Article by: Tide Research
On Wednesday, the three major U.S. stock indices closed higher, with chips, memory, and optical communications stocks leading gains; the Nasdaq rose over 1%, SpaceX climbed nearly 8%, and Super Micro Computer surged nearly 10%. After hours, Meta reported revenue and Q4 guidance that exceeded expectations, driving its stock higher; Tesla’s operating profit fell 56% year-over-year, and it lowered its full-year capital expenditure forecast, causing its stock to first rise then decline. During the GTC Berlin event, NVIDIA announced a collaboration with suppliers to expand production, covering substrates, advanced packaging, testing, and optical engines.
Nasdaq rose 1.05%, with the FANG+ index nearly up across the board.
As of the close of trading on Wednesday Eastern Time, the S&P 500 rose 0.58% to 7,757.17; the Dow Jones Industrial Average increased 0.69% to 52,856.09; and the Nasdaq Composite gained 1.05% to 26,702.86. The VIX fell 3.64%, closing at 16.68.
Of the 11 sectors in the S&P 500, Information Technology rose approximately 1.7%, and Industrials increased about 0.9%; Financials, Utilities, Energy, Materials, and Consumer Discretionary also closed higher. Health Care, Consumer Staples, Real Estate, and Communication Services declined.
Seven giants: five up, two down. Tesla rose 3.41%, NVIDIA rose 2.54%, Apple rose 1.32%, Meta rose 0.47%, and Microsoft rose 0.20%; Amazon fell 0.10%, and Alphabet C fell 1.62%.
The Philadelphia Semiconductor Index rose 1.97%, with 29 of its 30 components advancing, as only Lam Research declined. AMD increased 3.36%, ASML rose 2.81%, ARM gained 2.50%, TSMC climbed 1.60%, Intel advanced 1.39%, and Broadcom rose 1.03%.
Storage and optical communication stocks rose in tandem. Western Digital increased 3.89%, Seagate rose 3.22%, Micron gained 1.96%, and SanDisk climbed 0.94%; Credo advanced 6.28%, Lumentum rose 3.43%, and Coherent increased 2.47%.
Companies that disclosed earnings the previous night showed mixed performance. SpaceX rose 7.79%, Super Micro Computer increased by approximately 9.6%, and Dell gained about 5.3%; Netflix fell by approximately 5.3% due to weaker-than-expected guidance for the fourth quarter.
Chinese stocks declined against the trend, with the Nasdaq Golden China Index falling 2.35% to 5,584.79. Alibaba dropped 3.87%, JD.com fell 3.62%, and XPeng Motors declined 5.55%.
At the close of trading in New York, the 10-year U.S. Treasury yield was approximately 5.13%, and the 2-year yield was around 4.80%. WTI December crude oil futures fell 0.68% to close at $97.15 per barrel; Brent December crude oil futures rose 0.03% to close at $108.82 per barrel.
COMEX December gold futures rose 0.41% to $4,159.50 per ounce. At the time of this morning's review, Bitcoin was around $84,200 and Ethereum around $2,470.
Meta's revenue grew 26%, but legal expenses weighed on profits.
Meta's third-quarter revenue was $64.6 billion, a 26% year-over-year increase, exceeding market expectations. The company forecasts fourth-quarter revenue between $73 billion and $76 billion, with the midpoint also surpassing analyst estimates, driving shares higher in after-hours trading.
Advertising remains the primary growth driver. In the third quarter, ad impressions increased by 10% year-over-year, and average ad prices rose by 14%. Daily active users across its apps reached 3.64 billion, up 3% year-over-year.
Profit was impacted by legal expenses. The company recorded approximately $98.9 billion in related costs, causing operating profit to decline to $12.99 billion, a 37% year-over-year decrease; diluted earnings per share amounted to $3.83. Meta stated that, excluding this legal expense, earnings per share would have been $7.40.
The company continues to increase its investment in AI, revising its full-year capital expenditure guidance from $130 billion to $145 billion to $135 billion to $145 billion. Capital expenditures in the third quarter amounted to approximately $34.91 billion, with free cash flow at -$2.12 billion.
Zuckerberg revealed on the earnings call that, since its launch about a week and a half ago, over 10 million people in the U.S. and Canada have created personal agents on Muse, with approximately one-quarter using them daily.
Meta also plans to create non-voting Class C common stock to provide additional financing options in the future while maintaining Zuckerberg’s voting control.
Tesla's operating profit dropped 56%, and full-year capital expenditure guidance is now reduced to $20 billion.
Tesla's third-quarter revenue was $28.05 billion, flat year-over-year; adjusted earnings per share were $0.48, exceeding market expectations.
Automotive revenue decreased 3% to $20.56 billion, energy revenue declined 16% to $2.88 billion, and services and other revenue increased 33%, partially offsetting the declines. The company stated that lower average selling prices for vehicles and battery supply constraints limiting production impacted the automotive business performance.
Operating profit for the third quarter was $718 million, a 56% year-over-year decline; net income attributable to common shareholders, under U.S. GAAP, was approximately $787 million, a 43% year-over-year decline.
Free cash flow turned positive at $1.531 billion, up from a negative $1.092 billion in the previous quarter, but still below $3.990 billion in the same period last year. Capital expenditures for the third quarter amounted to $4.732 billion, below prior market expectations.
During the conference call, the company lowered its full-year capital expenditure guidance from over $25 billion to approximately $20 billion. Management stated that it will improve capital efficiency and plans to fund capital expenditures primarily through operating cash flow.
Musk stated that Megapack production capacity for 2027 is nearly sold out, and Optimus has begun early production at the Fremont factory. He provided no further details regarding potential merger discussions with SpaceX.
Tesla's stock rose over 2% in after-hours trading, then turned lower, falling more than 3% during the earnings call.
NVIDIA, in collaboration with its suppliers, is expanding production capacity to enhance packaging and testing capabilities.
NVIDIA has announced expanded manufacturing capabilities with multiple suppliers to meet the demand for AI infrastructure, covering substrates, advanced packaging, semiconductor testing, and optical engines.
Substrate suppliers include Ibiden, Samsung Electro-Mechanics, and Unimicron. In advanced packaging, NVIDIA plans to expand production capacity in South Korea with Amkor to support current and next-generation platforms.
During the testing phase, NVIDIA expects its total testing capacity in 2027 to double that of 2026. The company has paid $1.1 billion in capacity prepayments to Episil to support the construction of a testing facility in the United States, with the goal of entering mass production by April 2027.
NVIDIA has also partnered with Siliconware to expand production capacity for optical engines used in co-packaged optics. These components enable high-speed interconnects in large-scale computing systems, and their supply must scale in tandem with the growth of AI clusters.
Today's Focus
Pre-market U.S. stocks: P&G and American Airlines report earnings. For P&G, focus on sales volume, price increases, and profit margins; for American Airlines, monitor ticket prices, fuel costs, and Q4 demand outlook.
Beijing Time 20:30: U.S. Weekly Initial Jobless Claims. Monitor both initial claims and continuing claims to assess whether the labor market is cooling further.