Cerebras Stumbles After Earnings Report, Lakers Sell for Record $12.5 Billion

**Zaid Admani** (0:00)
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Thursday, August 13th. In today's episode, we'll get into why the AI trade is suddenly back in full swing. We'll also recap earnings from Cerebras, Super Micro and Cisco. Then stick around to the end of the show to find out why the Los Angeles Lakers just sold again for the second time in less than a year. We've got a great show for you today.
Let's go.
Stocks moved higher on Wednesday. The NASDAQ was up 0.5% and the S&P gained 0.3%, putting it just a few points away from a record high. The July CPI report definitely helped yesterday's rally. Headline inflation cooled to 3.4% while Core inflation came down to 2.5%. Both those numbers right in line with expectations. And this morning, we got even more encouraging inflation data. The July producer price index, which measures inflation at the wholesale level, came in flat compared to June. That was better than expected. And if you look at the annual wholesale inflation, that dropped to 4.7% in July, down from the 5.5% in June. The biggest cause of the drop came from falling energy and food prices. So this is yet another data point for the Fed. And I think it gives them a reason to hold off on hiking rates at the September meeting. And I think the optimism about no rate hikes could be fueling the AI rally again. Names like CoreWeave, Dell and SpaceX were some of the biggest winners on Wednesday. It also helps that earnings for some of these companies have come in strong as well. And by the way, this AI rally is spreading globally. I saw a crazy stat that South Korea's stock market, which is heavily reliant on memory giants, SK Hynix and Samsung, has now rallied 22% in just 10 trading days, officially putting the Cosby back into the bull market. It's a crazy turnaround because remember, the Cosby fell 22% in July, which was its worst month since the global financial crisis. And now just two weeks later, it's up more than 20% from its lows. So the market continues to experience some serious whiplash. I mean, a few weeks ago, investors were dumping AI and chip stocks over fears that the AI boom had gone too far. Now, because of strong earnings plus cooler inflation, have investors piling right back in. Now looking ahead, the next big thing to watch will be Nvidia earnings, which take place at the end of the month, and also the Fed meeting which is taking place in Jackson Hole. We're going to be staying on top of that along with everything else happening in the market, so make sure you guys are subscribed to the podcast and tuning in every day to stay in the loop.
Let's run through some headlines, starting with Cerebras. Cerebras reported earnings last night, and this is one of those reports where the numbers look pretty good, but the stock is getting absolutely crushed anyways. Now, a quick refresher on Cerebras. They are a chip company that makes AI chips the size of dinner plates, and these chips are designed for fast AI inference workloads. Now, Cerebras is trying to take a bite out of NVIDIA's market share. Now, there's a lot of hype around the company earlier in the year. They IPO'd back in May at $185 a share, raising $6.4 billion in the process. Now, we did a deep dive on them covering the company, and I gotta say the stock has done pretty well. It's up over 40% from its IPO price, but shares are down more than 15% today following their earnings. Now, like I said, the earnings numbers were solid. For the second quarter, Cerebras reported $210 million in core revenue, which was double what they generated a year ago and ahead of Wall Street expectations. Their adjusted operating loss also narrowed to $34 million, which was way better than the roughly $63 million in loss that analysts were expecting. Not to mention, management also raised their full year forecast. But underneath those numbers, there are some concerns. The big one seems to be that actual hardware sales fell 23% from last year to about $54 million. Meanwhile, Cerebras' cloud computing business nearly quadrupled to roughly $128 million. So, you know, Cerebras pitched itself as an Nvidia alternative, but they're now increasingly making their money from renting access to their chips through the cloud, rather than actually selling their chips. Now, personally, I don't think that's a bad thing, especially if margins on the cloud business are better, but it is kind of weird that a chip company is selling less chips during this huge AI boom cycle. CEO Andrew Feldman on the earnings call said that their hardware sales are going to be lumpy because these are massive systems that they're selling and sometimes customers literally don't have the data center space to install them. So I think investors are worried about the hardware slowdown. Another potential disappointment is that Cerebras' backlog stayed basically flat at around $25 billion. Now that's still a healthy number, but with the AI infrastructure spending exploding right now, investors probably wanted to see that backlog number keep climbing. Overall though, I think Cerebras' stock dipping after these earnings might just be a case of investors taking profit after the big run up in the stock price following the IPO. And look, if Cerebras' chips are actually that much better and faster at inference workloads than what NVIDIA has to offer, they could continue to see a ton of demand for their chips as long as the AI build out doesn't slow down. Let's talk about some stocks making moves today.