Wall Street Lunch: Apple To Bring AI To Iphones In China (undefined:AAPL)

Listen below or on the go on Apple Podcasts and Spotify.

AAPL and BABA will bring AI to iPhones in China. (0:15) Fed’s Powell in no hurry. (1:12) Corporate sentiment highest on record. (5:08)

This is an abridged transcript of the podcast.

Our top story so far. Apple (NASDAQ:AAPL) is working with Alibaba (BABA) to bring artificial intelligence features to iPhones in China.

The Information reports that the two companies have submitted the AI features to China’s cyberspace regulator for approval.

The timing of the Apple Intelligence launch in China was not immediately clear. However, the company said on its recent earnings call that its next round of language rollouts will be in April.

In addition, the European Commission launched an initiative called InvestAI to mobilize €200 billion for investment in artificial intelligence, including a new European fund of €20 billion for AI gigafactories.

The regulator said the large AI infrastructure is needed to allow open, collaborative development of the most complex AI models.

Commissioner Ursula von der Leyen said, “This unique public-private partnership, akin to a CERN for AI, will enable all our scientists and companies – not just the biggest – to develop the most advanced very large models needed to make Europe an AI continent.”

Heading to Capitol Hill, Federal Reserve Chairman Jay Powell addressed the Senate Banking Committee in the first part of his semiannual testimony before Congress, still known to some of us Gen Xers and Boomers as Humphrey-Hawkins.

Powell said the Fed does not need to be in a hurry to adjust its rate further now that its policy stance is significantly less restrictive than it was a few months ago.

“We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment,” he said.

If the economy stays strong and inflation doesn’t continue to move toward the Fed’s 2% goal, “we can maintain policy restraint for longer,” he said. But the central bank also needs to be attentive to risks on both sides of its dual mandate.

“If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly.”

Michael Rosner, managing director at Raymond James, says, “While Wednesday’s CPI is an important input into the Federal Reserve’s thinking on rates, we may be 6-8 months away from the next rate cut, so it’s premature to put much weight on what this data point means for the Fed.”

“Barring any major changes to the near-term economic data, we don’t think the Fed is going to pivot from its ‘wait and see’ approach on rates.”

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Among active stocks, Coca-Cola (KO) is up after topping Q4 estimates and delivering organic sales growth across all regions. The beverage giant’s top-line guidance was also above the company’s long-term target and well above the peer average.

Bank of America analyst Bryan Spillane said the stronger-than-anticipated FY25 guidance makes sense given the strong Q4 organic sales exit rate.

“In our view, this magnitude of a premium in terms of relative multiple is warranted as KO top-line management continues to fuel outperformance,” he said.

Shopify (SHOP) reported Q4 revenue shot up 31.3% year-over-year to $2.81 billion. It was the company’s seventh consecutive quarter of 25% or greater revenue growth when excluding logistics.

Looking ahead, Shopify sees Q1 revenue growing at a mid-twenties percentage rate on a year-over-year basis.

And Humana (HUM) was among the biggest S&P decliners after it warned that its annual Medicare Advantage membership could decline about 10% in 2025 following a decision to exit several loss-making markets and counties.

The company reiterated its full-year outlook for 2025, implying roughly $16.25 of adjusted earnings per share, which stood almost unchanged from 2024 but fell short of $16.91 per share in the consensus.

In other news of note, Archer Aviation (ACHR) announced that it has raised $300 million. BlackRock (BLK) was one of the leading institutional investors that participated in the financing round.

The new investment is seen as further reinforcing the company’s strong financial position and strategically positioning it to accelerate the development of its electric vertical takeoff and landing hybrid aircraft platform for the defense market and beyond.

The new investment raise brings Archer’s total liquidity position to ~$1 billion.

Archer also released certain preliminary estimated financial results for Q4, reporting that its GAAP operating expenses will be within the range of $120 million and $140 million and total non-GAAP operating expenses are in line with its guidance range of $95 million to $110 million.

And in the Wall Street Research Corner, BofA’s predictive analysis team says corporate sentiment is at its highest level since it began recording in 2004.

The team analyzes earnings call transcripts to calculate sentiment for S&P 500 companies. They use the Loughran McDonald’s financial dictionary to calculate sentiment scores, which takes into account the number of unique positive words minus the number of unique negative words in earnings calls.

Ohsung Kwon, Securities Equity & Quant strategist, notes the indicator has led S&P 500 EPS year-over-year, with a 69% correlation with a quarter lead, “suggesting a continued upcycle in earnings.”

Optimism jumped to the highest level since Q1 2021, with 52% of the companies so far expressing optimism during their earnings calls, compared to 46% last quarter.

“Mentions of ‘better’ or ‘stronger’ vs. ‘worse’ or ‘weaker’ also jumped to the highest level since 4Q21, showing signs of improvement,” Kwon said.

Mentions of the word “bottom” have jumped 24% year-over-year. This is the biggest bottom bump in history.

BofA says, “Rising ‘bottom’ mentions have historically marked an inflection in the EPS cycle, suggesting a potential earnings recovery in cyclically depressed sectors ahead.”

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.