Top Stock Market Highlights of the Week: US Core CPI, Google and TSMC

Welcome to this week’s edition of top stock market highlights.

US core consumer price index (CPI)

Investors who are hoping for some relief from high interest rates will feel disappointed.

Government data released this week showed that underlying US inflation came in at the high end of forecasts for a third consecutive month.

The core consumer price index (CPI) for March increased 0.4% from February while advancing by 3.5% from a year ago.

The year-on-year inflation number was higher than February’s 3.2% and was also slightly ahead of a panel of economists’ forecasts of a 3.4% annual increase.

This level of inflation is still above the 2% that the US Federal Reserve is targeting, though officials there did mention that the path towards the 2% level will be “bumpy”.

The statement seems to imply that officials are bracing for several upswings in the inflation rate before it firmly comes back down.

Investors have also adjusted their expectations on the interest rate cut trajectory by the central bank.

Two rate cuts of 0.25% each are now anticipated, down sharply from the six cuts projected at the beginning of this year.

Other data points such as the strength of the labour market will also factor into how the central bank adjusts interest rates in the months to come.

Stock markets are now pricing in the probability that the first interest rate reduction will take place in September 2024 rather than during June’s meeting.

Alphabet (NASDAQ: GOOGL)

Alphabet’s Google is the next in line to launch a new generative artificial intelligence (AI) model.

Many technology companies are entering the fray as generative AI proves to be a game-changer with the release of ChatGPT by OpenAI back in November 2022.

Google launched its Gemini 1.5 which is the most powerful foundational model that the company has produced thus far.

It runs larger quantities of data than any other available to deliver more personalised answers in shorter times.

Gemini 1.5 was first unveiled in February this year and was among nearly 30 new products and product improvements rolled out by the technology behemoth at its Google Cloud conference held in Las Vegas earlier this week.

Google’s new model is the only multimodal one in the market currently, meaning it can absorb and churn out content not just in text form but also audio, video, and code.

This release puts Google back in the lead for AI supremacy for now as this new upgrade allows organisations to perform new tasks that were not previously possible.

Google has the longest AI history and is the only operator to own a full stack of AI infrastructure, data, models, and solutions.

Close competitor Microsoft (NASDAQ: MSFT), which owns a stake in OpenAI, now needs to play catch-up.

TSMC (NYSE: TSM)

Taiwan Semiconductor Manufacturing Company, or TSMC, has been awarded US$6.6 billion in grants and as much as US$5.5 billion in loans by the US government.

The world’s largest chipmaker is being courted to build factories in Arizona to help boost domestic production of semiconductors.

Under the arrangement, TSMC will construct a third factory in the state, adding to the two that are slated to begin production in 2025 and 2028.

This package will support more than US$65 billion in investments by TSMC, which supplies chips for trillion-dollar companies such as Apple (NASDAQ: AAPL) and Nvidia (NASDAQ: NVDA).

The third site, which will manufacture 2-nanometre microchips, should be operational before the end of this decade.

The company’s grant also includes US$50 million in funding to train local workers and will create 6,000 high-tech manufacturing jobs along with over 20,000 construction jobs.

TSMC has other international projects in Japan and Germany.

Meanwhile, the Taiwanese chipmaker has also released its March 2024 sales numbers.

Revenue for March 2024 shot up 34.3% year on year to NT$195.2 billion which was a 7.5% increase from February’s sales figure of NT$181.6 billion.

For the first quarter of 2024, TSMC’s sales posted a 16.5% year on year increase to NT$592.6 billion.

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Disclosure: Royston Yang owns shares of Apple and Alphabet.

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