Apple's Foldable iPhone Is Coming

Your Daily Market Update in 10 Minutes. My name is Zaid Admani and today is Tuesday, September 8th. In today's episode, we'll preview Apple's iPhone event this week and break down why Amazon just took a $4 billion stake in a company that makes Android chips. Then stick around to the end of the show to find out why Microsoft is about to put a monthly time limit on cloud gaming. We got a great show for you today, let's go. Stocks are coming off a quiet but winning week. The S&P 500 was up 0.1% last week while the Nasdaq was up just 0.4% so pretty small moves and overall the stock market has been quiet for the last few weeks which is pretty normal for August. But we are now in September, Labor Day is over and there is a lot for investors to consider moving forward. The big news last week was the August jobs report which came in way stronger than expected. The U.S. economy added 162,000 jobs in August which is roughly triple the 55,000 that economists were expecting. And the reason that's key is because with the labor market looking strong, it could give the Federal Reserve a reason to hike interest rates at their meeting next week. New Fed Chair Kevin Walsh has been talking tough on inflation, he wants to get it back to the Fed's 2% target and that's why traders are now pricing in a 60% chance of a rate hike at the next meeting so we'll see what happens on September 16th. The other big news that could play into this is the rising oil prices. Fighting in the Middle East is escalating again, Iran fired missiles at U.S. Navy ships over the weekend, the U.S. responded by striking Iranian oil tankers, and now energy facilities in Saudi Arabia are being attacked again which is forcing Saudi Arabia to halt operations at some sites. So all that chaos is pushing up oil prices again, Brent Crude is trading around $100 a barrel while WTI is trading around $94 a barrel. I gotta say, for most of the summer, I feel like Wall Street was more obsessed with AI earnings and looking past the war and all the macro stuff. But earnings season is over, school is back in session, and investors are realizing that there are still some real macro headwinds. So it's possible that macro headlines like oil prices, inflation, and rate hikes could have the most impact on how the stock market does in the last four months of the year. Now we should learn more about the macro picture this week, the August Wholesale Inflation Report drops on Thursday morning, and then the CPI Inflation Report drops on Friday morning. We'll cover both those reports. And beyond just the macro stuff, there's also an Apple event on Wednesday where they're gonna show off the new foldable iPhone, and who knows, maybe one of these AI companies might surprise us too this week. So we'll have a lot to cover this week, definitely get subscribed to the podcast if you haven't already, and tune in every day to stay in the loop. Let's run through some headlines, starting with Apple. Tomorrow is the annual iPhone event, and this one could be the biggest one in years. For one, Apple has a new CEO now, John Ternus took over from Tim Cook back on September 1st. And for this event, Tim Cook will actually be sitting in the audience and not opening the keynote with his iconic folksy good morning intro. And the other reason this event is going to be important is because Apple is expected to release their first foldable iPhone. There's been a lot of hype building about this phone, there was a great write-up in Bloomberg this morning from friend of the show Martin Gurman about the development of the foldable phone. Apparently, it was something that Tim Cook pushed for after a trip to China in 2020 where he saw a ton of people using foldable phones. So Apple's been working on this for a few years now, and they're very late to this market. Samsung has been selling foldable phones since 2019, and Google and other Android manufacturers have been doing it for years as well. Now, foldables are still a niche product, they accounted for less than 2% of global smartphone sales last year, likely because they're very expensive, but they are the fastest growing segment in smartphones. And by the way, this new foldable iPhone is also going to be very expensive. The estimates are anywhere between $2,000 and $2,500 for this phone. Personally, I think Apple will likely price it on the higher end. I wouldn't be surprised if it comes out at $2,500, because regardless of what the price is, Apple fanboys will buy this. In fact, Morgan Stanley estimates that Apple will sell 7 to 8 million units in the second half of this year. That'll be an extra 14 plus billion dollars in revenue for Apple. You know, I feel like most people don't really upgrade their iPhones very often these days. Every new iPhone pretty much looks the same as a previous year's iPhone, and the cameras have gotten so good now that it doesn't really make sense to upgrade for like three to four years. But the iPhone fold might give people a reason to upgrade sooner because it's a new product. So that could be a boost to Apple's revenues in the second half of the year. Let me know in the comments on what you guys think. What do you think the price for this iPhone fold will be? Are you going to buy it? And what do you think that Apple will name it? Are they going to go with something basic like the iPhone Ultra or will they go outside the box? Drop your thoughts in the comments on Spotify and YouTube. Let's shift gears and talk about Qualcomm, because the company just landed a major AI chip deal with Amazon. Most people know Qualcomm as the company that makes the Snapdragon processors that are inside Android smartphones. But lately, the company has been trying to diversify away from smartphones and become a serious player in AI data centers. Back in June, the company showed off a data center CPU called Dragonfly, and they said they were targeting $15 billion in data center revenue by fiscal 2029. The company announced back then that Meta would start buying their data center chips in 2028, and now they just locked in Amazon. Qualcomm and Amazon Web Services are going to work together to create multiple generations of custom chips for AWS data centers. The focus is going to be mainly on AI inference. The details behind this deal are unique, just like with every AI deal these days. In order to land this deal with Amazon, Qualcomm is giving Amazon a warrant to buy up to 25 million shares of the company for about $160 each. That's about $4 billion worth of stock that Amazon could buy of Qualcomm. Now, those shares only vest as Amazon actually buys more chips with Qualcomm over the next decade. So essentially, the more that Amazon spends on Qualcomm chips, the more of Qualcomm that Amazon will own. It's just the latest example of unique financial engineering when it comes to AI deals. And it also shows you that the AI chip opportunity is way bigger than just NVIDIA GPUs. Especially now that AI agents are exploding, CPUs are becoming the bottleneck for data centers, and it looks like Qualcomm is trying to grab some market share while they can. Qualcomm's stock popped more than 10% initially after this news came out. It's up around 4% right now at the time of this recording. Surprisingly though, if you zoom out on the stock chart, the stock has been flat for the year. Let's talk about some stocks making moves today. Shares of Bloom Energy are jumping this morning after the company was selected to join the S&P 500. Bloom Energy makes fuel cell systems that generate electricity on-site for businesses and data centers. We've actually talked about this company before because it's one of the big winners of the AI boom. As you guys know, data centers need a ridiculous amount of electricity, and Bloom's fuel cells can provide power directly at the data center's site instead of waiting years for a new power grid connection. So that surge in demand from data centers has sent Bloom's stock up nearly 3x this year, and starting on September 21st, the company will join the exclusive S&P 500. That means that all the ETFs that are tracking the S&P 500, which is trillions of dollars, will have to buy Bloom's stock. That's why Bloom's stock jumped 7% on Friday when this S&P 500 news was announced, and it's up another 6% this morning at the time of this recording. On the flip side, shares of the pharma company Novartis are tanking this morning. The Swiss pharma company's stock is down around 10% after another experimental drug failed a late-stage clinical trial. This drug was called Deldeseran, it was being tested to treat a rare muscle-wasting disease, and it failed trials after showing no statistically significant improvement over a placebo. The bigger problem for Novartis here is that they acquired this drug as part of a $12 billion acquisition of Avidity Biosciences last year. This was supposed to be one of the drugs that helped justify that acquisition, and now it just failed late-stage trials. I gotta say, Novartis is going through a rough stretch right now. This is now their third major clinical setback in the past week. Another one of their potential blockbuster cholesterol drugs failed a late-stage trial a few days ago, and the company also paused eight trials of an experimental cell therapy after three patients died. So I think that could be contributing to why Novartis' stock is down double digits this morning. Investors might be questioning the company's entire drug development pipeline. Let's wrap the show with a fun fact. Microsoft is putting a time limit on Xbox cloud gaming. Starting in November, Game Pass Ultimate subscribers who pay $23 a month will only get 15 hours of cloud gaming per month. Game Pass Premium subscribers will get 10 hours a month, and Game Pass Essential subscribers will only get 5 hours a month. Back in my gaming days, I could do 5 hours in a single session. Now if you run out of hours, Microsoft will let you buy more hours, and Microsoft says that only about 4% of Game Pass subscribers currently exceed those limits. But regardless, this is still a pretty dramatic change for Game Pass subscribers after having years of essentially unlimited cloud gaming. I think the main reason Microsoft is doing this is because of AI. The AI boom has made compute very valuable, and cloud gaming is basically a video game running inside a Microsoft datacenter that gets streamed back to your phone or computer. The longer you play, the more it costs Microsoft to run that game. So every rack being used for cloud gaming could instead be used for AI. So I think that's why Microsoft could be putting a cap on cloud gaming. And I think it's fair to say that cloud gaming was just a flop. Microsoft has been hyping up cloud gaming for years now, and honestly, I used to be a big fan of Game Pass. But then Microsoft started raising prices, and I just kinda lost interest. To be fair, I also had a second kid which completely killed all my gaming free time as well. Shout out to my son, he actually turns 3 today. Can't wait till he's old enough where we can game together and I can kick his butt in 2K. You know, looking back, I wonder if Microsoft really regrets the $69 billion Activision acquisition that they did back in January of 2022. That deal was announced 10 months before ChatGPT came out, and it didn't close until 2023. I bet Satya Nadella probably wishes he used that $69 billion to buy more Nvidia chips and not a gaming company. Well alright guys, that's the rundown for today. I hope you guys enjoyed today's episode. Thank you guys so much for listening, watching, and commenting. Shout out to Mike and V for all the work behind the scenes. And we'll see you guys back here tomorrow.