12/16/2024

Good Morning.

Inflation still remains above the Fed's goal of 2%. The Consumer Price Index rose 2.7% YoY for November, the second consecutive month inflation has risen. Despite this increase, Fed sentiment remains that inflation is continuing to cool down. The markets are very confident of a 25 basis point cut this Friday with traders anticipating a 96% chance of a cut. This would be the third meeting consecutive meeting that rates have been cut and would bring the target rate down to 4.25%-4.50%

We are thrilled to deliver our 30th newsletter to you! 

Look out for our end of year report coming soon! SB Capital Insights plans on releasing an annual report that dives into the key financial drivers and events that transpired in 2024. This will be an outlook for both the markets and the newsletter moving into 2025!

In today’s newsletter we will cover: 

• Market Update

  • Broad market 

  • Bond yields 

  • Broadcom 

• Space X record valuation

• TSMC U.S Factory

• What to look out for this week

Markets 

Market Update

• The resilience and strength of the U.S consumer continues to boost economic growth within the US. The bar charts below show the U.S market return, economic growth (GDP), and inflation (CPI) for 2024 with estimates for Q4.

• Both the S&P 500 and DJIA closed lower this week, despite the heavy technology weighted NASDAQ finishing up to a record high. Large cap stocks performed better than their small cap peers in the Russell 2000 index, which is down (-2.97%) in the past 5 days. 

• The U.S 10 year Treasury rose consistently throughout the week to 4.395%, the highest level since 11/22/24. Investors look towards the final Fed meeting of the year and a jump in jobless claims signaled a potential weaker economy. 

• Broadcom (AVGO), a global leader in designing, developing, manufacturing, and supplying a diverse range of semiconductor and infrastructure software products, finished the week up 25.6% following an earnings report. The chip maker stated its current position to capture massive growth over the next 3 years from artificial intelligence. They expect their custom AI Chips to generate between $60 billion and $90 billion in revenue over the next 3 years from 3 hyperscaling customers. 

SpaceX Valuation 

SpaceX has broken the record for the largest privately owned startup with an valuation of $350 B. SpaceX does not trade publicly, however employees and other investors are able to trade shares within. In a recent share buy back program estimated to be worth $500 M, their valuation increased by $100 B. 

• A recent successful launch made history when the company was able to catch its super heavy booster rocket in mid air. This is a major breakthrough in its plan to make rockets more affordable and exploration more economical.

• Elon Musk has become synonymous with President Elect Trump. Many investors are speculating that this presidency will be extremely favorable to Musk's companies including SpaceX, which has long struggled with lengthy approval times and other regulations. The company also stands to potentially benefit from  increased government contracts under Trump.

The company dominates in satellites, rocket launches, and leads the way in reusable rocket development. Investors believe in this continued growth shown by their refusal to issue new equity. A reason for the large increase in the valuation was the lack of supply of investors willing to sell shares. The valuation increase was a way to increase the supply of shares willing to be sold.  

At this valuation SpaceX is the largest U.S. defense contractor and by market cap would rank 25th in the S&P 500.

Insights from SB Capital: Space X is well positioned to grow. The company has been able to fund its capital needs without the traditional path of going public. It is a part of a larger trend of companies staying private longer or alternatively receiving financing in other ways. The number of publicly traded companies in the U.S. has halved since 1996 and there has been a significant decline in IPOs as well. Only 13% of U.S. companies with revenues exceeding $100 M are public in the U.S. In the past for a startup to take that much risk to stay private would not have been heard of. SpaceX had early investors with large check books and benefited from their founders’ past success, however it is not an exception. This is a high profile example of a company finding ways to stay private. It could lead investors to question how they can gain exposure to private markets as public markets did not provide an opportunity to invest in SpaceX and a much larger portion of the economy.

TSMC Manufacturing Within the U.S

TSMC (Taiwan Semiconductor Manufacturing Company), the world's leading advanced chip manufacturer, is making strides in the U.S. semiconductor industry with its first Arizona fabrication plant. Located in the Arizona desert, this facility represents a $20 billion investment and marks the beginning of advanced chip production on U.S. soil.

• Construction began in April 2021, well before the CHIPS Act.

  • The CHIPS Act allocated $6.6 billion to TSMC, despite criticisms from some U.S. politicians.

• The completed fabrication spans 3.5 million square feet and is the most advanced chip facility in the U.S.

• The facility will produce advanced 4-nanometer chips, with plans for even more advanced 2-nanometer chips at a future fabrication plant (World's Most Advanced Chips).

• TSMC produces 92% of the world’s most advanced chips, used in Nvidia GPUs and Apple iPhones.

• By diversifying manufacturing locations, TSMC reduces dependence on Taiwan, mitigating risks like geopolitical tensions or natural disasters.

• The U.S. aims to secure a larger share of global chip manufacturing to enhance supply chain resilience and strengthen technological dominance.

What To Look Out For This Week!

Tuesday: FOMC meeting begins

Wednesday: Interest Rate decision, Fed Chair Jermore Powell will speak to press

Thursday: Nike announces earnings,

Friday: PCE for November

We are two college students on a mission to immerse ourselves in the financial industry. We are eager to learn more and make new connections. Our goal is to share exciting and informative content that provides a broad picture of current events and offers valuable insights.

Authors: Ben Banchik, Zachary Singer

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