1. The European Central Bank (ECB) cut its key deposit rate by 25 basis points to 3.5% as expected, and the main refinancing and marginal lending rates were lowered by 60 basis points to 3.65%, both in line with expectations. In its policy statement, the ECB indicated that it does not commit to a specific interest rate path in advance, and the Governing Council is always ready to adjust all tools. The data will determine the extent and duration of the restrictive measures. The ECB is determined to bring inflation back to 2% in a timely manner, but also warned that inflation may rise again in the second half of the year. After the announcement of the decision, European markets were not significantly volatile, and traders reduced their expectations for ECB interest rates, predicting another 36 basis points cut before the end of the year. Analysts are divided on the prospect of two more rate cuts within the year. At the same time, the ECB comprehensively lowered its economic growth expectations for the next three years: the GDP growth rate for 2024 is expected to be reduced from 0.9% to 0.8%, for 2025 from 1.4% to 1.3%, and for 2026 from 1.6% to 1.5%. In addition, the overall inflation expectations for the next three years remain unchanged, with the CPI growth rate expected to be 2.5% in 2024, 2.2% in 2025, and 1.9% in 2026. However, due to higher-than-expected inflation in the service sector, the core inflation (excluding more volatile energy and food) expectations for the next two years have been raised: the core CPI growth rate for 2024 is expected to be increased from 2.8% to 2.9%, for 2025 it is expected to rise from 2.2% to 2.3%, and for 2026 it is expected to remain at the level of 2.0%.
Chartered Financial Analyst, Zhou Chunzhe: The inflation rate in the Eurozone in August was 2.2%, a new low in three years, and the steady decline in inflation supports a second rate cut in September. However, the core inflation rate is still at a relatively high level of 2.8%, and service sector inflation remains the main driver of core inflation in the Eurozone. Persistent service costs increase the risk of a rebound in inflation. Therefore, the ECB will also control the pace during the rate cut process to avoid the risk of inflation rebounding due to too rapid a rate cut.
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Chief Investment Advisor of Northeast Securities, Guo Feng: As the US and Europe enter a rate-cutting cycle, the People's Bank of China has more room for maneuver. Observing the pace of rate cuts by the Federal Reserve and adjustments to China's monetary policy, the probability of a reserve requirement ratio cut is relatively high.
2. US stocks closed higher overnight, with technology stocks leading the way. The Nasdaq and S&P indices recorded gains for the fourth consecutive day. Data released last night showed that the US Producer Price Index (PPI) in August increased by 0.2% month-on-month, higher than the expected 0.1%; it increased by 1.7% year-on-year, a new low since the beginning of the year. The number of initial jobless claims in the US last week increased slightly, indicating that even though the labor market is slowing down, the number of layoffs is still very low. However, analysts pointed out that the survey period for last week's data included the US Labor Day holiday, and the number of initial jobless claims often fluctuates before and after public holidays. In terms of the outlook for US stocks, Morgan Stanley recently pointed out that the AI theme has been "overhyped" and suggested that investors buy high-quality defensive stocks. Goldman Sachs stated that after the Federal Reserve's rate cut, mid-cap stocks will outperform small-cap and large-cap stocks. Because mid-cap stocks are valued lower than large-cap stocks, and their fundamentals are stronger than small-cap stocks, it is expected that the return on mid-cap stocks will reach 13% next year. UBS Group CEO Sergio Ermotti said on Thursday that the fight against inflation is not over yet, and some investors seem to be overly optimistic about the possibility of a substantial rate cut by the Federal Reserve this month. He believes that the long-awaited soft landing is still possible, and he also expressed an optimistic view of the Asian market, stating that the two real opportunities and growth engines are still the US and Asia, with China being the main driving force.
Chartered Financial Analyst, Zhou Chunzhe: The US August PPI and the number of initial jobless claims last week in the US are not much different from market expectations. According to the CME "FedWatch," the probability of the Federal Reserve cutting rates by 25 basis points in September is 72%, and the probability of a 50 basis point cut is 28%. Based on inflation and employment data, inflation is effectively controlled, and the economy has not fallen into a recession. At present, there is no need for a substantial rate cut. At the same time, the leading increase in technology stocks is more due to the strong demand for Nvidia's Blackwell chip, but investors need to be cautious that the impact of a single Nvidia stock on US stocks is too significant and will also increase the volatility of US stocks.
Chief Investment Advisor of Northeast Securities, Guo Feng: Wall Street has started to pay attention to defensive sectors. A-shares are still in the rotation of the "two-eight" style, and the lack of incremental funds is the biggest problem faced by A-shares. The key is that market confidence still needs to be restored.
3. IBM is quietly experiencing a revival, with its stock price rising by more than 33% this year, outperforming tech giants such as Apple, Microsoft, Amazon, and Google. IBM's stock price closed up 0.84% overnight, reaching a historical high of $211.66, also breaking the intraday record set on March 14, 2013 for the second consecutive trading day. The company's second-quarter report released at the end of July showed that a surge in AI business orders is driving the company's revenue growth. CEO Arvind Krishna said at the time that about three-quarters of the company's AI orders come from consulting, with the rest from software, and as time goes on, the share of software revenue may increase. The media pointed out that IBM's cloud business includes data that may help train large language models (LLMs), which also means that IBM is beginning to be seen as a winner in the AI field, and its volatility is smaller than that of more popular AI concept stock companies such as Nvidia. US stock investors' preferences are shifting from high-valued popular tech stocks to cheaper stocks. In this context, IBM is in a favorable position: its price-to-earnings ratio is less than 20 times, lower than the Nasdaq 100 index's approximately 24 times. Although IBM's AI business is not yet significant, industry insiders say that IBM is a stock that "wins the race slowly and steadily." Its stable predictability is very suitable for long-term investors with a 15 to 20-year investment horizon or those who hope to receive dividend income. Evercore ISI Group raised its target price for IBM from $215 to $240 yesterday, maintaining an "outperform" rating.Chartered Financial Analyst, Zhou Chunzhe: IBM has been striving to transform from a traditional hardware-heavy asset company to a comprehensive technology company focused on high-growth software and IT services. It tends to embed a broader range of new artificial intelligence technologies in software and IT consulting services, and to help clients efficiently layout the AI field through upgraded consulting services. However, the AI business currently appears to be small in scale, and whether IBM's stock price can reach new highs will also depend to some extent on whether the AI business can continue to expand and occupy a larger proportion of revenue.
Northeast Securities Chief Investment Advisor, Guo Feng: The domestic artificial intelligence industry is expanding on a large scale. For domestic technology companies, extending the reach of the industry will be of great help for future performance, and related investment opportunities can be focused on.
④ SpaceX "Polaris Dawn" Mission Completes the First Commercial Spacewalk
As part of the SpaceX "Polaris Dawn" mission, four crew members completed the world's first commercial spacewalk yesterday evening. The extravehicular activity took place at an altitude of about 700 kilometers above the Earth's surface, with Isaacman and Gillis taking turns to go outside the cabin, each staying outside for about ten minutes to test the performance of the SpaceX spacesuit. The other two crew members stayed inside the cabin to manage the safety ropes that provide oxygen and electricity for the extravehicular crew, and to monitor data to ensure safety. Unlike larger spacecraft, the "Dragon" spacecraft does not have an airlock, so after the hatch is opened, the entire cabin is in a depressurized environment, and the astronauts inside are also exposed to a vacuum environment, which also broke the record for the most people entering a vacuum in space at the same time. At the same time, the astronauts also carried out a series of scientific activities, conducting about 40 experiments at an altitude of 1400 kilometers, including laser communication tests between the Dragon spacecraft and Starlink satellites, collecting data to study the impact of space radiation on human health, providing biological samples for long-term biobank multi-omics analysis, and research on spaceflight-related neuro-ocular syndrome (SANS). In the next few years, Isaacman hopes to carry out a second "Polaris Dawn" mission with SpaceX's manned Dragon spacecraft, possibly to enhance NASA's Hubble Space Telescope. The "Polaris Dawn" mission is planned to be launched three times, and the third mission may be the first manned flight of the "Starship." If Isaacman and Musk achieve their goals, it is likely to be the beginning of a more ambitious era of manned spaceflight.
Chartered Financial Analyst, Zhou Chunzhe: The "spacewalk" in the "Polaris Dawn" plan is the first commercial "spacewalk" in human history, and one of its main purposes is to test the upgraded SpaceX EVA spacesuit. SpaceX's spacesuit has been redesigned at the joints to make the astronauts' limbs more flexible; the spacesuit has also improved the thermal management function, equipped with cameras and displays to display the status of the spacesuit in real time. This SpaceX space plan means a "huge step" for the commercial space travel model, which can stimulate the private sector to participate more actively in space-related commercial projects.
Northeast Securities Chief Investment Advisor, Guo Feng: With strong policy support, China's commercial space industry is entering a fast track, with broad development prospects in the future.
⑤ OpenAI's valuation may soar to $150 billion, releasing the latest AI model with reasoning ability
Following the news at the end of August that it was seeking new financing to become a unicorn in the tens of billions, OpenAI has another explosive news - the new round of financing valuation may reach as high as $150 billion. This is nearly double the valuation of $86 billion in the initial acquisition offer at the beginning of the year, and is expected to become one of the highest financings in generative AI and even the entire technology field. This round of financing will be led by Thrive Capital, with Microsoft, OpenAI's largest investor, participating, and Apple, Nvidia and other giants have been negotiating on investment. If the negotiations make progress, the three companies with the highest market value in the world will become investors of OpenAI. However, it should be noted that OpenAI is still losing money. According to "The Information", by the end of the year, OpenAI's losses will approach $5 billion, and the company's cash flow may be exhausted within the next year. This huge financing will also solve OpenAI's shortage of funds. Overnight, OpenAI announced on its official website that it has started to push the OpenAI o1 preview model - that is, the widely anticipated "strawberry" large model. With this model with reasoning ability, OpenAI's tools should be able to solve multi-step problems, including complex mathematical and programming problems. The pricing of the o1-preview model is $15 for every million input tokens, and $60 for every million output tokens, which are 3 times and 4 times that of GPT-4o respectively. A million tokens are roughly equivalent to 750,000 English words. In addition, OpenAI also launched the o1-mini model at the same time, with a price 80% cheaper, suitable for scenarios that require reasoning but do not require extensive world knowledge. The company announced that from September 12th, ChatGPT subscribers can access these two new models, but currently the o1-preview weekly message limit is 30, and the o1-mini is 50. Enterprise version ChatGPT and educational users can start accessing these two models next week. Developers with API usage levels up to 5 can start using these two models immediately, with a rate limit of 20 times per minute. OpenAI plans to provide the o1-mini model to free users in the future, but there is no timetable yet. In addition, according to previous leaks, the "strawberry" plan aims to raise more funds, and OpenAI needs this money to support the development of the next-generation cutting-edge model codenamed "Orion".
Chartered Financial Analyst, Zhou Chunzhe: The characteristic of the reasoning large model is that AI will spend more time thinking before answering, just like the process of human thinking and solving problems. OpenAI has explained that the GPT-4 released in 2023 is similar to the intelligence level of high school students, and the future GPT-5 is to complete the growth of AI from "high school students to doctors", and this o1 model is a key step in it. However, judging from the current usage limit, this reasoning model is likely to consume a lot of computing power, and the high usage price makes it have certain limitations. In addition, if OpenAI reaches a valuation of $150 billion, it means that its valuation has increased by nearly 88% in less than 7 months, indicating that the capital market firmly sees the trend of generative artificial intelligence and the technical development of OpenAI. However, to support the beautiful vision of generative artificial intelligence, continuous capital and resource injection is needed. In addition to continuous large-scale financing, OpenAI itself urgently needs to find a way to commercialize and monetize to support huge R&D investment.
Yongxing Securities Computer Industry Weekly (released on September 11, 2024): It is optimistic about the AI computing power sector benefiting from the construction of domestic computing power clusters, the AI large model and application sector benefiting from Tencent's release of the new generation of large models, and the autonomous driving/virtual cockpit sector benefiting from Didi's exploration of unmanned driving technology. 1) AI computing power: it is recommended to pay attention to companies such as Hygon Information, Sugon, Hengwei Technology, and Runze Technology; 2) AI large model and application: it is recommended to pay attention to companies such as Wanxing Technology, Kingsoft Office, and Yingshi Network; 3) Autonomous driving/virtual cockpit: it is recommended to pay attention to companies such as Zhongke Chuangda and Desay Westward.