Remy Morgan: Milford Asset Management expert on US tech stocks dropping

Some of the most followed AI stocks have taken a hit over the last few days, prompting concerns about the sector's future.

Both Oracle and Broadcom were down 10 percent, prompting concern from investors.

Milford Asset Management expert Remy Morgan explained further.

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Episode Transcript

Speaker 1 (00:00):
Bryan Bridge.

Speaker 2 (00:01):
Let's go to Remy Morgan from Milford for our market update. Remy,
good evening, good eathing. Right, let's start with the US
tech stocks showing just some signs of weakness. Again, this
is this AI bubble fear thing back.

Speaker 1 (00:15):
Yes, so the market has reacted negatively following a couple
of results from some of the most followed AI stocks
at the back end of last week. Now, the results
themselves were not actually negative, but both Oracle and Broadcom
were down over ten percent, and I think that shows
that it's quite difficult to deliver against the very high
expectations investors place on these AI stocks. Oracle once again

(00:40):
raised its capex guidance. I think that spooked investors who
were already concerned that they're over investing in AI data
centers and the returns that that will generate. Broadcom reported
strong numbers and guided to AI chip sales growing more
than one hundred and fifty percent next year. But even
this level of growth seemed to disappoint investor expectations. So

(01:01):
I think it's likely that we'll see heightened AI scrutiny
until these AI investments and revenues start to really prove out.

Speaker 2 (01:08):
Really outside of tech and the business of tech. The
stocks in the US generally have been a bit softer
this week as well. What's going on there? What's driving that?

Speaker 1 (01:18):
Yet? So putting the AI fears aside, we have had
some slight softness in the US equity markets more broadly,
and that's because this week is a big week for
US data. We've got key data releases that indicate the
shape of the US economy and these can influence the
FEDS monetary policy decisions. Now, a lot of that data
has actually been delayed following that extended US government shutdown.

(01:41):
That's caused some concerns on the data quality, and the
market hasn't really been sure what to expect, So that's
created some uncertainty in the lead up.

Speaker 2 (01:51):
What the US started. Do we get this week jobs?

Speaker 1 (01:54):
Yep, So overnight we had the US employment report that
showed the US job mark it remains sluggish, but it's
not rapidly deteriorating. We also had the US October retail
sales which was a flat reed. Now, these two data
points didn't cause any material changes to market expectations for
interest rate cuts, but we did see the US equity

(02:17):
markets slightly softer overnight. Oh sorry, sorry, right, I was
just gonna say. We also get the USCPI print later
this week, which again won't be for a complete period,
so we could see markets continuing to be cautious.

Speaker 2 (02:30):
Roger that back home, We've just spoke to co Op
Bank and they've been you know, they were one of
the first actually to put their longer term rates back up,
and we've seen a couple of banks do that now
after that November rbn Z cut.

Speaker 1 (02:45):
Yeah, that's right. So what's happened since the last cut
is that market expectations have actually led to an increase
in New Zealand interest rates swaps. That's what flows through
to the increase in increases in some of those bank
mortgage rates. Now that could putent actually pose a bit
of a risk to economic growth, but we have had
the Reserve Bank governor come out this week with a

(03:06):
few comments that has seen some moves lower in swap rates,
not quite back to where they were pre the November
o CR announcement. But it's also worth mentioning that there's
still a relatively high proportion of mortgages that are yet
to roll over on to what are still overall lower
mortgage rates.

Speaker 2 (03:24):
Nice one Roomy appreciate that. Thank you. Rumy Morgan mil
Fanaset Management with our market update tonight. For more from
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