WallStreetBets Rallies Behind Wendy’s, Cerebras Flops in First Earnings Since IPO

**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, June 24th. In today's episode, we'll recap the earnings from Cerebras and FedEx. We'll also tell you about the latest meme stock emerging from Wall Street bets. Then stick around to the end of the show to find out why Google being added to the Dow Jones is making me nervous. We got a great show for you today.
Let's go.
Stocks continued to drop on Tuesday, with the S&P 500 falling 1.4 percent, while the Nasdaq tanked 2.2 percent. And just like Monday, this sell off was mostly concentrated around the tech and AI names. The tech sector fell 3.6 percent, while the SOX semiconductor index fell nearly 8 percent. But outside of tech, it wasn't too bad. In fact, six of the 11 S&P sectors were up yesterday, with consumer staples and healthcare being the best performers. So we're continuing to see that rotation out of tech and AI and into safer corners of the market, as investors continued to worry about the AI trade. And by the way, this is happening all over the world. South Korea's KOSPI index, which is like their version of the S&P 500, tanked nearly 10 percent yesterday. This index is heavily tied to tech and chip giants, like Samsung and SK Hynek. So it's become a pretty good barometer of the global AI trade. And as these high-risk tech stocks sell off, investors are pouring some of that money into the US dollar as a safe haven investment. The US dollar index, which measures the US dollar against a basket of other currencies, just hit a 13-month high. Now it also helps the market is increasingly expecting the Fed to hike rates this year. And as interest rates go up, the US treasury bonds pay more interest, which increases the demand for the US dollar as investors try to buy more treasuries. And by the way, the expectation of the Fed is going to raise interest rates is also dragging down the price of gold, which doesn't pay a yield. Gold is now down 10% over the last month and hovering near $4,000 an ounce. Now the other big macro mover is oil, which just keeps falling. Brent crude prices dropped below $76 a barrel this morning, which is the lowest level since the day before the Iran war started in late February. More oil tankers are starting to cross the Strait of Hormuz as the US and Iran continue to hash out a final peace deal. And you know, with oil prices coming down, that should help cool inflation, which could give the Fed room to hold off on rate hikes. So the market is kind of in a weird spot right now. On one hand, you have AI stocks getting hit and the dollar ripping as the odds of a rate hike are rising. But then on the other hand, oil prices are starting to fall, which could help inflation cool off and maybe give the Fed a reason to chill out on rate hikes. Now the next big thing the market is going to be paying close attention to is the Micron earnings which dropped tonight. That should give us a better idea of what's going on with AI demand. We'll cover those earnings on tomorrow's episode, along with the PCE inflation report, which comes out tomorrow morning. So if you're new here, definitely get subscribed to the podcast and tune in every day to stay in the loop.
Let's run through some headlines, starting with Cerebras. Cerebras reported earnings last night for the first time since their Blockbuster IPO back in May, and the market did not love it. Quick reminder here, Cerebras is an AI chip company. Their chips are built specifically for speed and inference workloads. They also rent out computing power as a cloud service. And the demand for their stuff is clearly there. Revenues last quarter jumped 94% from a year ago to $193 million, beating estimates on Wall Street. Their net losses also narrowed to 14 million from nearly 24 million a year ago. And in the cherry on top, they even guided their full year revenues above what Wall Street was expecting. But despite that, the stock is still down more than 10% this morning because investors are worried about margins. Cerebras told investors that it expects their operating margins to be between negative 28 to negative 32% because they're spending enormous amounts of money to build out capacity. And I think the bigger concern is that their gross margins, which is basically profit after production costs, is set to shrink to 37% next quarter, down from the 46.5% last quarter. For context here, Nvidia's gross margins are north of 70%. So you know, with investors already jittery about the AI trade this week, any whiff of bad news is getting amplified right now, which I think is the reason why Cerebras stock is selling off this morning. And by the way, looking back at Cerebras' IPO, they priced their shares at $185 a share, and then on day one, the stock jumped to above $300 a share. Well, today, the stock is trading right around $200. So if you got in at the IPO at $185, you're still up, but if you bought after the first day pop, you're likely in the red. So just be careful with those IPOs out there.