Wall Street Lunch: Meta Brings AI Studio

Summary:

• Meta Platforms launches AI Studio for creating personalized chatbots.
• Conference Board reports increase in consumer confidence.
• Procter & Gamble, Pfizer, Merck, and PayPal provide earnings updates; Disney’s “Deadpool & Wolverine” breaks box office records.

Listen below or on the go on Apple Podcasts and Spotify

The company will unveil a new tool called AI Studio. (0:16) ‘Deadpool & Wolverine’ sets a box office record. (3:24) BofA says AI hype days are over. (4:32)

This is an abridged transcript of the podcast.

Our top story so far. Meta Platforms (NASDAQ:META) said it will introduce a new tool called AI Studio in the U.S. that will allow people to create, share, and discover personalized AI chatbots.

Built with the company’s large language model, Llama 3.1, AI Studio lets anyone create and discover AI characters and allows creators to build an AI as an extension of themselves to answer common questions and story replies, helping them reach more people.

Meta said that with AI Studio, anyone can create AI characters on the website ai.meta or in the Instagram app.

People can use several prompt templates or start from scratch to make an AI that teaches how to cook, helps with Instagram captions, and generates memes, among other things.

The AI can be shared with followers and friends, and it can even be made available for anyone to discover and chat with on Instagram, Messenger, WhatsApp, and the web.

On the economic front, the Conference Board said its measure of consumer confidence rose to 100.3 in July, vs. 99.7 consensus. That’s up from 97.8 in June (but that figure was revised down from 100.4).

In the labor market, June job openings fell to 8.184 million, more than the 8 million expected, according to the Job Openings and Labor Turnover Survey, also known as JOLTS. The job openings rate stayed at 4.9%, and the quits rate stayed level at 2.1%.

Nick Bunker, an economist at Indeed, noted that the layoff rate ticked back down to an all-time low of 0.9%.

Julia Pollack, economist at ZipRecruiter, says: “The U.S. labor market is now slacker than before the pandemic, with just 1.20 job openings per unemployed job seeker, down from 1.22 job openings in February of 2022. How much slacker will it get before rates normalize?”

Treasury yields were little changed following the data, while equities were mixed and lacking firm direction.

Among stocks moving on earnings, Procter & Gamble (PG) tracked lower after posting a mixed earnings report. Organic sales rose 2% during the quarter to miss the consensus estimate of +3.4%. Pricing and volume were up 1% during the quarter, while mix was flat.

P&G guided for FY25 revenue growth in the range of 2% to 4%. EPS of $6.91 to $7.05 is anticipated, vs. $6.96 consensus.

Pfizer (PFE) topped expectations with its second quarter results and raised its full-year outlook, driven by strength in its oncology portfolio and continued efforts towards realigning its cost base.

Merck (MRK) reported stronger-than-expected financials as its cancer therapy Keytruda exceeded Wall Street forecasts. But the drugmaker trimmed its profit outlook for 2024 to a level below consensus.

And PayPal (PYPL) jumped after it turned in stronger-than-expected Q2 earnings and revenue, boosted its 2024 earnings guidance, and raised its share repurchase outlook.

The company now expects 2024 adjusted EPS of $3.88–$3.98, compared with its previous guidance of around $3.83 and the average analyst estimate of $4.16, and says it will buy back $6 billion of shares in 2024, up from its prior guidance of at least $5 billion.

In other news of note, “Deadpool & Wolverine” set a box-office record for R-rated movies with an estimated $205 million debut in North America, according to Comscore.

Made by Walt Disney’s (DIS) 20th Century Studios and Marvel Studios, the superhero flick is on track to exceed $438 million in its worldwide opening. The first “Deadpool” held the previous record for an R-rated debut at $132 million.

Among the top domestic opening weekends, “Deadpool & Wolverine” is in 8th place between “The Avengers” ($207.4 million) and “Black Panther” ($202 million). It pushed “Avengers: Age of Ultron” out of the top 10.

The opening is the biggest of the year, surpassing Disney and Pixar’s (DIS) animated sequel “Inside Out 2” ($154.2 million). It also overtook last year’s top hit, “Barbie,” which debuted with $162 million.

The No. 1 domestic opening in history was for “Avengers: Endgame” with $357.1 million, followed by “Spider-Man: No Way Home,” “Avengers: Infinity War,” “Star Wars: The Force Awakens,” and “Star Wars: The Last Jedi.”

And in the Wall Street Research Corner, BofA strategist Savita Subramanian says the AI investment cycle will likely roll on “but the AI hype days are over.”

As “AI transitions from ‘tell me’ to ‘show me’, companies clearly monetizing AI are likely to lead from here,” she said. The market has been in the AI “tell me” phase over the last 12 months.

Subramanian named ServiceNow (NOW) and Adobe (ADBE) as examples of companies monetizing AI. Hyperscalers Alphabet (GOOG)(GOOGL), Microsoft (MSFT), Meta Platforms (META), and Amazon (AMZN) are expected to account for most of the S&P 500’s (SP500) (SPY) capex growth in 2024, at $198 billion. Subramanian said that historically, companies that are in reinvestment cycles underperform.

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