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🗞️ Alibaba's New AI Chip
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Market Performance
S&P 500: 6,460.26 ⬇️ 0.64%
Nasdaq: 21,455.55 ⬇️ 1.15%
Dow Jones: 45,544.88 ⬇️ 0.20%
Alibaba Might Launch a New AI Chip
Chinese tech giant Alibaba (BABA) posted a remarkable rally, with the stock surging over 12% following strong quarterly results driven by its cloud computing unit.
The company reported revenue of 247.65 billion yuan ($34.6 billion) for the June quarter, missing analyst expectations by 2%, but net income soared 78% year-over-year to 43.11 billion yuan, well above forecasts.
The real story lies in Alibaba's cloud division, which accelerated revenue growth to 26% annually, faster than the 18% growth in the previous quarter.
This cloud momentum, combined with AI-related product revenue maintaining "triple-digit year-over-year growth for the eighth consecutive quarter," positions Alibaba as a serious AI contender alongside Microsoft and Google.
Adding fuel to the rally, reports emerged that Alibaba is developing a new AI chip manufactured by a Chinese company, marking a strategic shift from its previous partnership with Taiwan Semiconductor.
This move directly challenges Nvidia's dominance in China's AI chip market, as Beijing has recently directed companies to avoid using Nvidia's H20 chips.
Alibaba’s core e-commerce business reported mixed results, with revenue increasing by 10%.
Still, adjusted earnings fell 21% due to heavy investments in instant commerce, which involves delivering products within an hour through its Taobao app.
Our Takeaway
Alibaba's 40% rally this year reflects successful diversification beyond e-commerce into high-growth cloud and AI services.
While instant commerce investments are pressuring short-term margins, the company's cloud acceleration and AI chip development signal a compelling long-term transformation story in China's competitive tech landscape.
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Market Overview
Friday's session ended a strong August on a cautious note, with the S&P 500 falling 0.64% despite hitting record highs earlier in the week.
Core PCE inflation data showed prices rising 2.9% year-over-year in July, matching expectations but accelerating from the prior month and reaching the highest level since February.
The inflation reading kept expectations for a Federal Reserve rate cut in check, with traders now focusing on September's jobs data to gauge the Fed's next move.
"The Fed opened the door to rate cuts, but the size of that opening is going to depend on whether labor-market weakness continues to look like a bigger risk than rising inflation," noted Morgan Stanley's Ellen Zentner.
Despite Friday's pullback, all major indices posted solid gains in August, with the Dow up over 3% and the S&P 500 climbing nearly 2% for the month.
Stock Moves Deciphered 📈
Autodesk (ADSK) - The software stock surged nearly 10% after beating Q2 expectations with $2.62 EPS on $1.76B revenue, exceeding analyst forecasts and issuing strong guidance.
Super Micro Computer (SMCI) - Shares of the server maker dropped over 5% after disclosing ongoing material weaknesses in internal financial reporting controls, raising transparency concerns among investors.
Marvell Technology (MRVL) - The chip stock plummeted 19% despite beating Q2 earnings expectations, as Q3 revenue guidance of $2.06 billion fell short of the $2.11 billion consensus estimate.
Headlines You Can't Miss
📊 Consumer sentiment retreats as inflation fears rise, according to the University of Michigan's August survey reading of 58.2.
🏦 Fed Governor Lisa Cook's fate remains uncertain after a court hearing on Trump's dismissal authority.
💰 Gold tracks for best month since April with 4.5% August gain as rate cut expectations build.
🏪 Kraft Heinz nears break-up plan to separate decade-old merger, shares jump 2% on WSJ report.
🏦 Bank stocks head for best month of 2025 with SPDR Bank ETF up over 9% in August.
📈 Russell 2000 on pace for longest monthly win streak since 2021 with fourth straight positive month.
🔐 SentinelOne jumps 8% after beating Q2 earnings expectations and raising fiscal year revenue guidance.
Trending Stocks
Caterpillar (CAT) - The industrial giant fell over 3% after warning of a potential $1.5-1.8 billion impact from tariffs this year.
The company's cautionary guidance highlights how trade policies are creating headwinds for manufacturers with global supply chains, particularly those with exposure to international markets.
Ambarella (AMBA) - Shares surged 14% after the semiconductor design company raised its fiscal 2026 revenue outlook to $379 million, beating the $350 million consensus.
It cited strong AI demand for portable video applications reaching production status, with CEO Fermi Wang highlighting growing momentum in AI-powered video processing.
Ulta Beauty (ULTA) - The cosmetics retailer fell 7% after raising full-year guidance. It now expects revenue of $12.0-12.1 billion (vs. a $11.7 billion estimate) and earnings of $23.85-24.30 per share (vs. a $23.65 estimate), signaling resilient beauty spending despite economic headwinds.
What’s Next?
Key Events to Watch 👇
September jobs report will be crucial for Fed rate cut timing.
Manufacturing PMI data to gauge tariff impact on the industrial sector.
Consumer spending patterns ahead of the holiday season.
Focus on guidance revisions amid tariff uncertainty.
Track upcoming news and earnings on your portfolio companies with Ziggma.
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