovereign digital asset now more than ever, the answer is clearly yes.
Certainly, the miners are undeterred. 2021 saw the highest miner revenues to date, a remarkable fact given the block subsidy is halved every four years. Last year, bitcoin miners raked in $16.7 billion in revenue, more than the combined takings of the previous three years.
Evidently, China’s crackdown didn’t hit miners in their pockets the way many had expected. Perhaps that was just blind luck, China’s ban coinciding with bitcoin’s best year, but whatever way you look at it, miners seem to shrug off adversity with breathtaking ease.
Prior to Russia’s war with Ukraine, the central bank of Russia called for an outright ban on cryptocurrency mining, with a recent report claiming the “potential financial stability risks associated with cryptocurrencies are much higher for emerging markets, including in Russia.”
The pendulum has swung with Western governments concerned that Russian’s central bank, the regime, and oligarchs will now use cryptocurrency to evade sanctions, a concern that most agencies believe to be unfounded due to the inability of the cryptocurrency ecosystem to process such large volumes – bitcoin can’t fund a war.
Erik Thedéen, vice chairman of the European Securities and Markets Authority (ESMA), has meanwhile urged the EU’s 27 member states to ban Proof-of-Work mining, claiming PoW has become a national issue in his native Sweden due to the amount of renewable energy it uses. This itself is an interesting observation, since critics normally slate bitcoin for its dirty energy usage.
A few weeks back, concerns were raised by a text circulated by the European Parliament that created a defacto ban on proof of work consensus mechanisms in the EU. Following advocacy work from the industry, MEP Stefan Berger, the Parliament rapporteur, postponed the committee vote on February 28 and revisited the text highlighting the fostering innovation mandate of MiCA and its importance in this and setting global standards. As such, the text removed the reference to the ban.
A new text was inserted on the March 9 which is the one that will be voted on Monday March 14, now re-enters wording but instead creates a phase-out approach. The operative text in article 2a, makes no reference to proof of work consensus mechanisms directly but instead refers to those crypto assets already in issuance putting in place a phased rollout plan to ensure compliance with the minimum environmental sustainability standards.
Lavan Thasarathakumar, EMEA government and policy director at Global Digital Finance says, “What this means in practice will only become clear through the delegated acts with: the intensive consumption of energy; the use of real resources; carbon emissions; electronic waste; the specifics of incentive design; and, the scale of operation of the crypto asset being the attributing factors.
The text as sent to vote does include two recitals 5a and 5aa, which includes reference to proof of work consensus mechanisms and its propensity to be energy intensive, however crucially, the call for action is in the non-legislative part of the text but also asks for action to be taken on a horizontal basis as opposed to being product specific – good policy making.”
U.S. President Biden issued an Executive Order last week on Digital Assets paving the way for a new era of digital innovation, better coordinated cross-agency collaboration with industry, and ensuring America maintains its market leading position as the world’s digital innovation hub.
E.U. parliamentarians are advised to pay close attention to the digital space race unfolding with the China ban and Russia at war, Europe’s responsibility to open and fair competitive markets should be clear, and bitcoin and the crypto industry are key to this future.
“Banning mining is becoming a trend in the medium term,” observes Louis Cleroux, CEO of Canadian crypto platform Timechain. “Bitcoin miners need to find creative ways to reach agreements with countries right now. Using wasted energy with miners should be something to consider.”
Cleroux’s latter point is worth emphasizing, particularly as the bitcoin energy debate heats up. For all its energy demands, mining could actually reduce greenhouse gas emissions by consuming methane that would otherwise be leaked into the atmosphere via flaring.
On February 15, oil and gas giant ConocoPhillips confirmed that it was selling extra flare gas to bitcoin miners in North Dakota, part of its commitment to reduce routine flaring to zero by 2030. Ostensibly, the company will allocate gas that would otherwise be burned off to a pilot project managed by a third party, effectively making bitcoin a load balancer for energy waste.
“We need to increase awareness on actual losses we incur due to our inability to store energy,” says Louis Cleroux. “Selling excess energy to miners is the best for both parties. Also, in a Proof-of-Work ecosystem, the winning miners are the ones who are able to be competitive in terms of hashrate /energy cost. This competitive system promotes healthy competition between miners to push for more efficient mining activities.”
Eco-Friendly Evolution
According to Erik Thedéen, the crypto industry as a whole should be nudged towards Proof-of-Stake, a less energy-intensive form of mining wherein users stake coins to become validators. With this model, staking replaces the computational arms race of Proof-of-Work, with validators selected at random to add a block to the ledger. Number two network Ethereum is in the process of transitioning to Proof-of-Stake, a move which it’s claimed could reduce its energy use by up to 99.95 percent.
For the moment, though, there is no sign that the Bitcoin network will abandon its tried and tested Proof-of-Work mechanism. The model has stood the test of time and PoW is more decentralized than its energy-lite counterpart, aligning incentives to secure all transactions.
According to bitcoin bull Michael Saylor, PoW architecture “anchors the crypto-asset network physically and politically to the firmament of reality, driving ferocious competition in the marketplace to decentralize, improve, and secure the network, thus assuring vitality and integrity over time.”
Saylor’s business intelligence firm MicroStrategy is one of the world’s major bitcoin hodlers, having acquired 125,051 BTC for around $3.8 billion, and earning the company huge profits in the process. Last summer, amid mounting criticism from energy activists, Saylor co-founded the Bitcoin Mining Council to promote energy usage transparency and accelerate sustainability initiatives worldwide.
In its most recent report, the Council noted “dramatic improvements to bitcoin mining energy efficiency and sustainability due to advances in semiconductor technology, the rapid expansion of North American mining, the China Exodus, and worldwide rotation toward sustainable energy and modern mining techniques.”
Overall, the report put the percentage of renewable-powered bitcoin mining at 58.5 percent in the fourth quarter of 2021, a modest once percent rise since Q3. Nonetheless, things seem to be moving in the right direction. Ultimately, miners will always strive to seek out the lowest cost of power production they can find and the Council aims to highlight green options at every turn.
SpaceX founder and Tesla CEO Elon Musk was instrumental in bringing the Council into being, after all, it was the billionaire’s decision to reverse course on the acceptance of bitcoin for Tesla vehicles that reignited the debate around PoW. Musk even sat in on the inaugural Bitcoin Mining Council meeting last May. Energy concerns aside, Tesla still holds around $2 billion worth of bitcoin on its balance sheet.
“There are many initiatives that address criticism of bitcoin’s energy usage,” notes Maud Simon, COO of sharded blockchain Alephium, “Some are building alliances for clean mining, some are mining green blocks with certified hydro electricity, and others are attempting to reduce the quantity of energy required.
By capping energy consumption to less than an eighth of bitcoin’s after a certain threshold, our Proof-of-Less-Work innovation provides an example of how PoW chains can address the energy sustainability questions without sacrificing security and decentralization.”
One high-profile company that’s recently entered the mining business is Intel. Soon the California corporation will release its first crypto-focused chip, which it says provides “1,000x better performance per watt than mainstream GPUs for SHA-256 based mining.”
Dubbed Blockchain Accelerator, the chip will put Intel in direct competition with the likes of Bitmain, Canaan, and Nvidia. We’ll soon know whether the technology is all it’s cracked up to be. The first two companies to trial the chip will be Argo Blockchain and Block (formerly known as Square).
Existing hardware specialists are not deaf to the criticism of PoW. Bitmain’s latest mining rig, the S19 Pro+ Hydro, utilizes liquid cooling technology to reduce heat, power consumption and noise, with the added benefit of extending the machine’s lifespan. By deploying the machines, U.S. mining firm Merkle Standard expects to be net carbon negative by the end of 2022.
Clearly, the bitcoin mining industry as a whole is drifting away from polluting energies and embracing a more sustainable matrix that includes solar, wind, geothermal and hydro-electrical. Even nuclear sources are being tapped, as in the case of the fast-growing Mawson Infrastructure Group. Where an energy balance is not carbon free, Mawson uses carbon credits to offset its emissions.
Adrian Eidelman, Co-founder of smart contract platform and bitcoin sidechain RSK says, “The primary running costs for bitcoin miners is energy consumption, and they therefore have a clear incentive to find and maintain cheap sources, which are often renewable. Larger bitcoin mining farms are often located in remote locations, close to these energy sources, and take advantage of low energy costs that would either go to waste or be impossible to transfer to large cities.”
Mining has, to a large extent, taken place in the shadows up to this point. But that is beginning to change. We need only look at the launch of the first ever Bitcoin Miners ETF on the Nasdaq stock market. Rather than offering exposure to BTC itself, the product, which was pioneered by crypto asset manager Valkyrie, gives investors exposure to companies specializing in hardware or software used for mining the asset.
Looking to the Future
Aside from the criticism that stems from Proof-of-Work’s energy-intensive nature, questions have been raised concerning the longevity of the mining industry itself. After all, over 90 percent of bitcoin’s total supply has already been mined. With the block subsidy halving every four years (the next one’s due in 2024), won’t bitcoin have to see continual price appreciation for mining to remain profitable?
Well, yes. But that’s exactly what miners are banking on. While there is only 10 percent of bitcoin’s pre-programmed fixed supply left to mine, mainstream investors have only recently begun to look seriously at the asset class, suggesting there is plenty of room for growth. Bitcoin’s absolute scarcity, security and decentralization continue to make it a desirable digital asset for buyers.
And what happens when the final block has been confirmed, the last ever bitcoin mined?
One can only speculate what life will look like in 2140, but it’s entirely plausible that mining will continue. As mentioned earlier, miners receive a reward in every block they mine, made up of the block subsidy and the transaction fees.
In decades to come, the purchase power of bitcoin may be so strong, that the payout for the latter is enough to compel miners to maintain the ledger and mine blocks even in the absence of new bitcoins. It’s even possible that bitcoin will come to be regarded as so valuable a monetary base, that humans will allocate resources to keep the ledger alive despite money being lost when securing the network.
“Bitcoin mining will become an asset strategy of many countries in the future, and those opposing it will only be sacrificing their own prosperity by reducing innovation as well as jobs and wealth creation,” predicts RSK’s Adrian Eidelman.
Whatever happens, cryptocurrencies and mining will likely be front and center in the coming months, not just in the the great energy debate, but also in the social and political debate of the peoples’ rights to access self-sovereign cryptocurrency, a debate the will continue to be openly and productively led by the industry.
I cover fintech, crypto and digital assets, and sustainable finance and investments, and promote policies for a transparent, secure, and quality digital financial
Intel plans to invest $20 billion to build a new chip-making facility in Ohio, the company announced on Friday, in a push to ramp up domestic production of semiconductors as global supply chain disruptions and increased demand have led to a massive worldwide chip shortage.
The chip-making facility will be built in New Albany on the outskirts of Columbus, Ohio, Time first reported, citing an official confirmation by Intel.According to the report, the new complex will first have two chip making factories and directly employ 3,000 people.
Construction of the complex will reportedly begin this year and the chip making plants are expected to be operational by 2025. According to the New York Times, Biden Administration officials—who have backed a legislative effort for major federal investment into semiconductor manufacturing to compete with China—are expected to discuss the Intel announcement on Friday.
Disruptions in the global supply chain caused by the Covid-19 pandemic has had a serious impact on semiconductors in the past two years, as well as a sharp uptick in demand for digital products as more people work from home. A majority of advanced computer chips—used by the likes of Apple, AMD and Qualcomm—are manufactured by Taiwan Semiconductor Manufacturing Company (TSMC), whose proximity to China has also raised some concerns.
Legislation known as the CHIPs act, which would provide $52 billion in subsidies for the semiconductor industry, was passed by the Senate with bipartisan support last year, but it is yet to be passed by the House. In an op-ed for CNN in December, Intel CEO Pat Gelsinger backed the federal package, noting that it may not solve the current chip shortages but will “be fundamental in avoiding them in the future.”
In an effort to regain supremacy in the chips business, Intel has pledged more than $100 billion in investments over the past year. These efforts have been driven by Gelsinger, who became Intel’s CEO last year. In 2020, graphics chips maker Nvidia overtook Intel to become the most valuable chip maker in the U.S. and last year it was overtaken by Samsung as the biggest chip maker by quarterly revenue.
In the past few years, Intel chips have also lost their performance crown to rival AMD in both the desktop and mobile computing markets, caused by several years of delays to its cutting end manufacturing process.
Intel Corp said on Friday it would invest up to $100 billion to build potentially the world’s largest chip-making complex in Ohio, looking to boost capacity as a global shortage of semiconductors affects everything from smartphones to cars. The move is part of Chief Executive Officer Pat Gelsinger’s strategy to restore Intel’s dominance in chip making and reduce America’s reliance on Asian manufacturing hubs, which have a tight hold on the market.
An initial $20 billion investment – the largest in Ohio’s history – on a 1,000-acre site in New Albany will create 3,000 jobs, Gelsinger said. That could grow to $100 billion with eight total fabrication plants and would be the largest investment on record in Ohio, he told Reuters. Dubbed the silicon heartland, it could become “the largest semiconductor manufacturing location on the planet,” he said.
While chipmakers are scrambling to boost output, Intel’s plans for new factories will not alleviate the current supply crunch, because such complexes take years to build. Gelsinger reiterated on Friday he expected the chip shortages to persist into 2023.
To dramatically increase chip production in the United States, the Biden administration aims to persuade Congress to approve $52 billion in subsidy funding. read more …
The British government has opened a six-month probe into Nvidia’s takeover of the Cambridge, England-based chip designer Arm on national security grounds.
The $40 billion deal to buy the semiconductor businesses that helps power smartphones, tablets and countless other devices from SoftBank was announced in September 2020 but now faces a gauntlet of antitrust reviews to be approved.
The U.K.’s Department for Digital, Culture, Media and Sport announced on Tuesday that it would push for the British antitrust regulator, the Competition and Markets Authority (CMA), to run a six-month in-depth review of the deal on competition and national security grounds.
The deal had already been flagged by the CMA in January over fears that Nvidia’s takeover would lead to its rival losing access to Arm’s innovative chips that power Apple, Samsung and Sony devices, while the U.S., China and the European Union have also opened competition probes.
“Arm has a unique place in the global technology supply chain and we must make sure the implications of this transaction are fully considered. The CMA will now report to me on competition and national security grounds and provide advice on the next steps,” Digital Secretary Nadine Dorries said in a statement. “The government’s commitment to our thriving tech sector is unwavering and we welcome foreign investment, but it is right that we fully consider the implications of this transaction.”
The deal has been opposed by Google, Microsoft and chipmaker Qualcomm, who argued that takeover would threaten Arm’s position as the “Switzerland of the chips’ licensing to powerful and energy-saving technology to virtually all the world’s major chipmakers and smartphone producers, according to Bloomberg.
The new delay will be a blow to Nvidia CEO Jensen Huang and SoftBank, which bought Arm for $32 billion in 2016. Nvidia was once famous for its video games’ graphic chips, but its focus on powering data centers has helped catapult the business to a $757 billion market cap, with its shares up more than 500% since the Arm deal was announced in September 2020.
I joined Forbes as the Europe News Editor and will be working with the London newsroom to define our coverage of emerging businesses and leaders across the UK and Europe. Prior to
Williams, Elisa (April 15, 2002). “Crying wolf”. Forbes. Retrieved February 11, 2017. Huang, a chip designer at AMD and LSI Logic, cofounded the company in 1993 with $20 million from Sequoia Capital and others.
Feinstein, Ken (January 22, 1999). “Nvidia Goes Public”. gamecenter.co. Archived from the original on October 12, 1999. Retrieved July 13, 2019.
Leupp, Alex; Sellers, Scott (December 15, 2000). “3dfx Announces Three Major Initiatives To Protect Creditors and Maximize Shareholder Value” (Press release). San Jose, CA. Archived from the original on February 5, 2001. Retrieved January 23, 2017. Board of Directors Initiates Cost-Cutting Measures, Recommends to Shareholders Sale of Company Assets to NVIDIA Corporation for $112 million and Dissolution of Company
The first week of earnings season wraps up with major indices closely tracking the bond market in Wall Street’s version of “follow the leader.” Earnings absolutely matter, but right now the Fed’s policies are maybe a bigger influence. In the short-term the Fed is still the girl everyone wants to dance with.
Lately, you can almost guess where stocks are going just by checking the 10-year Treasury yield, which often moves on perceptions of what the Fed might have up its sleeve. The yield bounced back from lows this morning to around 1.32%, and stock indices climbed a bit in pre-market trading. That was a switch from yesterday when yields fell and stocks followed suit. Still, yields are down about six basis points since Monday, and stocks are also facing a losing week.
It’s unclear how long this close tracking of yields might last, but maybe a big flood of earnings due next week could give stocks a chance to act more on fundamental corporate news instead of the back and forth in fixed income. Meanwhile, retail sales for June this morning basically blew Wall Street’s conservative estimates out of the water, and stock indices edged up in pre-market trading after the data.
Headline retail sales rose 0.6% compared with the consensus expectation for a 0.6% decline, and with automobiles stripped out, the report looked even stronger, up 1.3% vs. expectations for 0.3%. Those numbers are incredibly strong and show the difficulty analysts are having in this market. The estimates missed consumer strength by a long shot. However, it’s also possible this is a blip in the data that might get smoothed out with July’s numbers. We’ll have to wait and see.
Caution Flag Keeps Waving
Yesterday continued what feels like a “risk-off” pattern that began taking hold earlier in the week, but this time Tech got caught up in the selling, too. In fact, Tech was the second-worst performing sector of the day behind Energy, which continues to tank on ideas more crude could flow soon thanks to OPEC’s agreement.
We already saw investors embracing fixed income and “defensive” sectors starting Tuesday, and Thursday continued the trend. When your leading sectors are Utilities, Staples, Real Estate, the way they were yesterday, that really suggests the surging bond market’s message to stocks is getting read loudly and clearly.
This week’s decline in rates also isn’t necessarily happy news for Financial companies. That being said, the Financials fared pretty well yesterday, with some of them coming back after an early drop. It was an impressive performance and we’ll see if it can spill over into Friday.
Energy helped fuel the rally earlier this year, but it’s struggling under the weight of falling crude prices. Softness in crude isn’t guaranteed to last—and prices of $70 a barrel aren’t historically cheap—but crude’s inability to consistently hold $75 speaks a lot. Technically, the strength just seems to fade up there. Crude is up slightly this morning but still below $72 a barrel.
Losing Steam?
All of the FAANGs lost ground yesterday after a nice rally earlier in the week. Another key Tech name, chipmaker Nvidia (NVDA), got taken to the cleaners with a 4.4% decline despite a major analyst price target increase to $900. NVDA has been on an incredible roll most of the year.
This week’s unexpectedly strong June inflation readings might be sending some investors into “flight for safety” mode, though no investment is ever truly “safe.” Fed Chairman Jerome Powell sounded dovish in his congressional testimony Wednesday and Thursday, but even Powell admitted he hadn’t expected to see inflation move this much above the Fed’s 2% target.
Keeping things in perspective, consider that the S&P 500 Index (SPX) did power back late Thursday to close well off its lows. That’s often a sign of people “buying the dip,” as the saying goes. Dip-buying has been a feature all year, and with bond yields so low and the money supply so huge, it’s hard to argue that cash on the sidelines won’t keep being injected if stocks decline.
Two popular stocks that data show have been popular with TD Ameritrade clients are Apple (AAPL) and Microsoft (MSFT), and both of them have regularly benefited from this “dip buying” trend. Neither lost much ground yesterday, so if they start to rise today, consider whether it reflects a broader move where investors come back in after weakness. However, one day is never a trend.
Reopening stocks (the ones tied closely to the economy’s reopening like airlines and restaurants) are doing a bit better in pre-market trading today after getting hit hard yesterday.
In other corporate news today, vaccine stocks climbed after Moderna (MRNA) was added to the S&P 500. BioNTech (BNTX), which is Pfizer’s (PFE) vaccine partner, is also higher. MRNA rose 7% in pre-market trading.
Strap In: Big Earnings Week Ahead
Earnings action dies down a bit here before getting back to full speed next week. Netflix (NFLX), American Express (AXP), Johnson & Johnson (JNJ), United Airlines (UAL), AT&T (T), Verizon (VZ), American Airlines (AAL) and Coca-Cola (KO) are high-profile companies expected to open their books in the week ahead.
It could be interesting to hear from the airlines about how the global reopening is going. Delta (DAL) surprised with an earnings beat this week, but also expressed concerns about high fuel prices. While vaccine rollouts in the U.S. have helped open travel back up, other parts of the globe aren’t faring as well. And worries about the Delta variant of Covid don’t seem to be helping things.
Beyond the numbers that UAL and AAL report next week, the market may be looking for guidance from their executives about the state of global travel as a proxy for economic health. DAL said travel seems to be coming back faster than expected. Will other airlines see it the same way? Earnings are one way to possibly find out.Even with the Delta variant of Covid gaining steam, there’s no doubt that at least in the U.S, the crowds are back for sporting events.
For example, the baseball All-Star Game this week was packed. Big events like that could be good news for KO when it reports earnings. PepsiCo (PEP) already reported a nice quarter. We’ll see if KO can follow up, and whether its executives will say anything about rising producer prices nipping at the heels of consumer products companies.
Confidence Game: The 10-year Treasury yield sank below 1.3% for a while Thursday but popped back to that level by the end of the day. It’s now down sharply from highs earlier this week. Strength in fixed income—yields fall as Treasury prices climb—often suggests lack of confidence in economic growth.
Why are people apparently hesitant at this juncture? It could be as simple as a lack of catalysts with the market now at record highs. Yes, bank earnings were mostly strong, but Financial stocks were already one of the best sectors year-to-date, so good earnings might have become an excuse for some investors to take profit. Also, with earnings expectations so high in general, it takes a really big beat for a company to impress.
Covid Conundrum: Anyone watching the news lately probably sees numerous reports about how the Delta variant of Covid has taken off in the U.S. and case counts are up across almost every state. While the human toll of this virus surge is certainly nothing to dismiss, for the market it seems like a bit of an afterthought, at least so far. It could be because so many of the new cases are in less populated parts of the country, which can make it seem like a faraway issue for those of us in big cities. Or it could be because so many of us are vaccinated and feel like we have some protection.
But the other factor is numbers-related. When you hear reports on the news about Covid cases rising 50%, consider what that means. To use a baseball analogy, if a hitter raises his batting average from .050 to .100, he’s still not going to get into the lineup regularly because his average is just too low. Covid cases sank to incredibly light levels in June down near 11,000 a day, which means a 50% rise isn’t really too huge in terms of raw numbers and is less than 10% of the peaks from last winter. We’ll be keeping an eye on Covid, especially as overseas economies continue to be on lockdowns and variants could cause more problems even here. But at least for now, the market doesn’t seem too concerned.
Dull Roar: Most jobs that put you regularly on live television in front of millions of viewers require you to be entertaining. One exception to that rule is the position held by Fed Chairman Jerome Powell. It’s actually his job to be uninteresting, and he’s arguably very good at it. His testimony in front of the Senate Banking Committee on Thursday was another example, with the Fed chair staying collected even as senators from both sides of the aisle gave him their opinions on what the Fed should or shouldn’t do. The closely monitored 10-year Treasury yield stayed anchored near 1.33% as he spoke.
Even if Powell keeps up the dovishness, you can’t rule out Treasury yields perhaps starting to rise in coming months if inflation readings continue hot and investors start to lose faith in the Fed making the right call at the right time. Eventually people might start to demand higher premiums for taking on the risk of buying bonds. The Fed itself, however, could have something to say about that.
It’s been sopping up so much of the paper lately that market demand doesn’t give you the same kind of impact it might have once had. That’s an argument for bond prices continuing to show firmness and yields to stay under pressure, as we’ve seen the last few months. Powell, for his part, showed no signs of being in a hurry yesterday to lift any of the stimulus.
TD Ameritrade® commentary for educational purposes only. Member SIPC.
I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I’ve also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van Der Moolen, USA. In 2006, I joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE. My licenses include the 3, 4, 7, 24 and 66.
Retail is the process of selling consumer goods or services to customers through multiple channels of distribution to earn a profit. Retailers satisfy demand identified through a supply chain. The term “retailer” is typically applied where a service provider fills the small orders of many individuals, who are end-users, rather than large orders of a small number of wholesale, corporate or government clientele. Shopping generally refers to the act of buying products.
Sometimes this is done to obtain final goods, including necessities such as food and clothing; sometimes it takes place as a recreational activity. Recreational shopping often involves window shopping and browsing: it does not always result in a purchase.
Most modern retailers typically make a variety of strategic level decisions including the type of store, the market to be served, the optimal product assortment, customer service, supporting services and the store’s overall market positioning. Once the strategic retail plan is in place, retailers devise the retail mix which includes product, price, place, promotion, personnel, and presentation.
In the digital age, an increasing number of retailers are seeking to reach broader markets by selling through multiple channels, including both bricks and mortar and online retailing. Digital technologies are also changing the way that consumers pay for goods and services. Retailing support services may also include the provision of credit, delivery services, advisory services, stylist services and a range of other supporting services.
Retail shops occur in a diverse range of types of and in many different contexts – from strip shopping centres in residential streets through to large, indoor shopping malls. Shopping streets may restrict traffic to pedestrians only. Sometimes a shopping street has a partial or full roof to create a more comfortable shopping environment – protecting customers from various types of weather conditions such as extreme temperatures, winds or precipitation. Forms of non-shop retailing include online retailing (a type of electronic-commerce used for business-to-consumer (B2C) transactions) and mail order
Four versions of "Solarpunk" artwork, created by the AI Midjourney, as prompted by Sean Ellul...Sean Ellul via Midjourney
And metaverse builders are already using text generators like ChatGPT—which responds to text prompts with startling poise and intelligence—and visual generators like DALL-E—which creates images out of text prompts—to ideate new worlds and designs.
In researching for this story, I emailed Sean Ellul, the co-founder of the 3D development studio Metaverse Architects, to ask him if he’s been impacted by ChatGPT. He responded with a well-written five-paragraph email about how he’s been using the technology. But there was a catch: in the fourth paragraph, the e-mail revealed that it had actually been written by ChatGPT itself. Ellul had punched in the following prompt into the service and then sent it over (with minimal editing):
