When the Federal Reserve announced a 50 bps rate cut on September 18th, the tech-heavy NASDAQ Composite surged by 1.47%. Investors, ever watchful, are banking on cheaper capital to provide a boon for capital-intensive tech firms.
This optimism is well-placed in the current landscape, where the tech industry is rapidly pivoting towards cloud-computing dependence and bolstering AI infrastructure. As this evolution unfolds, the behemoths of Big Tech are foreseen to ramp up investments in Property, Plant, and Equipment (PPE), becoming the bedrock upon which smaller entities can thrive.
While the likes of Amazon, Advanced Micro Devices (AMD), and Tesla already hold considerable market cap weight, the era of reduced interest rates portends a potential resurgence in their growth trajectory.
Amazon’s Unstoppable Ascension
Amazon.com Inc. has been on a tear, with its stock climbing by an impressive 8.21% in recent weeks to hit a market cap of $2.013 trillion, a level not seen since June-July when the e-commerce giant breached the $2 trillion mark.
Despite already commanding a diversified revenue stream encompassing e-commerce, third-party sellers, Amazon Web Services (AWS), advertising, and offline ventures like Whole Foods and Amazon Go, the company shows no signs of slowing down.
In the realm of AI development, where potential remains largely untapped, AWS is poised to emerge as a magnet for emerging generative AI applications. With optimized infrastructure for AI workloads and a robust suite for AI product development (as exemplified by AWS App Studio), Amazon is laying the groundwork for further expansion.
In parallel, Amazon’s foray into blockchain, alongside its stronghold in cloud solutions such as Docker, Kubernetes, and Hyperledger Fabric, bodes well for sustained growth. Notably, in the second quarter of 2024, AWS recorded a 19% year-over-year increase in sales, reaching $26.3 billion.
Moreover, the company’s advertising arm hit $12.7 billion in sales, a 20% YoY uptick, with innovations like the AI Video generator poised to fuel further revenue streams. In light of these developments, Amazon’s ecosystem appears well-positioned for unparalleled expansion, even as its stock price hits $192.45 per share.
The AMD Advantage
Advanced Micro Devices Inc. (AMD) might have long lived in the shadows of arch-rival Nvidia, but recent trends suggest a changing narrative. While AMD’s latest Ryzen 9000 series faced lackluster sales amid consumer belt-tightening, the budget-friendly X3D series, leveraging 3D V-cache technology, is seeing a surge in demand.
In Q1 of the fiscal year, this upturn propelled AMD’s market share to a record 23.9% across desktop and server sectors, underscoring a shift in momentum away from industry juggernaut Intel. With a market cycle poised for rotation and sustained negative press for Intel, AMD seems primed to grow its customer base over the long haul.
Not content with playing second fiddle, AMD is aggressively challenging Nvidia’s dominance in the AI sphere. The introduction of the MI325X AI chip, slated for release in Q4 2024, signifies a strategic push towards generative AI workloads, with subsequent iterations — MI350 (2025) and MI400 (2026) — promising monumental performance enhancements.
By emulating Nvidia’s comprehensive full-stack approach, exemplified by the $4.9 billion acquisition of ZT Systems in August 2024, AMD is eyeing a significant share of the data center market. Projections point to a staggering $400 billion valuation by 2027, up from $30 billion in 2023, offering investors a potential 70% CAGR.
Tesla’s Electrifying Resurgence
Tesla Inc. has enjoyed a remarkable turnaround this year, erasing its earlier losses to post a modest 1.73% positive return year-to-date. The past month alone saw a notable uptick of nearly 15% in TSLA stock, testament to its status as a high-reward, high-risk asset within the tech sector.
Given the capital-intensive nature of large-scale high-tech automotive manufacturing, Tesla has been particularly sensitive to the Federal Reserve’s policy shifts. The current stock price of $253 signals a trajectory back towards pre-Twitter acquisition levels.
Anticipation is rife ahead of Tesla’s Robotaxi Event on October 10th, a juncture that could potentially mark a transformative leap for the company. The event might herald a paradigm shift, propelling Tesla from a cyclically driven operation to a dynamic, high-growth ‘robotaxi cash machine’.
While the average TSLA price target stands at $210.56 per Nasdaq data, the uncertainties surrounding the impact of the Robotaxi Event, alongside the readiness of Tesla’s full self-driving (FSD) technology, pose intriguing questions for investors eyeing Tesla stock.