GM Tanks Despite Earnings Beat, Walmart Takes On Costco

Zaid Admani (0:00)

Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Tuesday, October 20th. In today's episode, we'll tell you why too many shares and the lack of share buybacks could put a stop to the AI rally. We'll also tell you about Apple's next big product event, and why GM stock is dropping despite decent earnings. Then stick around to the end of the show to find out why Walmart's new $120 membership bundle has me thinking about canceling my Costco membership. We got a great show for you today.

Let's go.

Stocks bounced back to start the week with the S&P 500 gaining 0.4% and the NASDAQ jumped by 1.1%, clawing back some of the losses from last week. It was kind of a weird day though, because more than 300 stocks in the S&P actually fell yesterday, but a rebound in tech stocks pushed the index into the green. I still feel like the market isn't sure how to feel about the AI trade right now, because the relief rally from yesterday is already losing some steam. Now, one of the concerns about the AI trade is a level of debt that some of these companies like CoreWeave and Oracle are taking on. We've been talking about that for the last couple of weeks now. The other problem though, might be the supply of stocks. Not many people are talking about this, but I found this very interesting from a breakdown in the Wall Street Journal. See for the last 20 years or so, the total supply of US stocks have actually shrunk by about 1% a year because tech giants were constantly buying back their own shares from all the money they were making. But now these tech companies are spending every dollar they make plus more on AI data centers. So all the share buybacks have dried up. Meta is a good example of this. They bought back nearly $150 billion of their own stock between 2021 and Q3 of 2025 But since then, they've bought back $0 worth of shares. Meanwhile, you also have companies like Alphabet and Oracle that have issued tens of billions of dollars in new shares to raise money for AI investments. Not to mention you have expiring lockups from the SpaceX IPO plus upcoming mega IPOs from Anthropic and OpenAI. They're about to flood the market with even more shares. So the supply of shares are going up, which could put a cap on the rally. There was a great report from the asset manager GMO that found that for every 1% increase in the supply of shares tends to knock about 4% off of the overall market over the next year. So it's funny, everyone keeps waiting for the AI bubble to pop because chip demand will slow down. There seems to be no signs of a slowdown in chip demand, but we could see a pullback in the market because there aren't enough buyers left to absorb the increased supply of stocks. Something to keep an eye on, not many people are talking about that. Now zooming out, there's also some macro headwinds to factor in. Oil prices are surging again. Brent crude is back above $110 a barrel, which is the highest level since May. So I think investors are really counting on a strong earnings season to come through and keep this rally alive. We have a stacked week of earnings coming up tonight. We are hearing from Netflix and SpaceX. SpaceX actually made a last minute announcement that they were reporting earnings today, which is pretty unusual. Companies typically give weeks of notice. But yeah, we'll break down all the numbers on tomorrow's show with everything else happening. So if you're new here, you picked a great time to start listening to the podcast. Definitely get subscribed if you haven't already and tune in every day to stay in the loop.

Let's run through some headlines, starting with Apple. Apple CEO John Ternes has been really busy since he took over as CEO two months ago from Tim Cook. Apple had their iPhone event back in September where they showed off their first foldable phone called the iPhone Duo. Then they had another event in New York last week where they showed off the HomeView device. And now Apple just announced they're having another product event on October 28th called Pro and Tell. All the rumors are pointing to the launch of Apple's first ever touchscreen MacBook Pro. You know, for the Apple fanboys like me, this would be a pretty big deal because Apple has said multiple times that they would never launch a touchscreen laptop. And honestly, I still kind of think that touchscreens on laptops aren't really needed, but it looks like Apple's finally gonna launch one and I bet it's gonna be very expensive. By the way, at this event, Apple is also expected to launch a new iPad Mini and a refreshed iMac. So we'll cover the event next week when it goes down. By the way, Apple also reports earnings next week. So next week is gonna be a big one for Apple. By the way, I should mention the iPhone Duo comes out this Friday, but unless you pre-ordered your phone right when it became available last week, you're probably not getting one until next year. If you try to order an iPhone Duo right now, the expected delivery date is January. Apple said that the pre-order demand was nothing short of extraordinary. You know, when Apple showed off this phone a month ago, I had a feeling the Duo would be pretty popular, but the phone being back-ordered is also a supply chain story. Apple can't build them fast enough because of supply constraints. In fact, Apple actually announced this morning that they are bringing on a new US titanium supplier for the Duo's frame. So they're doing whatever they can and scrambling to make more Duos. You know, I thought about getting the Duo myself, but if I have to wait till January to get it, I mean, at that point, you're already a quarter of the way to the launch of the Duo 2, so you might as well wait, you know? I wonder if this show has enough pull to get a review unit from Apple. I don't know if we're quite there yet, but if you're listening and you work at Apple or you know someone that works at Apple, let me know if you can hook it up. We'll do a special edition deep dive episode of the iPhone Duo if we're able to secure a review unit. Let's shift gears and talk about General Motors. They reported earnings this morning and the car maker stock is getting crushed. GM's earnings were pretty solid for the most part. Revenues grew about 3% to $50 billion and earnings per share came in at $3.70, both metrics beating Wall Street estimates. Not to mention their operating profit came in at $4.1 billion. That was up from the $3.4 billion a year ago and free cash flow jumped 40% to $5.9 billion. But the company did cut their top end of their annual profit forecast, which seems to be the reason the stock is down. Shares are down around 4% at the time of this recording. What's crazy is that it wasn't even that big of a revision. GM now expects to earn between $14.5 and $15.5 billion this year compared with the previous forecast of $14 to $16 billion. So the company actually raised the low end of their forecast, but investors seem to be more focused on the fact that it also capped the upside. I mean, the company is facing some challenges right now, one of them being affordability. See, over the last couple of years, GM has cut back on EVs and leaned more into the high margin pickup trucks and SUVs. Those trucks are expensive and they carry a higher profit margin, which is why GM's core profit jumped 22%, while the North America profit margins improved to 8.7% compared to the 6.2% a year ago. So GM is making more profit per car sold, but they're also selling fewer cars. Sales fell in the US in China this quarter. GM's US deliveries dropped by 5.5%. And the thing is, with gas prices continuing to go up, that could put more pressure on the sale of these giant SUVs and pickup trucks. Meanwhile, you have companies like Toyota and Hyundai, they're benefiting from the higher gas prices because they sell hybrid cars, and multiple models start below $30,000. GM has fewer offerings in those categories. Essentially, GM has become a luxury truck company. CEO Mary Barra said that hybrids are coming, but she wouldn't say which models or when. Now, GM did announce a $20 billion stock buyback plan to get investors excited. This is a pretty massive buyback plan, given the fact that GM's market cap is about $70 billion right now. So $20 billion is more than a quarter of the company. The company has been aggressively buying stock over the last few years. They bought $29.5 billion of their own stock since 2023, and $43 billion worth of their stock since 2015, cutting the share count by 45%.