The focus will likely be AI during upcoming tech conferences: Christine Short

Key Concepts

• Tech Conferences: Events that can influence market movements, offering insights beyond prepared earnings calls.
• AI Monetization: The process of generating revenue from Artificial Intelligence technologies.
• Return on Investment (ROI): The profitability of an investment, particularly relevant for AI spending.
• Cybersecurity: The practice of protecting systems, networks, and programs from digital attacks, with AI playing a dual role as a tool and a threat.
• Initial Public Offerings (IPOs): The process of a private company becoming public by selling shares to the public.
• Market Correction: A significant decline in the price of an asset or market, typically 10-20%.

Upcoming Tech Conferences and Market Impact

The current period is marked by several major tech conferences that have the potential to significantly influence market movements. These conferences are becoming increasingly important, sometimes even more so than earnings calls, due to the "on the ground" insights they provide. Unlike the somewhat prepared nature of earnings calls and analyst Q&A sessions, conferences can yield unexpected and valuable "nuggets" of information.

An example of this was a global summit in Hong Kong a couple of weeks prior, where the CEOs of Morgan Stanley and Goldman Sachs predicted a market correction of 10-20%. This type of forward-looking statement was not made during their respective earnings calls, highlighting the unique value of these summits. With earnings season winding down and companies not expected to report again until mid-January, investors are advised to pay close attention to conferences scheduled through the second week of December.

Microsoft Ignite Conference

The Microsoft Ignite conference is a significant event, kicking off a four-day program. While primarily company-specific, focusing on Microsoft's offerings for its developers, it also attracts "vision makers & partners." These are entities that develop software and integrate with Microsoft products, such as ServiceNow and Adobe. Key areas of interest at Ignite include:

• Monetization of Copilot: Understanding how Microsoft plans to generate revenue from its AI assistant.
• Customer Upgrades to Premium AI Tools: Assessing the adoption rate of advanced AI solutions within Azure.

RBC Capital's TMT Industry Conference

The RBC Capital conference is noteworthy for its juxtaposition of global tech, internet media, and telecom sectors. As an annual bank TMT (Technology, Media, and Telecom) industry conference, it will focus on broader industry trends. A central theme will be:

• AI Monetization Strategies: How companies across these sectors are generating revenue from AI.
• Sustainability of AI Spending: Many companies saw their Q3 earnings impacted by increased AI spending, raising questions about its long-term viability.
• Cybersecurity Implications: The conference will likely address the dual role of AI in cybersecurity, where it can be a powerful tool for defense but also exploited by sophisticated cybercriminals.

AI's Impact on Earnings and the Job Market

The conversation around AI is pervasive, even in casual investor discussions. A significant amount of capital, described as "trillions of dollars," is being invested in AI, leading to questions about the Return on Investment (ROI). It's acknowledged that there will be "winners and losers" in this AI-driven landscape.

Goldman Sachs reports that 47% of S&P 500 companies specifically mentioned AI in their earnings reports. These discussions often revolved around productivity and efficiency gains. However, a critical question remains regarding the impact of these advancements on the job market. The current data landscape is described as a "data desert" concerning job market implications, and the news may not be positive.

In the first half of the year, companies that did not discuss AI were often penalized by investors. This led to a strategic shift, with many companies adopting an "AI strategy" to gain favor. While this may have initially rewarded stocks, the lack of recent job numbers (expected on Thursday) and reports of layoffs from companies like Amazon and Verizon, which have some AI-related components, suggest potential negative consequences for employment.

IPO Market Performance and Challenges

The IPO market showed strength in Q3, considering the overall performance of 2023 and 2024. Approximately 156 public debuts were tracked, marking the highest number since Q4 2021. However, recent IPOs have experienced mixed earnings results.

• Recent IPOs: Companies like Gemini, Space Station, and StubHub faced challenges in their earnings reports for various reasons.
• Bright Spots: Figure Technology and Klarna (reporting tomorrow) were identified as positive performers. Bullish is also expected to report on Wednesday.
• IPO Risks: Investing in IPOs is inherently risky, as these companies may not yet be fully established or stable. Many of these companies had waited on the sidelines for months or even years before their debut.

The fundamental question for average investors when considering an IPO debut is whether it's the right investment for them, and whether to hold or "flip" the shares.