Top Stock Market Highlights of the Week: OpenAI, Nvidia and Alibaba


Welcome to the latest edition of top stock market highlights.

OpenAI

OpenAI, the artificial intelligence (AI) company responsible for the now-famous ChatGPT program, went through several days of corporate chaos last week.

Last Friday, CEO Sam Altman was asked to step down from his role by the board of directors (BoD).

The reason given was that the BoD no longer has confidence in Altman’s ability to lead OpenAI and that he was not “consistently candid” in his communications with the board.

The company’s chief technology officer Mira Murati was then appointed as the interim CEO to replace Altman.

After this shock pronouncement, OpenAI’s president and co-founder Greg Brockman announced that he was leaving the firm.

Two days later on Sunday, OpenAI hired the former CEO of Twitch Emmett Shear as interim CEO, replacing Murati.

Meanwhile, Microsoft (NASDAQ: MSFT) CEO Satya Nadella announced the hiring of Altman to lead a new AI department within the company alongside Brockman and several ex-OpenAI employees.

By Monday, almost 800 employees at OpenAI signed a petition calling for Altman’s reinstatement as CEO and for the BoD to resign.

Altman then reached an in-principle agreement to return as the CEO of OpenAI, with the condition that the company’s BoD be reconfigured.

His return capped four days of confusion as OpenAI first lost, and then regained, its charismatic CEO.

OpenAI and Altman are still determining the exact terms of his reinstatement, but it seems the drama has died down, for now.

Nvidia Corporation (NASDAQ: NVDA)

Nvidia announced a blowout set of earnings for its third quarter 2023 (3Q 2023) results.

Revenue more than tripled year on year to US$18.1 billion with its gross margin expanding by 20.4 percentage points to 74% for the quarter.

Operating profit leapt 17-fold year on year to US$10.4 billion while net profit catapulted 13-fold year on year to US$9.2 billion.

In particular, data centre revenue hit a record high of US$14.5 billion, up more than three-fold from a year ago and 41% from the previous quarter.

CEO Jensen Huang remarked that the era of generative AI is “taking off” with many organisations transiting from general-purpose to accelerated computing.

Nvidia is poised to pay out a quarterly dividend of US$0.04 per share.

The company has projected revenue of US$20 billion for its fourth quarter despite the US government’s curbs on exports of microchips to China.

Some of Nvidia’s best products have seen restricted sales to the Middle Kingdom for national security reasons.

If Nvidia can achieve its projected sales figure, it will represent a more than three-fold year on year increase from 4Q 2022’s revenue of US$6.1 billion.

Alibaba (NYSE: BABA)

Shares of Alibaba plummeted by 9.1% to US$79.11 after the technology giant cancelled a spin-off of its cloud business.

The reason given was tightened US restrictions on advanced chips for China.

The e-commerce company seemed to be backtracking on an original commitment to spin off six of its units in separate IPOs to realise value for shareholders.

Instead, Alibaba has opted for organic growth for its cloud division but will pay out an annual dividend of US$2.5 billion to investors who were anticipating the spinoff.

The company, along with peer Tencent Holdings (HKSE: 0700), is facing difficulties brought on by the Biden Administration’s curbs announced last month.

These curbs involved cutting-edge chips that the Chinese government needed for military applications.

In a stunning about-turn, Alibaba also confirmed the suspension of an IPO for its grocery arm Freshippo.

Its most recent quarter saw revenue rise 8.5% year on year to RMB 224.8 billion with net profit coming in at RMB 27.7 billion, a sharp turnaround from the net loss chalked up a year ago.

The group also has to contend with a slowing economy with consumers less willing to open their wallets.

China’s signature annual shopping festival, Singles’ Day, resulted in just single-digit year-on-year percentage increases for both Alibaba and JD.com (NASDAQ: JD).

Alibaba is taking steps to boost demand for e-commerce by focusing on content creation and launching AI-powered tools for developers.

Tens of thousands of employees were also let go in a bid to reduce the group’s fixed cost base.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.





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