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Nikkei 225 and Topix outlook as the USD/JPY retests 145

Nikkei 225 index rally accelerated this week as investors cheered the depreciating Japanese yen and the latest stimulus package by the Chinese government. The index, which tracks the biggest Japanese companies, rose to ¥38,736 on Thursday, its highest point since September 3rd. It has soared by over 24% from its lowest level in August.

The Topix index, on the other hand, has risen to ¥2,700, also 22% higher than its lowest point in August. 

Japanese yen crash

One of the main reasons why the Topix and the Nikkei 225 indices have jumped is that the Japanese yen (JPY) has continued its downtrend. The USD/JPY exchange rate has risen from this month’s low of 139 to 144, its lowest point in three weeks.

The pair has reacted to the last Federal Reserve and Bank of Japan (BoJ) interest rate decisions. In its meeting last week, the Fed delivered a jumbo rate cut and expressed concerns about the deteriorating labor market as the unemployment rate rose to over 4%. 

Most Fed officials who have talked this week, including Raphael Bostic and Neel Kashkari, noted that the bank would continue cutting rates.

The case for more Fed cuts was made after data by the Conference Board and S&P Global showed that the economy was softening. The consumer confidence figure dropped at the fastest pace in three years while the manufacturing PMI remained below 45. US and global stocks tend to do well when the Fed has embraced a dovish tone. 

Meanwhile, in Japan, the central bank left interest rates unchanged at 0.25%, as some analysts had expected. At the same time, Governor Kazuo Uoda has hinted that the bank was not in a hurry to restart rate hikes. As such, there is a general view that the BoJ may be done hiking for now. In a note, Mizuho Securities said:

“The dollar/yen is likely to continue to fluctuate, with market expectations for the size of the interest rate cut at the next FOMC meeting in November changing in response to the strength or weakness of US economic indicators.”

Many Japanese companies do well when the local currency is falling because they mostly focus on exports. This includes well-known brands like Toyota, Honda, Nissan, Sony, and Mitsubishi Heavy.

However, there are signs that this dynamic is changing now that Japan has moved into having large trade deficits. The most recent data shows that Japan has had an annual deficit for three consecutive years.

USD/JPY chart

China stimulus package

The Nikkei 225 and the Topix indices have also soared because of the recently announced stimulus package by Beijing.

The People Bank of China (PBoC) announced measures that will see local banks unlock over $125 billion in lending.

Other policies also aim to boost the troubled real estate sector and China’s stock market. This explains why most Chinese and Asian indices have rebounded this week.

The China A50 index has soared by over 12% from its lowest point this month. Similarly, the Hang Seng index jumped to H$19,690, its highest level since August 2023. It has risen by over 32% from its lowest point this year. 

Other Asian indices in Indonesia, South Korea, and the Philippines have also surged this week.

This week’s ruling party elections will be the next key catalyst for the Nikkei 225 and Topix indices. In most periods, the winner in this election will likely become the next prime minister. 

Some of the best-performing companies in the index this week are Mitsubishi Heavy Industries, Kawasaki Heavy Industries, Fujikura, Ebara, Shiseido, Tokyo Electron, Resonac Holdings, and Japan Steel Works. All these companies have surged by over 10%.

Nikkei 225 index analysis

Nikkei index chart by TradingView

The weekly chart shows that the Nikkei 225 index soared to a multi-decade high of ¥42,401 earlier this year.

It then suffered a harsh reversal in August as the Japanese yen carry trade unwinding happened. This retreat reached a low of ¥31,172, its lowest point since October 2023.

The index then formed a small hammer candlestick pattern, which is often a sign of a bullish reversal. 

It has now risen above the 50-week exponential moving average (EMA) and the 23.6% Fibonacci retracement point. The index has risen for three consecutive weeks and has moved above the neutral line of the Andrew’s pitchfork tool.

The Relative Strength Index (RSI) has moved slightly above the neutral level of 50 while the MACD is facing downwards. 

Therefore, the Nikkei index will likely continue rising as bulls target the next resistance level at ¥40,000. The alternative scenario is where the rally takes a breather and retests the support at ¥36,250, the 23.6% retracement point.

The post Nikkei 225 and Topix outlook as the USD/JPY retests 145 appeared first on Invezz

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Is Pi Network a genuine crypto project or a scam?

Pi Network pioneers are patiently waiting for the platform’s airdrop, which is expected to happen later this year or in 2025. However, most of them have abandoned the project since it has been around for over five years, and the token listing may be delayed. 

Pi Network aimed to solve a real problem

Pi Network is a crypto project that was launched in 2018 to solve some of the biggest challenges in Bitcoin’s network. 

First, Bitcoin mining is quite expensive, making it only accessible to wealthy individuals and companies. Today, the industry is dominated by huge companies like Marathon Digital, Riot Platforms, and Core Scientific, which have thousands of machines.

Pi changed this by building an application that can be installed on Android and Apple phones. People can then mine these tokens by just clicking a button each day. As a result, Pi became highly popular with over 50 million users. 

Second, Pi’s goal is to ensure that cryptocurrency is used widely in transactions and in commerce. As a result, they will ensure that transaction costs are substantially low. This is unlike Bitcoin, which is known for having big transaction costs. 

Third, Bitcoin’s network is known for being slow, with transactions taking minutes before they are finalised. Pi Network’s transactions will be instant, making it a better cryptocurrency to use in commerce. 

Pi Network aims to be more available to users since its app can be readily downloaded even in the cheapest mobile devices. For example, a local shopkeeper in rural Africa, Asia, or Latin America can start accepting the coin. Users will pay to their wallet, and then they can change them to fiat currencies later on.

In theory, this would solve a real problem, especially in countries like Nigeria, Turkey, and Zimbabwe, where the local currencies have imploded. 

However, most of these businesses now have access to stablecoins like Tether and USD Coin (USDC), which are backed 1:1 to the US dollar.

Additionally, Pi Network’s developers have worked to ensure that there is a ready ecosystem of applications that accept the coin. Some of the current parts of the ecosystem are its browser and the Fireside Forum.

Pi and its users have faced major challenges

The reality, however, is that the Pi Network has not lived to the anticipated hype, which explains why activity has slowed. 

A key reason for this is that a gap has existed between miners, often known as pioneers, and its developers. On official statements, Pi’s developers have noted that the goal is to have a popular cryptocurrency with a utility. 

However, most pioneers have never been interested in the ecosystem. Instead, their goal has been to mine the tokens and then convert them to fiat currencies. 

This explains why many of these users have now moved to other clicker games like Hamster Kombat, Tapswap, and Notcoin. Hamster has accumulated over 300 million users while Tapswap has more than 70 million users.

Launched just a few months ago, Hamster Kombat will launch its airdrop on Thursday, making it possible for players to convert their tokens into fiat currencies. Tapswap, on the other hand, is expected to launch the airdrop later this year.

Pi Network has identified three key things that need to happen before the mainnet launches. First, they want to ensure that the market conditions are good. In other words, their goal is to launch the token when cryptocurrencies are doing well.

Second, they hope to have completed KYC verification of most pioneers, to get rid of bots. In a recent statement, Pi Network extended the first deadline for the Grace Period in which pioneers must submit their KYC application to November 30th. After this grace period ends, pioneers who will not have done their KYC will forfeit their tokens.

Third, the developers will only move from the enclosed mainnet when there are enough applications in the ecosystem. This goal is to ensure that the token has a use case when it is available in exchanges.

Read more: 4 reasons why Pi Network mainnet launch may not happen soon

Is Pi Network a scam?

A popular question is whether Pi Network is a scam. So far, all evidence is that it is not a scam because users are never asked to pay any money to mine the token.

However, the most likely scenario is where the developers have used the enclosed mainnet period to make money since users see ads whenever they click the mining button. 

As such, the mainnet launch will only happen when this advertising revenue dwindles completely. After that, the developers will make money through ads and by selling their allocated coins. 

Read more: Pi Network: Pi coin listing faces a mountain of risks ahead

The post Is Pi Network a genuine crypto project or a scam? appeared first on Invezz

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HYG vs JEPI: Which is the better dividend ETF to buy?

The iShares iBoxx High Yield Corporate Bond ETF (HYG) and the JPMorgan Equity Premium Income ETF (JEPI) ETFs have grown to become some of the most popular dividend funds among retirees, accumulating $35 billion and $15 billion in assets. So, which is a better dividend fund between the two?

What is the iShares iBoxx High Yield Corporate Bond ETF?

The HYG ETF is a fund that tracks the biggest junk-rated companies in the United States. Historically, junk-rated companies always pay a higher return than investment-grade ones because of their substantial risk.

Ideally, a highly-rated company like Johnson & Johnson will pay a lower interest rate on bonds because of its strong balance sheet and strong free cash flow. On the other hand, a junk-rated company like AMC has a substantial debt load and whose business is slowing.

The HYG ETF does well when corporate default rates are low, as we have seen in the past few years even as interest rates have remained elevated. As a result, the fund’s total return in the last twelve months was 15%, while the three-year return was 7.38%.

The HYG comprises 1,263 companies that have received a junk rating from agencies like Moody’s, S&P Global, and Fitch. Most of these firms are in the consumer cyclical industry followed by communications, consumer non-cyclical, energy, and capital goods. 

The biggest company in the fund is Clear Channel Outdoor Holdings (CCO), which has $183 million in cash against long-term debt of $5.6 billion and capital leases of $1.2 billion. 

The other big name in the HYG ETF is Transdigm, a firm that has accumulated over $24 billion in liabilities. Other top firms in the fund are Venture Global LNG, Tenet Healthcare, Cloud Software, Bausch Health, and Medline Borrowers. 

I believe that the HYG ETF will do relatively well as the Federal Reserve starts cutting interest rates. Recent data shows that the 10-year yield has dropped to 3.7% while the 30-year has moved to 4.31%. Most importantly, the yield curve has emerged from its deepest inversion as conditions normalise.

Therefore, the HYG fund, which yields 5.4% could see more inflows from investors as default risks ease. Also, it will benefit now that the US has dodged a hard landing, as some analysts were expecting.

JPMorgan Equity Premium Income (JEPI)

The JEPI ETF is a significantly different one to HYG. It is an actively managed boomer candy ETF that invests in 133 carefully selected American companies. The biggest names in the fund are Trane Technologies, Progressive, Meta Platforms, Southern Company, Amazon, Microsoft, and ServiceNow. 

In addition to this, the fund uses the options market to generate returns. After buying these stocks, the fund then sells call options tied to the S&P 500 index. It specifically uses equity-linked notes with exposure to the index and then receives options premium.

Therefore, the fund first benefits when the 133 companies it has invested in rise. Historically, American stocks tend to do well in the long term, which explains why the fund has had positive returns since its inception.

The options segment also does well when the stock market is rising. The challenge, however, is that if the S&P 500 index rises too much, these gains are often capped. 

HYG vs JEPI performance

HYG vs JEPI ETF

Data shows that the JEPI ETF has a dividend yield of about 7.0% and an expense ratio of 0.35%. In contrast, the HYG fund has a smaller yield of 5.8% and an expense ratio of 0.49%. Therefore, based on these high-level metrics, JEPI is a better fund for dividend investors.

Looking at their annual performance, we see that the JEPI ETF had a 21% return in 202, followed by negative 3.52% in 2022 and 9.81% in 2023. Its performance in 2022 is notable because American stocks crashed in that year, with the SPDR S&P 500 Trust (SPY) falling by 18%. This is a sign that the fund will mostly do better during bear markets.

The HYG ETF, on the other hand, had a total return of 3.75% in 2021 followed by an 11% retreat in 2022 and an 11.53% gain in 2023. As shown above, HYG’s total return in the last three years was 7.3%, while JEPI returned 27%.

Therefore, while the two funds are good for dividend investors, I feel like the JEPI fund is a better fund. It has a big exposure to many large American companies and has a record of paying higher dividends than the HYG. 

However, as I have written before, one of the best ways to invest in the long term is to focus on benchmark indices like the S&P 500 and Nasdaq 100. 

The post HYG vs JEPI: Which is the better dividend ETF to buy? appeared first on Invezz

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ServiceNow stock is severely overvalued – rating downgrade

ServiceNow (NOW) stock price has done well, rising by 26% this year and by 243% in the last five years. It has also risen by 1,385% in the last decade, giving it a market cap of over $190 billion.

ServiceNow is doing well

ServiceNow is a large technology company that provides an end-to-end workflow automation platform to some of the biggest companies globally.

It offers these companies the Now Platform, which comprises key areas that make work easier. For example, its technology segment empowers IT departments to plan, build, and operate service that IT departments need. 

The customer and industry segment lets these firms have quality customer relations, while the employee workflow business helps firms simplify how their employees get the services that they need. 

ServiceNow has added over 85% of all companies in the Fortune 500 as clients. Some of the top customers are firms like Saudi Aramco, Siemens, and BT Group, the biggest telecommunication company in the UK.

The company has been recognized by some of the biggest players in the tech sector like Forrester and Gartner. 

ServiceNow’s business has grown rapidly in the past few years as companies have worked to simplify their operations. It also benefits from ongoing investments in artificial intelligence (AI), which it has partnered with Microsoft and Nvidia. It also acquired Element AI in 2020 and Luma AI in 2022 to boost its presence in the industry.

Its total revenue has jumped from $3.4 billion in 2019 to over $8.9 billion last year, and analysts expect that its business will continue doing well. Its performance is notable, because, unlike other large companies like Salesforce and Microsoft, it has not done big acquisitions in the past.

NOW earnings download

The most recent financial results show that its quarterly revenues rose by 23% in the last quarter, a remarkable thing for a company that has been in business for 20 years. In most periods, such companies grow earlier on and then stall afterwards. We have seen that with companies like DocuSign, Smartsheet, and DocuSign.

ServiceNow’s gross profit rose by 79% to over $2 billion, while its net income was $262 million. It also expects its business to continue doing well in the current quarter, with revenues between $2.660 billion and $2.665 billion.

Analysts expect that ServiceNow’s revenue for the year will jump to $10.9 billion, followed by $13.15 billion in 2025. 

Its earnings per shares are expected to jump to $13.79 in 2024 from $10.78 last year. They will then jump to $16.54 next year. In the past, ServiceNow has done better than analyst estimates. 

Servicenow valuation concerns

A big concern is whether ServiceNow has room for more growth now that it counts most of the biggest customers as clients. 

The other common issue is on its valuation, which has become highly stretched in the past few years. Its market cap has moved to $183 billion, while its trailing and forward price-to-earnings multiples being 161 and 53. These multiples are significantly bigger than other fast-growing companies like Microsoft, Nvidia, and Alphabet. 

ServiceNow also trades at a price-to-sales multiple of 18.5, higher than its five-year average. 

The best valuation metric for SaaS companies like ServiceNow is known as the Rule of 40. It is an approach of valuing firms that involves adding a company’s growth and its margins.

In ServiceNow’s case, it has a net income margin of 11% and an EBITDA margin of 16.4%. Its forward growth metric is 22%. Therefore, its net profit-based rule of 40 figures comes in at 33% while its EBITDA-based figure is 338%, meaning that the company is highly overvalued. This explains why Guggenheim downgraded it in August.

The stock has also jumped above the analysts’ estimates of $872. 

ServiceNow stock price analysis

The weekly chart shows that the NOW share price has been in a strong bull run for a long time. It flipped the important resistance point at $706.70 earlier this year. This was a crucial level because it was its previous all-time high.

Now, shares have remained above all moving averages, while the MACD and the Relative Strength Index (RSI) have continued to rise, forming a rising wedge pattern.

Therefore, the stock will likely retreat and retest the psychological point at $800 and then resume the rebound to $1000.

The post ServiceNow stock is severely overvalued – rating downgrade appeared first on Invezz

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US businesses can now trade crypto via PayPal: here’s what we know

PayPal has announced that US businesses can now buy, hold, and sell cryptocurrency directly through their PayPal business accounts.

This move marks a significant step in the company’s strategy to expand cryptocurrency’s role in everyday business transactions across the United States.

By allowing merchants to integrate digital assets into their operations, PayPal is responding to increasing demand from businesses eager to access the same crypto services already available to consumers.

However, the service will not be available to businesses in New York at launch.

Since 2020, PayPal has enabled its users, including consumers on Venmo, to buy, sell, and hold popular cryptocurrencies like Bitcoin and Ethereum.

Now, the company is extending this functionality to its business account holders, offering new opportunities for merchants to leverage digital assets.

This development allows businesses to handle cryptocurrencies similarly to traditional currencies, with PayPal acting as a seamless bridge between conventional finance and the expanding world of blockchain technology.

With this new feature, PayPal business accounts can now transfer cryptocurrencies to external wallets, offering increased flexibility for merchants.

This enables businesses to send and receive digital assets through blockchain networks, aligning with the growing adoption of decentralized finance (DeFi) technologies.

As more businesses embrace digital currencies, PayPal’s enhanced crypto services position it as a crucial player in the evolving landscape of digital finance.

For businesses unfamiliar with the intricacies of cryptocurrency, PayPal’s integration simplifies the process.

Merchants can now treat digital currencies like Bitcoin, Ethereum, and others similarly to traditional money, providing them with an easy entry point into the crypto space.

With PayPal handling the transaction process, businesses can offer customers the option to use digital currencies, broadening their payment options and potentially attracting more tech-savvy customers.

PayPal’s stablecoin success

This latest development follows PayPal’s successful launch of its stablecoin, PayPal USD (PYUSD), in August 2023.

PayPal became the first major financial company to introduce a stablecoin, which debuted on the Ethereum blockchain.

PYUSD is backed by US dollar deposits and short-term US Treasuries, providing businesses with a stable, reliable digital currency option.

The introduction of PayPal USD further solidified the company’s commitment to integrating cryptocurrencies into mainstream financial services.

PYUSD quickly gained traction, particularly after PayPal expanded its use to the Solana blockchain.

This move led to a significant increase in weekly transaction volumes, jumping from $150 million to over $500 million by May 2024.

Currently, the total supply of PayPal USD across Ethereum and Solana exceeds $534 million, with 74% of the supply circulating on Ethereum and 25% on Solana

The post US businesses can now trade crypto via PayPal: here’s what we know appeared first on Invezz

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HYG vs JEPI: Which is the better dividend ETF to buy?

The iShares iBoxx High Yield Corporate Bond ETF (HYG) and the JPMorgan Equity Premium Income ETF (JEPI) ETFs have grown to become some of the most popular dividend funds among retirees, accumulating $35 billion and $15 billion in assets. So, which is a better dividend fund between the two?

What is the iShares iBoxx High Yield Corporate Bond ETF?

The HYG ETF is a fund that tracks the biggest junk-rated companies in the United States. Historically, junk-rated companies always pay a higher return than investment-grade ones because of their substantial risk.

Ideally, a highly-rated company like Johnson & Johnson will pay a lower interest rate on bonds because of its strong balance sheet and strong free cash flow. On the other hand, a junk-rated company like AMC has a substantial debt load and whose business is slowing.

The HYG ETF does well when corporate default rates are low, as we have seen in the past few years even as interest rates have remained elevated. As a result, the fund’s total return in the last twelve months was 15%, while the three-year return was 7.38%.

The HYG comprises 1,263 companies that have received a junk rating from agencies like Moody’s, S&P Global, and Fitch. Most of these firms are in the consumer cyclical industry followed by communications, consumer non-cyclical, energy, and capital goods. 

The biggest company in the fund is Clear Channel Outdoor Holdings (CCO), which has $183 million in cash against long-term debt of $5.6 billion and capital leases of $1.2 billion. 

The other big name in the HYG ETF is Transdigm, a firm that has accumulated over $24 billion in liabilities. Other top firms in the fund are Venture Global LNG, Tenet Healthcare, Cloud Software, Bausch Health, and Medline Borrowers. 

I believe that the HYG ETF will do relatively well as the Federal Reserve starts cutting interest rates. Recent data shows that the 10-year yield has dropped to 3.7% while the 30-year has moved to 4.31%. Most importantly, the yield curve has emerged from its deepest inversion as conditions normalise.

Therefore, the HYG fund, which yields 5.4% could see more inflows from investors as default risks ease. Also, it will benefit now that the US has dodged a hard landing, as some analysts were expecting.

JPMorgan Equity Premium Income (JEPI)

The JEPI ETF is a significantly different one to HYG. It is an actively managed boomer candy ETF that invests in 133 carefully selected American companies. The biggest names in the fund are Trane Technologies, Progressive, Meta Platforms, Southern Company, Amazon, Microsoft, and ServiceNow. 

In addition to this, the fund uses the options market to generate returns. After buying these stocks, the fund then sells call options tied to the S&P 500 index. It specifically uses equity-linked notes with exposure to the index and then receives options premium.

Therefore, the fund first benefits when the 133 companies it has invested in rise. Historically, American stocks tend to do well in the long term, which explains why the fund has had positive returns since its inception.

The options segment also does well when the stock market is rising. The challenge, however, is that if the S&P 500 index rises too much, these gains are often capped. 

HYG vs JEPI performance

HYG vs JEPI ETF

Data shows that the JEPI ETF has a dividend yield of about 7.0% and an expense ratio of 0.35%. In contrast, the HYG fund has a smaller yield of 5.8% and an expense ratio of 0.49%. Therefore, based on these high-level metrics, JEPI is a better fund for dividend investors.

Looking at their annual performance, we see that the JEPI ETF had a 21% return in 202, followed by negative 3.52% in 2022 and 9.81% in 2023. Its performance in 2022 is notable because American stocks crashed in that year, with the SPDR S&P 500 Trust (SPY) falling by 18%. This is a sign that the fund will mostly do better during bear markets.

The HYG ETF, on the other hand, had a total return of 3.75% in 2021 followed by an 11% retreat in 2022 and an 11.53% gain in 2023. As shown above, HYG’s total return in the last three years was 7.3%, while JEPI returned 27%.

Therefore, while the two funds are good for dividend investors, I feel like the JEPI fund is a better fund. It has a big exposure to many large American companies and has a record of paying higher dividends than the HYG. 

However, as I have written before, one of the best ways to invest in the long term is to focus on benchmark indices like the S&P 500 and Nasdaq 100. 

The post HYG vs JEPI: Which is the better dividend ETF to buy? appeared first on Invezz

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OpenAI’s CTO Mira Murati joins the exit wave: what’s behind the recent departures?

OpenAI’s chief technology officer, Mira Murati, announced her resignation on Wednesday, marking another significant leadership exit as the artificial intelligence powerhouse undergoes substantial organizational changes.

Murati, a pivotal figure behind the development of ChatGPT and DALL-E, in a note to the OpenAI team posted to X (formerly Twitter), said,

My six-and-a-half years with the OpenAI team have been an extraordinary privilege. There’s never an ideal time to step away from a place one cherishes, yet this moment feels right.

Murati’s departure is particularly shocking as she was chosen to replace Sam Altman as interim CEO last November when Altman was ousted for a brief period and then restored to his role within days.

She has also served as a prominent public face for the start-up, regularly making appearances to discuss its technology.

Her exit follows a string of high-profile resignations within the company, signaling broader shifts within OpenAI’s leadership as it navigates its controversial path to profitability.

Mira Murati’s departure is not an isolated incident. Hours after her resignation, OpenAI’s chief research officer Bob McGrew, and vice president of research Barret Zoph also announced their plans to leave the company.

In posts on X, McGrew noted that it was “time for me to take a break,” while Zoph shared that he was “exploring new opportunities.”

Exits coincide with company’s plans to make it profitable

These exits come after a turbulent year for OpenAI, marked by the sudden removal of CEO Sam Altman from his position, followed by his reinstatement just five days later.

The New York Times reported that OpenAI’s leadership departures coincide with efforts by Altman and his team to transform the company’s business model.

While OpenAI was initially founded as a non-profit research lab, recent moves suggest a shift toward raising revenue and scaling the business.

OpenAI is currently controlled by the board of a non-profit organization, but the company is reportedly exploring options to shift into a more traditional for-profit structure by next year.

As part of this strategy, OpenAI is in discussions for a new round of investment that could value the company as high as $150 billion, Bloomberg and others have reported.

Potential investors include prominent players such as Microsoft, Nvidia, Apple, Tiger Global, and MGX, a technology investment firm from the United Arab Emirates.

OpenAI’s previous valuation was $80 billion, highlighting the firm’s rapid growth and the increasing interest from global investors.

Despite its significant achievements, including the widespread success of ChatGPT and DALL-E, OpenAI’s costs are outpacing its revenue.

The company generates over $3 billion annually in sales but reportedly spends around $7 billion per year, NYT said.

The financial gap has intensified the company’s need for additional funding, driving the ongoing investment talks.

‘Shiny products’ over safety concerns

In May, two key figures, Ilya Sutskever, and Jan Leike, left after leading OpenAI’s Superalignment team, which was responsible for ensuring artificial general intelligence (AGI) remained safe.

Leike later criticized OpenAI for prioritizing “shiny products” over safety concerns and stated that resource constraints hindered the team’s ability to complete critical research.

Former policy research worker Gretchen Krueger, who also recently resigned from OpenAI, expressed concerns about the lack of transparency and accountability within the organization.

She highlighted the need for improvements in decision-making processes, the careful use of AI technology, and the mitigation of impacts on inequality, rights, and the environment.

“These are concerns shared by many people and communities and should not be misread as narrow or speculative,” Krueger wrote in her resignation note.

The exits followed those of two other safety researchers, Daniel Kokotajlo and William Saunders, who left for similar reasons. 

Kokotajlo said he left after “losing confidence that it (OpenAI) would behave responsibly around the time of AGI.”

In August, John Schulman, another OpenAI co-founder resigned to join rival AI firm Anthropic.

As OpenAI pivots towards becoming a more profit-driven company, the tension between ethical AI development and commercial interests remains a point of contention both within the organization and in the broader industry.

With prominent figures like Murati, Sutskever, and Schulman departing, the AI world will be watching closely to see how OpenAI evolves in the coming months.

While the company continues to push the boundaries of what is possible with artificial intelligence, the internal dynamics and leadership shifts suggest that its path forward may not be without challenges.

The post OpenAI’s CTO Mira Murati joins the exit wave: what’s behind the recent departures? appeared first on Invezz

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Is India’s IPO market overheating? Veteran investor Ramesh Damani thinks so

India’s booming initial public offering (IPO) market may be on the verge of overheating, according to veteran investor Ramesh Damani.

With a surge of upcoming IPOs from major South Korean multinationals, referred to as ‘K-pop’ issues, the market could face a significant liquidity drain, impacting secondary market stability.

Damani expressed concerns that high valuations sought by these companies could stretch the market further, leading to a more cautious approach by investors.

In a conversation with CNBC-Awaaz, Damani, a member of the Bombay Stock Exchange (BSE), highlighted his worries about the influx of South Korean companies eyeing India’s IPO landscape.

He noted that prominent brands like Hyundai, LG, and Samsung are looking to raise significant capital, which could sap liquidity from the broader market.

The upcoming Hyundai Motor India IPO, poised to be India’s largest ever at $3 billion, exemplifies this trend.

Damani also observed that valuations in the mid and small-cap sectors have become “stretched” following a strong market rally.

He indicated that he has begun shifting his portfolio focus toward large-cap stocks, reducing his exposure to smaller companies.

“At some point, we’ll have liquidity sucked out of the market,” he warned, hinting at potential market froth.

The market regulator, SEBI, recently approved Hyundai Motor India’s IPO, with other South Korean giants like LG Electronics and Samsung India expected to follow suit soon.

This influx of ‘K-pop’ IPOs could potentially crowd out local companies in the race for investor capital, according to Damani.

India’s IPO market has been red-hot in 2024, with companies raising approximately $9 billion so far, according to Bloomberg data.

This surge has attracted major institutional investors, with mutual funds also snapping up newly listed companies like Brainbees, Ola Electric, and Unicommerce, based on the latest data from the Association of Mutual Funds in India (AMFI).

The frenzy isn’t slowing down, with several more billion-dollar IPOs expected before the year ends.

Swiggy, backed by Softbank, recently increased its IPO size to $1.4 billion, driven by growing competition in the online grocery space.

Alongside Swiggy, Indian businesses of LG Electronics and Hyundai Motor are also preparing to go public.

The demand for new IPOs has led to massive oversubscriptions, with many offerings seeing a listing day pop of around 30%—much higher than the global average of 22%, Bloomberg reported.

While the IPO wave has been lucrative for many investors, Damani’s warnings suggest that the influx of high-profile foreign companies could shift market dynamics, leading to heightened caution in the months ahead.

As the Indian market braces for these mega IPOs, the question remains whether the market can absorb such a large influx of new offerings without a significant liquidity crunch. Investors will need to stay vigilant as they navigate this evolving landscape.

The post Is India’s IPO market overheating? Veteran investor Ramesh Damani thinks so appeared first on Invezz

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ServiceNow stock is severely overvalued – rating downgrade

ServiceNow (NOW) stock price has done well, rising by 26% this year and by 243% in the last five years. It has also risen by 1,385% in the last decade, giving it a market cap of over $190 billion.

ServiceNow is doing well

ServiceNow is a large technology company that provides an end-to-end workflow automation platform to some of the biggest companies globally.

It offers these companies the Now Platform, which comprises key areas that make work easier. For example, its technology segment empowers IT departments to plan, build, and operate service that IT departments need. 

The customer and industry segment lets these firms have quality customer relations, while the employee workflow business helps firms simplify how their employees get the services that they need. 

ServiceNow has added over 85% of all companies in the Fortune 500 as clients. Some of the top customers are firms like Saudi Aramco, Siemens, and BT Group, the biggest telecommunication company in the UK.

The company has been recognized by some of the biggest players in the tech sector like Forrester and Gartner. 

ServiceNow’s business has grown rapidly in the past few years as companies have worked to simplify their operations. It also benefits from ongoing investments in artificial intelligence (AI), which it has partnered with Microsoft and Nvidia. It also acquired Element AI in 2020 and Luma AI in 2022 to boost its presence in the industry.

Its total revenue has jumped from $3.4 billion in 2019 to over $8.9 billion last year, and analysts expect that its business will continue doing well. Its performance is notable, because, unlike other large companies like Salesforce and Microsoft, it has not done big acquisitions in the past.

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The most recent financial results show that its quarterly revenues rose by 23% in the last quarter, a remarkable thing for a company that has been in business for 20 years. In most periods, such companies grow earlier on and then stall afterwards. We have seen that with companies like DocuSign, Smartsheet, and DocuSign.

ServiceNow’s gross profit rose by 79% to over $2 billion, while its net income was $262 million. It also expects its business to continue doing well in the current quarter, with revenues between $2.660 billion and $2.665 billion.

Analysts expect that ServiceNow’s revenue for the year will jump to $10.9 billion, followed by $13.15 billion in 2025. 

Its earnings per shares are expected to jump to $13.79 in 2024 from $10.78 last year. They will then jump to $16.54 next year. In the past, ServiceNow has done better than analyst estimates. 

Servicenow valuation concerns

A big concern is whether ServiceNow has room for more growth now that it counts most of the biggest customers as clients. 

The other common issue is on its valuation, which has become highly stretched in the past few years. Its market cap has moved to $183 billion, while its trailing and forward price-to-earnings multiples being 161 and 53. These multiples are significantly bigger than other fast-growing companies like Microsoft, Nvidia, and Alphabet. 

ServiceNow also trades at a price-to-sales multiple of 18.5, higher than its five-year average. 

The best valuation metric for SaaS companies like ServiceNow is known as the Rule of 40. It is an approach of valuing firms that involves adding a company’s growth and its margins.

In ServiceNow’s case, it has a net income margin of 11% and an EBITDA margin of 16.4%. Its forward growth metric is 22%. Therefore, its net profit-based rule of 40 figures comes in at 33% while its EBITDA-based figure is 338%, meaning that the company is highly overvalued. This explains why Guggenheim downgraded it in August.

The stock has also jumped above the analysts’ estimates of $872. 

ServiceNow stock price analysis

The weekly chart shows that the NOW share price has been in a strong bull run for a long time. It flipped the important resistance point at $706.70 earlier this year. This was a crucial level because it was its previous all-time high.

Now, shares have remained above all moving averages, while the MACD and the Relative Strength Index (RSI) have continued to rise, forming a rising wedge pattern.

Therefore, the stock will likely retreat and retest the psychological point at $800 and then resume the rebound to $1000.

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Volkswagen union negotiations begin amid looming factory shutdowns in Germany

Volkswagen has embarked on crucial discussions with its trade unions, initiating a pivotal negotiation phase that will shape the future of the company’s workforce and operational structure in Germany.

These talks, set to begin on Wednesday, come at a time when Europe’s largest car manufacturer is weighing significant layoffs and the possible closure of several plants in the country.

The outcome of these negotiations will largely determine the company’s course in navigating high costs and intensifying competition.

The threat of plant closures, which surfaced earlier this month, has placed Volkswagen on a direct collision course with IG Metall, the influential union representing workers at the automaker.

IG Metall has pledged strong resistance to any factory shutdowns, positioning itself as a defender of the company’s workforce.

Adding complexity to the situation, IG Metall must also secure a new labor agreement for the 130,000 workers employed under Volkswagen’s core brand.

This task follows Volkswagen’s recent termination of employment guarantees, which had shielded jobs at six major production plants in western Germany since the mid-1990s.

Volkswagen’s cost struggles amplified by global competition

Volkswagen has voiced concerns that Germany’s rising energy and labor costs put it at a disadvantage compared to other European competitors and aggressive Chinese automakers who are looking to capture a larger share of Europe’s electric vehicle (EV) market.

This pressure, according to the company, forces it to consider drastic measures, including layoffs and facility closures, despite the longstanding agreements with its workforce.

Germany’s industrial sector, including titans like BASF and Thyssenkrupp, has been grappling with similar challenges.

Soaring costs, coupled with labor shortages, have pushed several major companies to downsize or even contemplate partial exits from the country.

This strain is echoed across the German automotive industry, as evidenced by recent profit warnings from fellow automakers Mercedes-Benz and BMW, both of which have suffered from waning demand in China.

Cavallo to defend Volkswagen workers as talks begin

At the heart of these negotiations stands Daniela Cavallo, head of Volkswagen’s works council.

The 49-year-old, who has long been a staunch advocate for workers’ rights, is set to face off against Volkswagen executives in what could be the most contentious labor discussions in recent memory.

Cavallo, who ascended to her leadership role as the first female head of the company’s works council, is determined to shield the “Volkswagen family” from the looming threats.

The high-stakes talks come on the heels of Volkswagen’s announcement that it may close plants in Germany for the first time, ending a fragile two-year period of calm between the unions and management.

Although tensions had temporarily eased under Cavallo’s leadership alongside CEO Oliver Blume, the automaker’s ongoing struggles—fueled by high operational costs and shifting market demands—have forced these difficult decisions to the forefront.

Cavallo expressed her dismay earlier this month, shortly after Volkswagen informed employees of the potential plant closures, saying:

Unfortunately, I’ve got to admit that this is the darkest day so far.

The breaking of employment guarantees and talk of shuttering factories mark a cultural shift at the company, a development that Cavallo and her fellow union members view as a serious blow to worker security.

Volkswagen maintains that such moves are unavoidable given the challenging market conditions and the high cost of doing business in Germany.

However, the unions remain unwavering in their opposition, preparing for a hard-fought battle to protect jobs and prevent the closure of vital production plants.

As the talks progress, all eyes will be on how Volkswagen and IG Metall navigate this volatile situation, with broader implications for Germany’s automotive industry hanging in the balance.

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