technology

Germany's Siemens, a manufacturer of technology to automate and digitalise businesses and households by supplying hydraulic, electrical and electronic equipment and household appliances, today reported revenue growth of 27% (year-on-year) and 1% growth between quarters. What happened? This exceeded analysts' expectations of €17.47 billion, reaching €17.87 billion in Q3 (the financial year starts earlier than the calendar year). This growth was mainly attributed to an increase in orders from the areas of business automation and intelligent infrastructure.   "Demand in the European capital goods sector is holding up," commented Barclays last week, following the publication of results from other companies in the sector, such as ABB and Schneider Electric. This was also confirmed by CEO Roland Busch, who said that demand remained strong in the quarter despite an environment affected by sanctions on Russia, high inflation and the ongoing effects of a pandemic. However, it is worth noting that these companies typically operate on long-term contracts and the decline in demand can be noticed after a long delay.    Siemens has a strongly diversified business, not only in terms of products but also in respect of the countries of origin of its customers. However, this may not protect it from the looming recession, which seems to be a problem not only for Europe or the US but for the whole world.    Alarming are, for example, the data of the German manufacturing PMI (Purchasing Managers' Index), which measures the assessment of the economic situation by managers. This index is currently at almost its lowest level in two years. The results in other countries in Europe and America also look similar. Asian economies also appear to be weakening.   Siemens also incurred a net loss of €1.66 billion charge for the write-down of the value of its stake in Siemens Energy, which operated in Russia. In addition, the company estimates that it has incurred additional losses of €0.6 billion due to the actions of the Russian Federation.   Despite high energy prices, Siemens is struggling to make savings from its 35% stake in the turbine and wind energy company. It has had a difficult two years since the spin-off in 2020, with operational problems and losses in the Siemens Gamesa wind turbine division.   Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)   Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.   CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Siemens posted its first loss since 2010, yet shares are gaining

Once again we can get to know Jim Cramer's comments on the stock market. The market of new technologies, including cryptocurrencies, deserves attention. In addition, information about the re-candidacy of Donald Trump appeared. In this article: Stock Market via Jim Cramer Global Population Trump’s campaign Cryptocurrencies NVIDIA Jim Cramer’s comments Mad Money On CNBC tweets stock market situations.   Stocks rose on Tuesday after the October producer price index data signaled that inflation is cooling. https://t.co/gIMz8ZPn4q — Mad Money On CNBC (@MadMoneyOnCNBC) November 16, 2022 Jim Cramer observes and comments on the situation on the stock market. His comments are very valuable as he is an expert in this field. In his opinion, the current rally in the market may last until the middle of next month, based on chart analysis. 8 billion people The IMF in its post addresses the topic of demographic problems Today the world’s population has reached 8 billion people. But the greatest demographic challenge facing the world is actually population aging, according to @HarvardChanSPH's David E. Bloom and Leo M. Zucker. Read their new F&D article here. https://t.co/ahrBTUSg8F — IMF (@IMFNews) November 15, 2022 On November 15, humanity surpassed 8 billion, but what does that mean? For a long time we have been struggling with general overpopulation, which can have ecological, political and economic consequences. In highly developed countries, the main problem is an aging society, in such countries large families are reluctantly established because it is associated with costs and high responsibility, and now the focus is on career. In underdeveloped countries, where sex education is very low, more and more children are born, which deepens poverty. Alan Weusman in his book Countdown: Our Last, Best Hope For A Future On Earth? have addressed this problem. As we know, the more people, the greater the demand for food, water and a place to live, which will also affect the condition of our planet, and the economy may struggle with greater problems of poverty or other problems. Donald Trump will try again CNBC Now tweeted that Donald Trump will run for president again. Donald Trump launches 2024 presidential campaign https://t.co/zw0nXvNnHv — CNBC Now (@CNBCnow) November 16, 2022 There are still two years until the presidential election in the United States. Former President Donald Trump has officially launched a campaign for president in 2024. The announcement comes just a week after Republicans lost key midterm races. I recently wrote about the Speaker of the United States House of Representatives' endorsement of President Joe Biden's re-election. In connection with the information received, is there a possibility of another revalidation on the Biden-Trump line for the presidency. Recall that in 2020 Trump sought re-election and lost. Cryptocurrencies are extremely volatile Morningstar, Inc. tweets about the lesson that investors got on the example of cryptocurrencies. What lessons can investors take away from crypto's implosion?For one, the dangers of volatility cannot be avoided, writes John Rekenthaler. https://t.co/xOG2nEG4H2 pic.twitter.com/RoNQ1B6G6E — Morningstar, Inc. (@MorningstarInc) November 15, 2022 Some markets are more prone to volatility than others, but volatility is always very likely. This statement comes as no surprise. Cybercurrency buffs can trade countless differences between various digital assets and debate which ones have the brightest future, but knowing them didn't prove helpful when the cryptocurrency bear market hit. A year ago, cryptocurrencies were all the rage. Now the situation in this market is different. What more conclusions can current and future investors draw, maybe the CEO of Binance is right in saying that the market needs regulation? New technologies market Bloomberg Terminal tweets about new technologies market A faltering metaverse, a stagnating crypto market, and weakness in the gaming market signals that @nvidia's gaming arm may need an extra life. Check out the graphics using MODL <GO> on the #BloombergTerminal as Nvidia reports earnings. pic.twitter.com/HiAhopnww9 — Bloomberg Terminal (@TheTerminal) November 15, 2022 Stagnation in the cryptocurrency market and more affects the gaming market, including NVIDIA.As the tweet shows, the situation on the new technologies market is difficult.

After losing ground to branded products during the pandemic, private label sales have regained momentum this year. Also, Instagram updates come as young people flock to newer apps like BeReal and TikTok. Own brands of stores are becoming more and more attractive Growing inflation has made consumers pay attention to the price and prefer to take advantage of cheaper sukpermaket products instead of their branded counterparts. A recent survey of food retailers by FMI, a food retail group, revealed that more than 80% of respondents plan to moderately or significantly increase their investment in private labels over the next two years. Supermarkets tend to make a higher profit margin on private label goods than on the sale of branded products made by consumer giants. Large supermarket operators such as Kroger Co. in the US and Carrefour S.A. in Europe say they are investing to expand their internal offerings in more price ranges and product categories. Kroger's private label sales increased more than 10% year-on-year in the third quarter, which saw the launch of 147 new store-brand products. Kroger launched a new bargain line called Smart Way in September, which has been purchased by two million households. As the data shows, KR share prices have increased the most this year since the beginning of the pandemic. In the recent period, prices have been in a downward trend, and today their level is 45.45 Kroger shere chart Walmart Inc. it also develops its private label products and tracks growing consumer demand as revenues are squeezed. The Dutch group Koninklijke Ahold Delhaize NV manages supermarket chains in Europe and the US, where its brands are Food Lion and Stop & Shop. The company says its store brands account for half of its sales in the Netherlands and Belgium compared to 30% in the US. The picture is similar in some other parts of Europe, where shoppers tend to buy more branded goods than their American counterparts. Read next: $1 Trillion As Part Of Barclays Efforts To Accelerate The Transition To A Low-Carbon Economy | FXMAG.COM Instagram new feature The photo-sharing app owned by Meta Platforms Inc (Instagram) has been testing a new feature in South Africa since Tuesday. Over two billion people use Instagram every month, says Meta. The app and its parent company had concerns about its impact on younger users. At the same time, some users — including celebrities who have long been champions of the platform — urged the company to "turn Instagram back to Instagram" by prioritizing friends' posts over paid posts. Candid Stories gives users a daily notification to take and share two unfiltered photos using the front and rear camera lenses - similar to the prompts sent by BeReal, which has recently garnered millions of users. Instagram did not say when or if Candid Stories will go global. If Candid Stories goes mainstream, Instagram could have an advantage over BeReal in terms of scale and business model. For Meta critics, Candid Stories will be the latest example of Instagram emulating the features of other popular apps to grow and maintain its user base. Previous examples include Stories, a Snapchat hallmark, and Reels, short TikToks-like videos. Instagram is testing other friend-centric tools. Group Profiles, a new type of profile, allow members to share posts and stories with each other rather than with all of their followers. Group profiles have already started testing in Canada, Chile and Taiwan. The new features are intended to give users more ways to interact with people. After a year-low, Meta shares rose at first but then fell and held its price in the 114-115 range. Today's share price is at 114.71 Source: wsj.com, finance.yahoo.com

Summary:  The semiconductor industry was negatively impacted last year by rising interest rates pushing down equity valuation and pricing pressures in certain segments such as memory chips. In the first week of trading the industry is off to a better start and Taiwan has just passed a law that will allow local semiconductor companies to get tax credits up to 25% of their R&D spending in an attempt to increase the industry's competitiveness against the US and European measures to set up their own supply chains. The Chip War is on and we expect more policy headwinds with tax incentives as the key driver which will end up being positive for shareholders. Semiconductors are off to a good start The recent book Chip War: The Fight for the World’s Most Critical Technology by Chris Miller is a great historical journey and perspective on the current semiconductor chip war between China and the US. The book is highly recommended and one can get a taste for the content in Chris Miller’s interview on the Top Traders Unplugged podcast. We have written extensively on semiconductors last year and highlighted that the US CHIPS Act is the biggest industrial policy since WWII paving the way for creating a domestic supply chain of semiconductors with tax credits provided to foreign chip companies if they stop engaging with Chinese firms on the most advanced chips. Europe is also building out its semiconductor supply chains. It is all about controlling the key ingredients in military equipment and all other important applications in a modern society from computers, smartphones, cars etc. Read next: Incorporating Slack And Other Apps Into The Salesforce Platform Can Actually Put Buyers Off| FXMAG.COM At the centre of this conflict sits Taiwan which is key nexus in the global supply chain of semiconductors and with China openly aiming to integrate Taiwan into China, the risks are too high for the US and Europe because China is becoming a strategic competitor that does not share the same values hence the US CHIPS Act. Taiwan is feeling the pressure and has just passed a new law that will allow local semiconductor companies to get tax credits for up to 25% of their R&D expenses in a bid to remain competitive and offset the subsidies in the US and Europe. It will boost earnings of Taiwanese semiconductor companies but also increase the competition further. Since an integrated domestic supply chain of semiconductors is existential for Europe and the US the two regions will continue to add incentives to accelerate the reconfiguration of this supply chain. If Taiwan provides incentives and subsidies, the US and Europe will just top it. There is no alternative. This has ramifications for the industry as it means a more attractive investment and tax setup which will be positive for shareholders longer term. Semiconductors are off to a good start this year up 3.7% after being down 27% last year. Taking a closer look at our theme basket we can see that the best performing stocks have been Samsung Electronics, ASML, Intel, Micron Technology, and STMicroelectronics.   Source: The Chip War kicks into gear | Saxo Group (home.saxo)

Economies differ in many respects, not only in cultural and social terms, but also, to a large extent, in economic terms, and thus the difference in development. Definition Emerging markets - in other words, emerging economies, this name appeared in the early 1980s. It refers to financial and export markets, and was intended to replace the old term "Third World". The adoption of the new name ushered in the end of the era when the global economy was divided into three parts, including developing countries. Emerging markets include: China, India and countries of Central and Eastern Europe. Emerging markets and investments Companies that have their roots in emerging markets have cheaper resources and increased competitiveness, which has its source in a much smaller technical and organizational distance between them and less developed markets. Thanks to this, it is possible to efficiently assimilate organizations and techniques from emerging market countries. Of particular importance here is the much lower differentiation of human capital in both countries. This is a significant source of competitive advantage based on lower labor costs and expert research. However, technology also plays an important role here, which significantly limits the possibilities, because this type of advantage is possible only when high technology is not required, including in industries such as: agri-food industry mining industry processing industry. The attractiveness of emerging markets as an importer and exporter of FDI (Foreign Direct Investment) is determined by: lower level of debt, greater fiscal discipline, higher rates of return on securities, higher interest rates than in developed countries, GDP growth rate, lower level of debt. Emerging markets and the financial crisis China and other countries pursued a growth strategy based on exports or pursued a macroeconomic policy focused on accumulating foreign exchange reserves. This resulted in a strong increase in the current account surplus, which, given the clearly slower growth in domestic demand than in income, meant a strong increase in savings. These, in turn, were then transferred to highly developed countries. The above correlations led to a drop in world real interest rates, which resulted in a decline in the propensity to save in highly developed countries and fueled consumerism in the real estate market. The financial crisis has significantly weakened growth in developed countries in favor of emerging and developing economies. Capital has flowed partly from developed countries, both in the form of direct and portfolio investments, while at the same time flowing into emerging countries (especially in Asia). High tech industries in emerging markets Currently, the development of high-tech industries in emerging markets is proceeding much faster. Of particular importance here is the globalization of the economy, which has created new development opportunities. The accompanying processes, which include the intensive flow of services, capital and goods, as well as the development of modern means of communication, played a special role in the changes in the structures of the industry. Thanks to globalization, a new organization of production activities has been launched, and traditional production paths such as vertical production or separation of individual production stages have receded into the background. Thanks to this, each country has the opportunity to specialize in a selected, narrow part of the manufacturing process and draw huge benefits from it. The absorption of new technologies in emerging markets depends on factors such as: the level of education of the society and cultural factors, investment policy (e.g. clustering, etc.), mechanism of development and support (e.g. financial, legal, etc.) of domestic companies operating in high-tech industries, the potential of a given market (expressed by reported demand), as well as locational advantages (owned natural resources, existing infrastructure). Source: Piasecki R. (2015).Determinanty bezpoÅ›rednich inwestycji zagranicznych przedsiÄ™biorstw pochodzÄ…cych z rynków wschodzÄ…cych, Łasak P.(2016).Rola rodzimych korporacji wielonarodowych w rozwoju przemysÅ‚u wysokich technologii na rynkach wschodzÄ…cych

Shares of China's largest tutoring companies are up more than 300% from their lows. There is no denying that the Chinese government's blockade of the entire tutoring industry has collapsed this market, which was estimated to be worth approx. USD 120 billion. What is the situation of companies operating in this industry and why have they become a source of interest for Hedge Funds? TAL Education Tal Education Group (TALE), a company that helped children learn during the difficult time of the pandemic, experienced a drop in revenue of more than 84% and the near suspension of its core business a year and a half ago, resulting in its largest loss ever. The Wall Street Journal website characterises the company's current operations as follows: "TAL Education Group has been selling online-learning materials and providing technology solutions to schools." Source: Conotoxia MT5, TALE, Daily The company now appears to be managing to reduce its net loss quarter-on-quarter - to USD 51 million in Q3 2022 - and may be prioritising cost optimisation and debt repayment. The loss from operations fell by 69.7% year-on-year, the volume of debt in turn fell by 5% year-on-year. and now stands at USD 855 million. The $3.3bn in cash that the company can use to continue restructuring and enter new markets could be a lifesaver. Tal Education Group's capitalisation currently stands at USD 4.63 billion, which means that as much as 71% of its value is cash held. From this, it could be concluded that the company currently has a low probability of insolvency with the potential for successful restructuring. New Oriental Education & Technology with interest from Hedge Funds The second company in China's private teaching industry to gain significantly from the slump in this market is New Oriental Education & Technology (NewOriental). Here, shares are already up 380% since the bottom, the company's CEO conveyed in its H1 2022 quarterly report: "It is encouraging to see a continuously strong momentum of our overall business in the second fiscal quarter of this year, which marks a fresh start after downsizing throughout the last fiscal year. Our remaining key businesses started to show a steady trend of recovery after several years of pandemic disruption. In this fiscal quarter, our overseas test preparation and overseas study consulting businesses increased by approximately 17% and 14% year over year, respectively. Simultaneously, our educational new business initiatives sustained a strong growth and generated meaningful profit in this fiscal quarter." New Oriental Education & Technology, in contrast to TAL Education, has posted positive earnings in the last reported two quarters. The company has US$4.2 billion in cash and no debt. Its revenues have now managed to recover to half of their pre-collapse value. The company is currently valued at USD 7 billion, which means that as much as 60% of its value is cash. It seems that, as with TAL Education, the company is currently showing no signs of insolvency risk. Source: Conotoxia MT5, NewOriental, Daily The Bloomberg portal reports, "Hedge funds now have become one of the biggest investor groups of New Oriental — some 36% of publicly disclosed American Depository Receipts of the company were controlled by such investors in December, up from less than 5.6% in October 2021. The hedge funds were initially attracted by the cheap valuation, and bet on the Beijing-based company’s ability to win market share and pricing power after smaller competitors retreated." Hedge funds are the company's five largest shareholders. The largest of these is Baupost Group, Inc (holding 3.41%). They also include the Renaissance Technologies, LLC fund (holding 2.24%) run by what is considered one of the top managers Jim Simons. Sean Ho, manager of one of these funds, states: "New Oriental’s test and English language preparation, book publishing, and corporate training businesses remain unaffected, Ho says, despite the regulatory overhaul wiping out about 50% of its revenue. The firm’s management has paid off all its accounts receivables, started a live-streaming e-commerce business, and shifted the focus of its education segment to non-school curriculum subjects and 10th to 12th grades. It now offers a range of hobby group sessions, ranging from music to chess, calligraphy and dance classes. It’s also been able to charge higher rates than competitors”. However, the industry as a whole seems further exposed to the possible negative impact of possible regulation from the Chinese government. Current valuations of companies in the sector may have the basis to develop new business models with an appropriate level of financial security. Grzegorz Dróżdż, Market Analyst of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Crypto Industry News: Peter Schiff, a well-known economist and investor, has supported blockchain and NFT technology. Given his previous positions on digital assets, Schiff unexpectedly expressed his enthusiasm on Twitter for a new art project.   Schiff expressed his excitement about collaborating with Market Price on a joint work that would combine conventional elements of art with blockchain. The goal of these efforts is a unique work of art called "Golden Triumph".   Art lovers and collectors will also be able to purchase a set of prints that have been permanently stored on the Bitcoin blockchain. Given Schiff's long-standing distrust of this technology and cryptocurrencies, this news came as a shock to many. His support for Bitcoin shows how his views on the convergence of art, technology and investing are changing. Schiff has repeatedly said that Bitcoin is a "bubble" with no intrinsic value that will soon burst.   The economist claimed that Bitcoin and most cryptocurrencies are not real currencies and are too volatile. Schiff's recent tweets on blockchain and NFT seem to contradict his earlier position. In 2021, he questioned the value of owning a digital NFT image. The fact that Schiff is now involved in a work of art using blockchain technology is proof that he appreciated the unique features of this technology and its practical applications.   Technical Market Outlook: The ETH/USD pair has broken below the short-term technical resistance located at the level of $1,865 and made a local high at the level of $1,928. The local low was made at the level of $1,874, but the market is still under the bullish pressure.   The momentum is strong and positive on the H4 time-frame chart, however, the bulls hit the extremely overbought level, so a pull-back is welcome. The bigger time frame trend remains down.

In addition, the recent increase in the debt ceiling has helped to boost sentiment by removing some of the uncertainty that was present in the moment. By raising the debt ceiling, the government ensured continued funding of essential programmes and services, reducing uncertainty and boosting investor confidence in the US economy and its ability to service its obligations.   The market momentum was further supported by a solid first quarter 2023 reporting season. Many companies across sectors reported solid financial results that exceeded analysts' expectations. Overall to date, 99% of S&P 500 companies have reported actual results for the first quarter of 2023. Of these companies, 78% reported actual EPS above estimates, exceeding the 5-year average (77%) and the 10-year average (73%). Collectively, companies report revenues that are 6.5% above estimates, below the 5-year average (8.4%) but above the 10-year average (6.4%). At the sector level, seven sectors saw upward EPS estimates for 2023, led by communications services (+3.1%), consumer services (+2.5%) and information technology (+2.0%).   S&P 500 companies thus performed better than analysts' expectations from Q4 2021, both in the number of companies reporting positive EPS surprises and in the magnitude of these surprises, exceeding the 10-year average.  The strong earnings performance instilled confidence in investors and demonstrated underlying business strength and profitability, which contributed to the upward trajectory of the market.   It is also worth noting the sector rotation that has occurred in the market. Last year, pro-inflationary sectors such as energy, commodities and protective market segments led the way amid concerns about inflation and uncertainty. This year, however, there has been a shift towards growth sectors, particularly technology, semiconductors and communications services, which have taken the lead.

Competition Competition for SecoWarwick's products is varied and depends on the business segment in question. For aluminum processing lines, the market is similar in value to vacuum furnaces. SecoWarwick's position in aluminum processing is TOP5. In contrast, the market for aluminum atmospheric processing lines (CAB lines within the AP segment) is the smallest of all segments, with SecoWarwick TOP1 in terms of projects worldwide. Given the increasing demand for battery brazing lines with cooling systems, this market can, in our opinion, record high growth rates in the future, which should also be followed by SecoWarwick's order book.   In the case of atmospheric furnace lines, SecoWarwick was one of around a few hundred to a thousand similar players in the industry (there are around 100 significant global competitors in the segment, while the entire segment, including all competitors, local and low-end companies, could number up to 1,000 players). The lack of clear competitive advantages and the progressive decline of the technology have prompted SecoWarwick to leave the segment. In the case of vacuum furnaces, there are approx. 20 significant companies. The remaining companies (approx. 100-150) are local (mainly Asian) players with global exposure and they do not supply key global customers (OEMs). The high technological sophistication of the equipment and access to key markets provides opportunities to increase market share in the future. In terms of melting furnaces, the market is very broad, with very extensive specialization (Retech is one of the market leaders; a smaller market than for vacuum and AP furnaces)   Overall, SecoWarwick's biggest competitive advantages are access to highly qualified engineering staff, its own highly advanced technology and its presence in key sales markets close to the customer (Europe, US, China). Cost advantages are the manufacturing locations in Poland and China.   Financial forecasts The SecoWarwick group's order book rose to a record PLN 560mn at the end of 1Q23. Relative to 1Q21, this represents virtually a doubling of the value of orders won, with aluminum processing equipment (Aluminum Process; +160%) the highest-growing sector in the period, followed by melting furnaces (+70%) and vacuum furnaces (+50%). The value of new orders won in 2022 was a record PLN 842mn, of which the highest was for melting furnaces (PLN 332mn), followed by aluminum processing lines (AP; PLN 182mn) and vacuum furnaces (PLN 182mn). It is worth noting the growing orders in Aftersales and Service, which is the most profitable part of SecoWarwick's business (over PLN 70mn of orders at the end of 1Q23).     On the basis of the order book, we assume that sales revenues in 2023 will exceed PLN 700mn and will be 13% higher y/y. The CAB AP and melting furnace segments will see the highest growth, followed by vacuum furnaces. We assume that, in the long term, the CAB AP segment will be one of the main drivers of revenue growth in the following years (due to investments in electromobility). We assume that EBITDA in 2023 will grow at a lower rate than revenues, due to higher staff costs, selling and management costs and the strengthening of the PLN against the USD and EUR. We assume that net profit in 2023 will be comparable y/y, due to higher financing costs and higher CIT.     We assume an improvement in cash flow from operations in 2023, which, assuming investment is maintained at replacement level, will lead to the generation of financial surpluses (partly paid out in dividends).   We assume that SecoWarwick's net debt will be approx. PLN 2mn at the end of 2023, a very low level that provides an opportunity to increase the dividend stream to shareholders in the future.

In this Outlook, our chief focus is on the current market impact of the AI theme across markets and around the world. But Steen’s introductory piece also argues that market participants are making a mistake in believing that the current market cycle will play out like previous ones, as inflation is set to stay higher for longer than the market anticipates, which will eventually register as an enormous surprise, given that yield curves in most markets are pricing significant eventual policy easing starting early next year and a glide path to a soft landing. The complacency surrounding that disinflationary and soft-landing scenario have kept long yield anchored and allowed equity markets, and particularly AI-linked names, to inflate perilously. Also on the AI theme that has dominated focus over the last quarter: Equity strategist Peter Garnry argues that the emergence of advanced AI systems such as GPT-4 from OpenAI is by far the most surprising event this year, a phenomenon that has turned everything on its head. Further, he writes that the AI-hyped rally has pushed the US equity market to new extremes, even as the benefits and risks of this new technology are hotly debated. He predicts that we risk seeing US and China engaging in an AI arms race. Our Greater China strategist, Redmond Wong, points to the challenges China faces in the field of generative AI as it navigates a global order of fragmentation. The success of generative AI breakthroughs in the US, coupled with limited computing power and geopolitical tensions, has threatened to break down China’s virtuous cycle of technology application, productivity enhancement and growth. Macro strategist Charu Chanana highlights Japan’s expertise in semiconductor manufacturing and robotic integration, suggesting these could be the foundation of a very strong presence in AI. She notes that Japanese equities and artificial intelligence combine the two most powerful market themes of this year. Cryptocurrency analyst Mads Eberhardt notes that AI fever has stolen the spotlight from blockchain technology and the cryptocurrency market generally, pushing the space further into speculative no man’s land. Despite the contrasting performance between crypto and AI-linked assets, there are striking similarities, especially the risk of bubble-like dynamics. Investment Coach Hans Oudshoorn outlines in his piece how investors can gain exposure to AI via ETFs that provide considerable diversification, but still noting the risks from valuations that have become very elevated in places. In addition to the AI focus, this report also delves into the outlook across major asset classes: In currencies, FX strategist John Hardy notes that USD shorts could be set for a vicious reality check if the US economy remains resilient and core inflation remains sticky, possibly engaging both sides of the "USD smile" that drive USD strength: the Fed remaining on the warpath and market turmoil.  John notes that the stakes are even higher for the Japanese yen if the longer yields of the major sovereign yield curves have to price in a new economic acceleration, as the BoJ will have to eventually capitulate on its yield-curve-control policy. In commodities, commodity strategist Ole Hansen suggests that the commodity sector looks set to start the third quarter on a firmer footing after months of weakness saw a partial reversal during June. Ole notes that strong gains were at times driven by a weaker US dollar, but specific developments in each sector also weighed. Most concerning for is the risk of higher food prices into the autumn, as several key growing regions battle with hot and dry weather conditions sparked by the first El Niño weather pattern in years. Fixed income strategist Althea Spinozzi argues that central banks face a troubling dilemma: if they really want to get ahead of inflation, they will need to burst asset bubbles created by a decade of quantitative easing (QE) and trigger a recession. But she asks whether they are willing to take policy tightening that far and ever win the inflation fight.

In this Outlook, our chief focus is on the current market impact of the AI theme across markets and around the world. But Steen’s introductory piece also argues that market participants are making a mistake in believing that the current market cycle will play out like previous ones, as inflation is set to stay higher for longer than the market anticipates, which will eventually register as an enormous surprise, given that yield curves in most markets are pricing significant eventual policy easing starting early next year and a glide path to a soft landing. The complacency surrounding that disinflationary and soft-landing scenario have kept long yield anchored and allowed equity markets, and particularly AI-linked names, to inflate perilously. Also on the AI theme that has dominated focus over the last quarter: Equity strategist Peter Garnry argues that the emergence of advanced AI systems such as GPT-4 from OpenAI is by far the most surprising event this year, a phenomenon that has turned everything on its head. Further, he writes that the AI-hyped rally has pushed the US equity market to new extremes, even as the benefits and risks of this new technology are hotly debated. He predicts that we risk seeing US and China engaging in an AI arms race. Our Greater China strategist, Redmond Wong, points to the challenges China faces in the field of generative AI as it navigates a global order of fragmentation. The success of generative AI breakthroughs in the US, coupled with limited computing power and geopolitical tensions, has threatened to break down China’s virtuous cycle of technology application, productivity enhancement and growth. Macro strategist Charu Chanana highlights Japan’s expertise in semiconductor manufacturing and robotic integration, suggesting these could be the foundation of a very strong presence in AI. She notes that Japanese equities and artificial intelligence combine the two most powerful market themes of this year. Cryptocurrency analyst Mads Eberhardt notes that AI fever has stolen the spotlight from blockchain technology and the cryptocurrency market generally, pushing the space further into speculative no man’s land. Despite the contrasting performance between crypto and AI-linked assets, there are striking similarities, especially the risk of bubble-like dynamics. Investment Coach Hans Oudshoorn outlines in his piece how investors can gain exposure to AI via ETFs that provide considerable diversification, but still noting the risks from valuations that have become very elevated in places. In addition to the AI focus, this report also delves into the outlook across major asset classes: In currencies, FX strategist John Hardy notes that USD shorts could be set for a vicious reality check if the US economy remains resilient and core inflation remains sticky, possibly engaging both sides of the "USD smile" that drive USD strength: the Fed remaining on the warpath and market turmoil.  John notes that the stakes are even higher for the Japanese yen if the longer yields of the major sovereign yield curves have to price in a new economic acceleration, as the BoJ will have to eventually capitulate on its yield-curve-control policy. In commodities, commodity strategist Ole Hansen suggests that the commodity sector looks set to start the third quarter on a firmer footing after months of weakness saw a partial reversal during June. Ole notes that strong gains were at times driven by a weaker US dollar, but specific developments in each sector also weighed. Most concerning for is the risk of higher food prices into the autumn, as several key growing regions battle with hot and dry weather conditions sparked by the first El Niño weather pattern in years. Fixed income strategist Althea Spinozzi argues that central banks face a troubling dilemma: if they really want to get ahead of inflation, they will need to burst asset bubbles created by a decade of quantitative easing (QE) and trigger a recession. But she asks whether they are willing to take policy tightening that far and ever win the inflation fight.

The AI race between the US and China Vladimir Putin said in 2017 that whoever becomes the leader in AI will become the ruler of the world. Russian leaders are experienced in hyperbolic language, so this prediction should naturally be discounted, but AI will likely play a crucial role in the great power competition of the future. Reading articles about technology and AI from those years around 2017, it is clear that the world thought China was either leading the AI race or at least had the speed to overtake the US in a few years. Surprisingly, it turned out, that the US was leading everyone else, as AI systems such as OpenAI’s GPT-4 and Google’s Bard are crushing AI systems from China across many benchmark tests. As we described in our previous Quarterly Outlook, the future will be dictated by what we call the fragmentation game, which is essentially a strategic geopolitical dynamic fragmenting the world into regions with a higher degree of independence and with national security interests driving policies around four pillars: defence, energy, technology, and commodities. The fragmentation game is mostly a game evolving around how the physical world operates and it is a game in which Europe and the US are aiming to reduce China’s role in their respective supply chains. While it causes headwinds for China, it creates tailwinds for other countries, which is well crystalised in our chart showing Chinese equity market performance vs those countries that are benefitting.     Inside the fragmentation game framework, semiconductors also play a crucial role because they are the very foundation for AI chips. The capital expenditures on semiconductors will create an investment boom in the US and Europe over the next decade, as the regions will increase domestic production to limit dependencies on Asia. This dynamic will benefit semiconductor equipment makers as their revenue figures are linked to capital expenditures on semiconductors. Regardless of the rollercoaster experience investors will have with AI stocks, one thing is certain: this technology will be an important technological battleground between the US and China, and many opportunities and threats will arise in the years to come.  

China is confronted with challenges in the field of generative AI as it navigates a global order of fragmentation. The success of generative AI breakthroughs in the U.S., coupled with limited computing power and geopolitical tensions, has threatened to break down China’s virtuous cycle of technology application, productivity enhancement, and growth.   China's strategic initiatives for AI development In May 2017, Google's AlphaGo astounded China when it defeated Ke Jie, the renowned Chinese Go champion and the world’s number one in ranking, with its artificial intelligence (AI) capability in a 3-0 victory. This triumph not only demonstrated the power of AI, but also somehow marked the point China embarked on a more aggressive pursuit of AI technology. In July 2017, China unveiled its "Next Generation Artificial Intelligence Development Plan," followed by the "Three-year Plan for Next Generation AI Development (2018-2020)" in December. These strategic initiatives aimed to propel China to the forefront of AI innovation and were further complemented by the New Infrastructure Initiative introduced in May 2020. China leveraged its mobile-plus-internet economy, fuelled by vast amounts of data, to empower AI algorithms in understanding consumer preferences. Internet giants like Baidu, Alibaba, Tencent and JD.COM successfully utilised AI to identify market trends, deliver personalised products and services, and even anticipate customer needs before they arise. The challenge of generative AI China has made significant strides in AI applications, but generative AI demands a new level of sophistication and computing power. Over the past two decades, Chinese companies thrilled on applying relatively mature technology to disrupt and transform how merchandise trading, retailing, payment, entertainment and social media are conducted, first starting by copying the business models from overseas and eventually coming up with business innovations that turned out to lead the global trend instead. Nonetheless, the achievement has been mainly about business model innovation and expanding AI applications to more and more aspects of people’s lives. In this process, the vast pool of data available in China has added to the speed and extent of development and made Chinese internet companies corporate giants with dominant domestic positions and global reach. While China excelled in certain AI domains, particularly visual recognition and AI-enhanced big data analysis, it now faces a new challenge in the form of generative AI, similar to AlphaGo's breakthrough. Generative AI models, such as OpenAI's ChatGPT, have proven capable of generating coherent and contextually relevant content, expanding the boundaries of AI capabilities. This development has sent shockwaves across China, prompting a scramble to catch up. In search of technology innovation and computing power The Chinese authorities have reportedly been urging Chinese internet companies to come up with more generative AI solutions and applications and the latter are fully aware of the urgency to prepare for the disruption that generative AI presents. However, the new challenges posed by generative AI are the advancement of the underlying technology innovation and the massive demand for computing power, and less about business model innovation and new applications of mature technology. According to the Artificial Intelligence Index Report 2023 by Stanford University, China has come close to the US in AI conference citations (China: 22.02%; US: 23.86%) and depository citations (China: 20.98%; US:29.22%), but China (at 8.04%) is still a long way away from the US (at 54.02%) in terms of citations in the field of large language and multimodal models, which are fundamental to generative AI such as ChatGPT.  The challenge of computing power faced by China is even more daunting as computing power requires a large number of advanced microchips, which China is incapable of designing and manufacturing. Moreover, the US ban on exporting high-end semiconductors as well as the relevant equipment and technology to China since October last year has further exacerbated the situation, limiting the country's access to the necessary hardware for rapid AI development, in particular generative AI.

Cloud Technologies is a Warsaw-based data tech company operating on the Internet advertising market. The Company uses its proprietary technology called a Data Management Platform (DMP) for collecting and processing data about Internet users employing big data instruments, machine learning or AI. Cloud Technologies boasts of the unique on the WSE exposure to the fastest growing segment of the global ad industry (online advertising), in particular it operates in its biggest segment using the programmatic model which provides over 72% of global display advertising. According to different sources1, the programmatic segment value should grow with 21%-31.9% CAGR in 2022-28. Data sold by the Company plays the crucial role in creating profiles of Internet users and targeting of advertising in the programmatic model, that is why we believe this market’s growth will have directly positive impact on the Company’s business.   Since Cloud Technologies’ business model change (2019-21), the Company recorded dynamic growths of financial results (in 2021 and 2022 adj EBITDA grew 196% and 31% yoy, respectively). Given the optimistic outlook for the industry we assume a further strong improvement of the Company’s total revenues in 2023/ 2024/ 2025 by 28%/18%/12% yoy translating into an increase of adj EBITDA by 34%/23%/16% yoy.   According to the Company’s new strategy, the main goal for 2023-25 is a further business growth to be realized by the expansion of distribution networks, quality and depth improvement, and search for new applications for the data collected. To achieve this, Cloud Technologies intends, among other things, to spend up to PLN 60 million on acquisitions. Within the framework of the new strategy the Company also plans to conduct a buyback for the needs of the incentive program (up to PLN 30 million) and to earmark 20% of its adj EBITDA for a dividend payout.   Our 12M EFV for Cloud Technologies constituting a 50%–50% mix of the DCF FCFF method and peerrelative valuation, stands at PLN 88.0 per share. Since February the Company’s market share price has almost tripled and now is close to our assessment of the fair value, therefore, we initiate the Company’s coverage with LT fundamental Hold recommendation and ST market-relative Neutral rating.   We see some downside risks to our forecasts and among the most serious ones we include the risk related to the privacy laws, risk of the economic slowdown coupled with rising costs of data acquisition. There are upside risks as well, among which we list the risk of a faster than expected growth pace of the revenues from data sales and lower than we assumed cost of data acquisition.   Catalysts 1. The prevailing trend to transfer marketing budgets to Internet from traditional advertising such as the press, radio, TV, outdoors. 2. Dynamic growth of the programmatic segment (21%-31.9% CAGR expected in 2022-28) being the main model in the Internet advertising industry. 3. More and more frequent implementation of AI for more precise users profiling with the use of AI algorithms. New AI-based instruments may inspire new applications for the data offered by the Company – structured data may be employed in learning how to use the AI algorithm-based instruments. 4. Active dividend policy. 5. High level of cash generation: in 2021 and 2022 OCFs accounted for 94% and 108% of adj EBITDA, respectively. 6. Dynamic growth of financial results in 2021-22 coupled with our optimistic forecasts for 2023E-25E. 7. Faster than expected growth pace of the data sales segment’s revenues.8. Positive impact of potential acquisitions.   Risk factors 1. Economic slowdown risk. The advertising market where Cloud Technologies operates is sensitive to the macroeconomic environment changes in the most important for the Company geographical regions (mainly EU and US). The economic slowdown, capex lowering, tax rises or interest rates hikes may exert especially adverse impact on this market. 2. Competition risk. Cloud Technologies provides services for entities operating in the Internet advertising industry that falls under the influence of global tycoons like Google, Apple, Facebook, Amazon or Microsoft which to date have not undertaken activities related to data processing and analysis of Internet users’ behavior for their further resale, thus they are not the Company’s competitors. However, should they enter this market, this would tremendously increase the competition level for Cloud Technologies given their resources, ranges, and capital strength. 3. Privacy regulations risk. The Company’s operations are connected to the collection, analysis, and processing of data about Internet users’ behaviors which in some jurisdictions may be regarded as personal data. Due to unfavorable changes in the appropriate law the Company may face difficulties or even lose the possibility to conduct business. 4. IT systems malfunction risk. The Company’s business activities are based on IT systems (proprietary Data Management Platform and servers leased from external suppliers). Thus, there is the risk related to IT systems malfunctions, disturbances, damages or stoppages which may hamper the Company’s efforts to fulfill agreements with clients leading to their discontent. 5. Key data source loss risk. 6. Key data distributor loss risk. 7. Internet advertising business model change risk. The Company is sensitive to the risk of consumers’ preferences change; consumers may prefer paid subscriptions requiring no consent for data processing and having advertisements removed which may result in falling volumes of the data on Internet users and more difficult data acquisition, albeit at the moment the consumers do not tend to prefer pay services. The Company has to be able to adjust its business model (including technology) to fast and dynamic changes of the Internet advertising market in a fast and effective way. There is the risk that some capitally stronger entities may be able to act faster and start offering technologically more advanced or more cost-effective services. This risk materialized in the years 2018-19 when the Company had to change its business model and its results temporarily deteriorated. 8.Currency risk. Cloud Technologies generates the majority of revenues in foreign currencies, especially in US$, whereas the Company’s costs are incurred mainly in PLN (some in US$). A weak/strong PLN in relation to US$ is favorable/unfavorable for the Company’s financial results. The Company does not use hedging against the currency risk. 9. Risk regarding the shareholder structure and control over the Company. The main shareholders own over 57% of the votes at the Company’s AGM. Their interests and actions may sometimes vary from the interests of the minority shareholders. 10. Slower than expected growth pace of the data sales segment’s revenues. 11. Negative impact of potential acquisitions. 12. Low liquidity on the WSE. Average daily turnover reaching c. PLN 100 000   Competitive advantages 1. Technology. Cloud Technologies owns the proprietary Data Management Platform for data integration and management. Instruments from big data field, machine learning and AI are used for data processing. The DMP has been under development for over 10 years which constitutes the competitive advantage over newcomers to the market. 2. Market experience. The Company has been dealing with the acquisition, processing, and distribution of data about Internet users for over 10 years and managed to develop a vast network of business contacts with both, the suppliers and clients. 3. Volume and data quality. Cloud Technologies processes c. 100 billion profiles of PC users and mobile devices users which makes the Company one of the biggest data warehouses in the world. Data comes from more than 200 countries. The Data Management Platform analyzes c. 5 billion activities per day

Q3'23 EBITDA below expectations; 2023-26 strategy announcement Q3'23 results are below our expectations at the revenue/EBIT/EBITDA level. Revenue was below our expectations (PLN -0.4m) mainly due to the recognition of a lower amount of grants in the current period. The company recognized higher-than-expected cost of sales (PLN +0.16m), lower R&D costs (PLN -0.23m) and higher general and administrative expenses (PLN +0.23m), which ultimately translated into EBIT/EBITDA below our expectations. The slightly lower difference on net income is a result of recognition of higher-than-expected financial income (PLN +0.1m).     Revenue. Revenues from sales of products and services were in line with published preliminary estimates (-1% y/y to PLN 3.6m in Q3'23). The product sales line posted a 76% y/y increase in revenue to PLN 2.5m, and the R&D line saw a 50% y/y drop in revenue to PLN 1.1m. Sales and rental of printers generated PLN 2.3m in revenue in Q3'23 (+71% y/y), and sales of nanoinks generated PLN 0.2m in revenue in Q3'23 (-50% y/y).   Costs. On the cost of sales side, R&D expenses were maintained at a lower level y/y (PLN -0.19m), while cost of goods sold increased (in line with the increase in product sales). General and administrative expenses increased y/y and q/q in Q3'23 mainly due to intensified efforts to commercialize the developed technology.   Financial activities and net profit. The balance on financing activities amounted to PLN 0.1m in Q3'23 vs. PLN -0.1m in Q3'22. Income tax amounted to PLN 0m, resulting in a net loss of PLN 0.8m in Q3'23 vs. a net profit of PLN 0.5 million in Q3'22.   Cash flow from operations amounted to PLN -2.4m in Q3'23 (vs. PLN 0.9m in Q3'22), which was negatively affected by an increase in inventories (stocking up for new orders), an increase in receivables (contracted equipment sales) and a decrease in payables. Capex was PLN -2.7m in Q3'23 (PLN +1.5m q/q vs. PLN -0.7m vs. Q3'22).   The company approved a strategy for 2023-26 which aims focus on two main business areas - business development and sales, and operational development to increase production capacity in all three business lines. The company reiterated the goal of increasing revenues to PLN 100m by the end of 2026 and achieving the first industrial-scale deployments of XTPL technology. In addition, it plans to expand the projects under development into new industries in the form of telecommunications and biosensors, as well as to further expand its international distributor network and establish stationary sales centers in key technological destinations: USA, Taiwan, South Korea.   NEUTRAL. We expect a neutral investor reaction to the company's results, which are below our expectations. We note that current results have little impact on the company's valuation, and in the short term, results are likely to be burdened by investments in scale growth and product commercialization. Printer sales are taking an increasing share of the sales structure, which is a positive sign. Two industrial modules were sold in Q3'23, indicating progress in industrial deployment processes. For the full year, the company should sell 13 devices. The assumptions of the published strategy are in line with previously communicated targets. Printer sales should accelerate in the coming quarters, but we expect further investment in sales development, which could be a drag on results. Important for the company's valuation in the medium term will be information on progress in implementation projects and progress in printer sales.  

Norges Bank set to keep rates on hold amid lower energy prices Lower oil prices and growing anticipation of rate cuts from the global central banks have taken the pressure off Norway's central bank to hike rates one last time in December. We expect an on-hold decision but expect the bank's new rate projection to push back against expectations of imminent rate cuts in 2024. A hawkish hold should partly shield the krone.   Norges Bank promised a hike, but no longer needs to deliver Back in September, Norway’s central Bank signalled that a December rate hike was likely. By November, policymakers were watering down those promises and said that further progress on the inflation outlook could lead to a pause. We now think “no hike” is the most likely scenario next week, though it’s a close call. Market pricing is leaning this way too. Since the November meeting and the last forecasts produced in September, we’ve seen both a pronounced fall in oil prices and a big dovish repricing in global rate expectations. The former is assumed to weigh on oil investment and ultimately growth and the labour market. The latter removes one source of potential weakening pressure on the krone – or at least that’s true in theory. Norges Bank’s preferred trade-weighted exchange rate index is actually 4% weaker than assumed in the September forecasts. Still, the net effect of all of that should be a lower interest rate projection for coming months. Previously the projection saw rates peaking around 4.50% and staying there until the latter part of 2024. Assuming we don’t get a rate hike from Norges Bank on Thursday, we’d expect a lower peak rate in the projection and there’s a chance we also see a slightly earlier rate cut pencilled in. That said, we doubt policymakers will want to endorse the shift away from “higher for longer“ among investors over recent weeks. Ultimately though we do expect rate cuts next year and we think Norges Bank could end up following the Federal Reserve with easing, starting in the second quarter of next year   Norges Bank interest rate projections over time Still reasons to like NOK in the long-end Markets are pricing in around a 30% implied probability of a rate increase, meaning the risks are skewed to the upside for the Norwegian krone considering how close of a call this is set to be for policymakers. Our baseline is – as discussed – a hold, which should add a bit more pressure on the underperforming NOK, even though Norges Bank may well try to tame dovish speculation by signalling openness to more tightening if necessary. Ultimately, the impact on NOK should not be too material in the event of a hawkish hold, and the krone should quickly revert to being driven by external factors. Indeed, it’s been mostly external factors – namely the dollar recovery, worsening of the European economic outlook, softer oil prices – that have weighed on NOK of late. Domestically, the sustained pace of daily FX purchases in December (NOK 1.4bn) and dovish repricing have had a secondary but non-negligible influence. Expect CPI figures three days before the Norges Bank announcement to move NOK. Looking beyond the short-term underperformance, and despite a less hawkish Norges Bank, there is still a lot to like about NOK; it is deeply undervalued, has a relatively stable economic outlook, and good carry advantage. We continue to favour the krone against its oil peer the Canadian dollar, in 2024.

Q4’23 preliminary sales and Q4’23 results preview, due on Apr 25 Preliminary sales results for Q4'23. XTPL reported Q4'23 sales estimates, according to which revenues from sales of products and services amounted to PLN 4.4m in Q4'23 vs. PLN 3.4m in Q4'22. Funds raised from subsidies amounted to PLN 0.7m in Q4'23 vs. PLN 2.9m in Q4'22 (only some of these funds will be included in the company's income statement). XTPL had PLN 27.1m in cash at the end of Q4'23 (vs. PLN 31.7m at the end of Q3'23). The company's management says the cash on hand will be sufficient to implement the 2023-26 strategy. The backlog as of January 19 for the delivery of DPS printers in 2024 is 5 units. Q4’23 results preview. XTPL is due to publish its Q4’23 results on April 25, 2023. We expect sales to increase y/y and q/q in Q4'23 (on y/y basis driven mainly by higher revenue from sales of products). We expect cost of sales to increase y/y due to an increase in the share of product sales in revenues. At the same time, we assume an increase in R&D as well as in general and administrative expenses due to the growing scale of operations. The above factors should translate into a y/y decline in EBIT/EBITDA in 4Q'23. Revenue. We expect revenue to increase by 6% y/y to PLN 4.55m. We are estimating sales of products and services in line with preliminary estimates published by the company, but we assume a much higher share products sale in sales-mix y/y. On the grants line, we assume recognition of about PLN 0.15m in Q4’23, representing about 21% of grants awarded in the period (the remainder should be recognized by the company as deferred income). Costs. We assume R&D costs to decrease y/y (we expect higher part of costs to be capitalized y/y), while we expect an increase in costs of products sold due to the assumed higher share of products sales in the sales-mix. We expect G&A costs to increase by 76% y/y to PLN 3.7m, which should result from business scale-up. Net profit. We expect a net loss of PLN 1.6m in Q4'23 vs. a net profit of PLN 0.1m in Q4’22. We assume the balance on financing activities at PLN 0.1m (mainly interest on cash held) vs. PLN 0m in Q4'22.     Opinion. NEUTRAL. Despite the y/y revenue growth, XTPL should report lower EBIT/net profit y/y in Q4’23, mainly due to increased costs (investment in further revenue scaling). The deterioration in the result is expected and is mailny due to XTPL's investment in the commercialization of its solution. Currently, the backlog for 2024 is 5 units of DPS devices; nevertheless, we ultimately expect sales of DPS devices to be higher than the 13 units recorded in 2023. In the medium term, investors' attention will be focused on the progress of industrial implementations of XTPL's technology and the expected first industrial deployment in 2024, which should al