SK Hynix Drops Despite $42B Profit, Ford Bets Big On Gas Guzzlers

**Zaid Admani** (0:00)
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Wednesday, July 29th. In today's episode, we'll break down why markets are on edge ahead of the Fed decision. We'll also tell you why Ford stock is surging after their earnings and why SK Hynix is falling despite posting $42 billion in profit. Then stick around to the end of the show and find out how much someone paid for Jensen Huang's leather jacket at auction. We got a great show for you today.
Let's go.
Yesterday was a weird one for the markets. Stock started off Tuesday deep in the red, but did manage to climb out of a hole. The NASDAQ still finished lower by 0.2% after being down over 1.5% and the S&P squeezed out a 0.2% gain. The Dow was the star of the show jumping 1% on Tuesday, but nobody cares about the Dow, so. You know, what stood out to me is that roughly 71% of stocks in the S&P finished higher yesterday with the healthcare and consumer staples sector being the best performing. So the market rotation continues out of tech and into other sectors of the market. And that brings me to today. The next 48 hours could really set the mood for the markets moving forward. First up, we had the Fed decision on interest rates at 2 p.m. Eastern. Now what's shocking here is that traders are pricing in a roughly one in three chance of a rate hike. That is unusually high odds this close to the meeting. Now part of the uncertainty is that Fed Chair Kevin Warsh himself has refused to signal his moves in advance. So that's adding to the uncertainty here. And I can't wait to hear what Kevin Warsh has to say at the press conference later today. But that's not all though. After the bell, we are getting earnings from Microsoft and Metta, which are two of the biggest AI spenders on the planet. Investors will be watching and listening closely to what they have to say about their AI CapEx plans. And then the backdrop of all of this is what's happening with oil prices and the flare up in the Middle East. Iran launched additional strikes yesterday and the US says they will retaliate, which is causing oil prices to jump more than 6%. In fact, Brent Crude is trading back above $90 a barrel again. So there's a lot going on right now. Tomorrow's episode is going to be stacked. So definitely get subscribed to the podcast if you haven't already. Consider hitting the notification bell as well so you don't miss when the episode is up.
Let's run through some headlines. Starting with Ford. Ford reported second quarter earnings last night and the old school automaker delivered a beat and raised their guidance for the second time this year. Now what's interesting is that total revenues for the quarter were down 4% compared to last year, coming in at $48.3 billion. But investors were more focused on the profit number. Ford's adjusted operating profit came in at $2.5 billion, which beat Wall Street estimates. And looking ahead, Ford expects to earn 10 to $11 billion in operating profit this year, which is up from their previous estimates of 8.5 to $10.5 billion. These earnings from Ford are very similar to what we heard from GM. Just like with GM, Ford is actually selling less cars. In fact, vehicle sales dropped 10% last quarter. But Ford sold a ton of high margin cars like the Bronco and the Explorer. Americans keep buying the big, expensive, gas-powered SUVs, especially the expensive off-road versions with all the extra packages. And that's been great for Ford's bottom line. Meanwhile, Ford's EV business is still bleeding. EV sales dropped 41% and the EV unit as a whole lost about $1.3 billion for the quarter. Ford expects to lose roughly $4 billion in total on EVs this year. But Ford is trying to salvage the EV investment they've made over the years by turning their battery factory in Kentucky into an energy storage business that could potentially provide power to AI data centers. This pivot from Ford came out earlier this year, which led to a surge in stock price. But Ford did say that profits from this pivot won't show up until sometime in 2028 But overall, though, I think Ford is in a good spot here. They're juicing their bottom line right now by charging more for premium cars like the Bronco. In the meantime, they're pivoting their money losing EV business into a potential money maker energy storage business, which could pay off big time in the long term. I think investors like what they heard. Ford shares are up around 6% this morning at the time of this recording, and the stock has gone up 35% over the past 12 months. Let's shift gears and talk about SK Hynix, because the Korean memory chip maker also recorded earnings last night, and the numbers were insane, and so was the stock's reaction. Last quarter, revenues more than tripled to roughly $55 billion, and operating profit jumped more than six fold to roughly $42 billion. This huge demand that AI has created for memory chips has been great for SK Hynix's business. Margins topped 80% as the company continues to raise prices due to the shortage. So yeah, those were some absurd numbers, but somehow they weren't good enough. Revenues in operating profit actually missed Wall Street estimates, and the stock fell nearly 10% on the Korean Stock Exchange. I guess that's what happens when a stock quadruples in a year. Expectations get so high that even a $42 billion operating profit quarter isn't enough to satisfy the market. And look, there are some other concerns that investors have right now like spending. SK Hynix now expects capital expenditure to rise at roughly 50% this year to at least $31 billion as they raise to increase memory production. And that's raising fears that these memory companies could be building towards a supply glut. That's historically what happens in this business. When prices go up, memory makers overbuild and prices then come crashing down. Investors are also worried about the role that China's chip maker, CXMT, could play in the near future. We talked more about CXMT on yesterday's episode, so go check that out if you missed it. Now, SK Hynix, for their part, says that memory demand could continue to outpace supply through at least 2030 In fact, the company has already signed a multi-year supply agreement with around 10 customers and is preparing to ship their next generation HBM4e chips to NVIDIA in 2027 But that hasn't stopped the market from panicking a bit. SK Hynix stock has lost roughly half its value since its June peak. I gotta say, SK Hynix really timed their US listing perfectly. Remember, they raised $26 billion from their NASDAQ listing in early July, right before all of this.