Broadcom goes all Gwyneth | Xpeng isn't going anywhere |

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Hi John, here's what you need to know for May 24th in 3:04 minutes.

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Today's big stories

  1. US chipmaker Broadcom is thinking about buying software firm VMware
  2. You may think you're buying the dip, but there's reason to believe this dip will dip even more – Read Now
  3. Chinese EV maker Xpeng's quarterly earnings came in weaker than expected

Sliding Doors

Sliding Doors

What’s Going On Here?

US chipmaker Broadcom is reportedly in talks to buy software company VMware, in a deal analysts reckon could be worth more than $50 billion.

What Does This Mean?

Broadcom’s sliding doors moment came in 2018, when its big-money bid to buy fellow chipmaker Qualcomm was thwarted by regulators’ national security concerns. The letdown motivated the company to shift its strategy, in view of transforming itself into a diversified tech company that offers everything from chips to cloud computing. It kicked things off by buying Symantec’s cybersecurity division and CA Technologies for $11 billion and $19 billion respectively, and now VMware – one of the cloud industry’s key players – seems to have caught its eye. That stands to reason: data centers and the cloud have become critical areas of growth for the company.

Why Should I Care?

The bigger picture: What goes up…
It’s no surprise that Broadcom has been trying to reduce its reliance on chips over the past few years. Like other chipmakers, the company’s sales have boomed as semiconductors have become both more vital and harder to get hold of, with its chip segment growing around 20% last year alone. But the company has been vocal about the fact that the industry’s growth simply isn’t sustainable, admitting that it’s expecting to go back to its historical average of 5% a year sooner or later.

For markets: Who said dealmaking was dead?
It’s also no surprise that Broadcom thinks now’s the time to make this bid: VMware’s market value is now around half that of its peak in 2019, and Broadcom’s has more than doubled in the same period. That just goes to show that there’s still very much a market for big tech deals, as inflation and interest rate hikes bring down valuations and encourage cash-rich buyers to snag a bargain.

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Analyst Take

You Call This A Dip?

You Call This A Dip?
Photo of Stéphane Renevier

Stéphane Renevier, Analyst

In the last few weeks, we’ve seen the S&P 500 lose around 20% of its value.

That’s got the market speculating that we’ve finally hit “capitulation” – the moment when investors decide to give up trying to claw back their gains and just cut their losses.

But here’s the thing: there are ways to tell when investors capitulate, and this ain’t it.

There’s actually no evidence that we’ve hit capitulation yet, which suggests this dip could dip even further.

So that’s today’s Insight: what you’d see if investors had capitulated, and how that impacts your dip-buying.

Read or listen to the Insight here

SPONSORED BY TRADESTATION

Old dogs, new tricks

The stock market’s been ruled by young bucks like Amazon, Apple, and Tesla recently.

But it looks like the old-timers are back to show them how it’s done: utilities and commodities stocks have been catching investors’ attention this year, according to a new TradeStation report.

Check it out for yourself: the chart above – created with TradeStation’s TradingView tool – shows insurance stock Traveler reached new highs earlier this month.

There’s more where that came from, and you can spot them all using TradeStation’s market-scanning tools.

Now sounds like a good time to get started: claim a $150 bonus when you sign up with TradeStation.

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Locked Down

Locked Down

What’s Going On Here?

Chinese EV maker Xpeng reported a higher-than-expected loss on Monday.

What Does This Mean?

Investors aren’t an easy breed to please right now: they sent Xpeng’s share price down 5%, even as the company grew quarterly revenue by an impressive 153% and more than doubled the number of cars it delivered last quarter from the same time in 2021. That was probably because they couldn’t see beyond the higher-than-expected $260 million loss it posted, as the EV maker grappled with Chinese lockdowns and surging raw materials prices. Xpeng’s other revelations probably didn’t help settle their stomachs, either: the company acknowledged that shipments were already down 42% between March and April, leading it to issue a worse-than-expected revenue outlook for this quarter.

Why Should I Care?

The bigger picture: Tesla has no friends.
Xpeng isn’t the only EV producer to be hit by China’s lockdowns: Tesla’s domestic deliveries in the country fell 90% last month from the same time last year. But while Tesla is confident that the market is still ripe for the picking, plenty of its suppliers have announced plans to move at least parts of their production elsewhere. Take Primax Electronics: the camera supplier unveiled plans to reduce manufacturing in China by 2024, and shift its production to Thailand and the Czech Republic instead. Analysts think this could be a sign of things to come, arguing that China’s zero-Covid policy could accelerate the trend toward more evenly distributed supply chains.

Zooming out: Someone get this country some lithium.
That’s certainly likely to be the case for EV battery material lithium, which both Europe and North America are trying to build up their own supplies of. That’s no mean feat: analysts have estimated that demand for the material will quadruple by the end of the decade, and that the sector will need $7 billion of investment every year until 2028 if it wants to meet the need (tweet this).

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💬 Quote of the day

“If you look at what you have in life, you’ll always have more. If you look at what you don’t have in life, you’ll never have enough.”

– Oprah Winfrey (an American talk show host)
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🎉 Coming Up This Week

All events are in UK time.

📈 How To Invest Thematically: 12pm, May 24th
🎨 How To Build And Manage A Balanced NFT Portfolio: 5pm, May 24th
⚡️ How To Invest In The EV Revolution: 1pm, May 25th
😎 The Blockchain And Real Estate Revolution: 6pm, May 25th
📈 The Future Of The M&A Market: 5pm, May 26th
📱 How To Hedge Against The Chip Shortage: 1pm, May 30th
📉 A Guide to Automated Crypto Trading: 6pm, May 30th
♻️ How Green Bonds Can Fuel A Sustainable Future: 1pm, May 31st
🏆 Peer-To-Peer Vs. Crypto Exchanges: 5pm, May 31st

💪 And Then After That…

🎉 De-Mystifying Refi: 5pm, June 1st
🌿 How To Get The Green With Cannabis ETFs: 12pm, June 9th
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🌍 How And Where To Invest In Africa: 5pm, June 14th
🚀 Finimize NFT Fest: 12pm, 15th June
🤗 Investing In Metaverse Opportunities: 5pm, 23rd June
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🏡 Tokenizing Real Estate: 6pm, September 13th

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