A survey of North American markets heading in both directions
On the decline
Brookfield Corp. (BN-T) slid 1.1 per cent in volatile trading after Madrid-based newspaper Expansión reported on Wednesday it is close to selling Saeta Yields, a renewable energy company with assets in Spain and Portugal, to Masdar of the United Arab Emirates.
The transaction could exceed €1.5-billion (US$1.66-billion), the newspaper reported.
Saeta owns 28 wind farms, 10 photovoltaic parks and seven solar thermal plants, according to its website.
Masdar’s €817-million (US$887-million) acquisition of a 49.99 per cent stake in 48 solar plants controlled by Endesa, a unit of Italy’s Enel, was announced in July.
Brookfield acquired Saeta, founded by construction company ACS, in 2018 for €1-billion and delisted it.
Nvidia (NVDA-Q) shares were once again lower on Wednesday, propping up chip firms after a bruising sell-off in the prior session, in a sign that AI optimism on Wall Street held out despite concerns around the stocks’ lofty valuations.
AI heavyweight Nvidia rose 1 per cent briefly in afternoon trading before closing in the red. That followed Tuesday’s 9.5-per-cent fall which wiped out US$279-billion from Nvidia’s market value, in the biggest ever single-day decline for a U.S. company.
The collective market valuations of seven of the biggest beneficiaries of the AI boom - including Nvidia, Advanced Micro Devices and Broadcom - have dipped to US$3.99-trillion as of previous close, from US$5.06-trillion in mid-June.
Enthusiasm around the growth of artificial intelligence technologies has propelled much of the equity market’s gains this year, lifting the valuation of chip companies to levels some investors consider inflated.
Worries around a slow payoff from hefty AI investments have mounted, and Nvidia’s forecast last Wednesday fell short of lofty expectations even though the company posted strong quarterly revenue growth.
“The focus is now shifting to valuations in the U.S. equity market in general, and some of the tech names have pretty large premium built in,” said Tai Hui, Asia chief market strategist at J.P. Morgan Asset Management in Hong Kong.
Intel (INTC-Q) declined 3.3 per cent after Reuters reported its contract manufacturing business has suffered a setback after tests with chipmaker Broadcom (AVGO-Q) failed, dealing a blow to the company’s turnaround efforts.
The tests conducted by Broadcom involved sending silicon wafers - the foot-wide discs on which chips are printed - through Intel’s most advanced manufacturing process known as 18A, the sources said. Broadcom received the wafers back from Intel last month. After its engineers and executives studied the results, the company concluded the manufacturing process is not yet viable to move to high-volume production.
Reuters could not determine the current relationship between Broadcom and Intel or whether Broadcom had decided to walk away from a potential manufacturing deal.
From Tuesday: Intel’s Dow status under threat as struggling chip maker’s shares plunge
“Intel 18A is powered on, healthy and yielding well, and we remain fully on track to begin high volume manufacturing next year,” an Intel spokesperson said in a statement. “There is a great deal of interest in Intel 18A across the industry but, as a matter of policy, we do not comment on specific customer conversations.”
A Broadcom spokesperson said the company is “evaluating the product and service offerings of Intel Foundry and have not concluded that evaluation.”
Intel’s contract manufacturing business was launched in 2021 as a key part of Chief Executive Pat Gelsinger’s turnaround strategy.
Broadcom is not a household name but makes crucial networking gear and radio chips that helped generate US$28-billion in overall chip sales in its last fiscal year. It has benefited from the boom in spending on artificial intelligence hardware, and J.P. Morgan analyst Harlan Sur estimated it will bank US$11-billion to US$12-billion from AI this year, up from US$4-billion last year.
Some of its chip sales are from agreements with companies such as Alphabet’s Google and Meta Platforms to help produce in-house AI processors, which can include arrangements with a manufacturer, such as Intel or Taiwan Semiconductor Manufacturing Co.
U.S. Steel (X-N) plummeted 17.5 per cent on reports the White House is signaling an openness to blocking its acquisition by Nippon Steel, as a government review of the proposed takeover by the Japanese company is on the cusp of ending.
The Washington Post reported Wednesday that President Joe Biden plans to stop the deal from going forward. A White House official, insisting on anonymity to discuss the matter, did not deny the report and said Biden still needs to receive the official recommendation from the Committee on Foreign Investment in the United States. That review could end as soon as this month.
Mr. Biden had already voiced his objections to the merger, backing his supporters in the United Steelworkers union who oppose the deal. The objection carries weight as U.S. Steel is headquartered in the swing state of Pennsylvania and is a symbol of Pittsburgh’s industrial might in an election year where Republicans and Democrats alike are promising more domestic manufacturing jobs.
Vice President Kamala Harris, the Democratic nominee, came out against the deal this week. Former President Donald Trump, the Republican nominee, already said he would block the merger if he was still in the White House.
Lyft (LYFT-Q) closed narrowly lower after it said Wednesday it will stop offering standalone dockless bikes and scooters and eliminate some jobs as part of a restructuring to cut costs.
The ride-share service provider, which operates the Citibike service in New York City and similar rental programs in other U.S. cities, had in July 2023 said it was exploring options for the unit after having received “strong inbound interest”.
“We are discontinuing our dockless scooters in Washington, D.C., and are exploring alternatives for our dockless bikes and scooters in Denver,” the company said.
As part of the move, the company will rename its bikes and scooters division as “Lyft Urban Solutions”.
The company does not operate its own bikes and scooters in many U.S. cities and has partnered with Bird and Spin, allowing riders to access them through the Lyft app.
Lyft said it would incur about US$34-million to US$46-million in charges, largely related to asset disposal costs, and lay off about 1 per cent of its nearly 3,000 employees at the end of last year.
Cost savings from the restructuring, improved operations, and better sales strategies will help boost adjusted operating income by about US$20-million on an annual basis by the end of next year, the company said.
Lyft last month forecast a weak September quarter, raising concerns about the company’s ability to cope with intense competition from Uber Technologies (UBER-N).
Zscaler (ZS-Q) shares tumbled on Wednesday following the cybersecurity firm’s downbeat annual forecast, as macroeconomic challenges slowed spending by its customers.
Zscaler’s management said that the challenges impacted the billings from three-year contracts, resulting in a lower growth expectation for the first half of fiscal 2025.
The bleak forecasts prompted at least 10 brokerages to cut their price targets on the stock, with Needham making the biggest revision by cutting it to US$235 from US$290.
Enterprises are slashing down on security spending as high interest rates and a sluggish economy weigh on the overall budgets.
Zscaler’s peers Palo Alto Networks (PANW-Q) and SentinelOne (S-N), however, boosted expectations with strong annual revenue forecasts as CrowdStrike’s (CRWD-Q) customers reevaluated their options in the aftermath of a global IT outage.
The company expects full-year revenue in the range of US$2.60-billion to US$2.62-billion, while analysts’ estimated $2.63 billion, according to LSEG data.
“Contracted billings (scheduled billings from prior-year contracts), a significant and growing portion of total billings, are projected to grow 7% in 1H2025, reflecting the impact of past macro challenges that have led to a historically lower growth rate in the first half,” Rosenblatt Securities analyst Catharine Trebnick said in a note.
Zscaler on Tuesday also forecast full-year adjusted net income of US$2.81 to US$2.87 per share, compared with estimates of US$3.33.
Dollar Tree (DLTR-Q) joined main rival Dollar General (DG-N) in cutting annual forecasts after missing quarterly estimates on Wednesday as the discount store operator struggles to attract price-sensitive shoppers amid rising competition.
Shares of the company, which have lost nearly half of its value so far this year, were down 22.2 per cent.
Bigger rivals including Walmart and Target as well as newer entrant, PDD Holding’s ecommerce platform Temu, have been able to lure in shoppers with lower prices for everything ranging from groceries to apparel as consumers looks for value, hitting sales at dollar stores who are struggling to boost demand.
“While rising prices drove shoppers to low-cost retailers like Dollar Tree and Dollar General, that wave has crested and those merchants are now struggling to compete,” eMarketer analyst Zak Stambor said.
Dollar Tree CFO Jeff Davis said in a statement on Wednesday that the annual forecast cut was partly due to expectations of conservative sales for the balance of the year amid a challenging macro-environment.
The company has been in the process of restructuring its business and in April said it was exploring options, including a potential sale or spinoff of its Family Dollar banner.
Earlier this year, it had outlined plans to shutter 970 Family Dollar stores. As of Aug. 3, Dollar Tree has shuttered about 655 stores and would close 45 stores through the remainder of the year, the company said on Wednesday.
Last week, rival Dollar General’s shares also slumped nearly 30 per cent and executives said that the company would have to increase promotional activity that would pressure sales and margins for the remainder of the year.
Chesapeake, Virginia-based Dollar Tree expects annual sales between US$30.6-billion and US$30.9-billion, compared with its prior forecast range of US$31-billion to US$32-billion.
The company sees annual adjusted earnings per share in the range of US$5.20 to US$5.60, compared with its prior forecast range of US$6.50 to US$7 per share.
Nordstrom (JWN-N) finished flat after its founding family offered to take the department store chain private for US$23 a share, teaming up with a Mexico-based retailer in its latest bid.
That price would value the company at roughly US$3.76-billion. Its shares have gained 35 per cent since Reuters first reported in March that the family showed interest in taking Nordstrom private.
Nordstrom’s sales have been stronger of late than some of its peers such as Macy’s (M-N) and Kohl’s (KSS-N) as it focuses on stocking its shelves with trendier products.
The bidders include CEO Erik Nordstrom, President Peter Nordstrom and Mexican retailer El Puerto de Liverpool , who sent a non-binding letter proposing to form a new entity that would buy the chain, according to the filing.
The company in April confirmed the family’s interest in a potential deal and formed a special committee of independent directors to evaluate such a proposal.
The Nordstrom family owned about 54.6 million shares, or 33.4-per-cent stake in the company, as of Sept. 4. Liverpool owns 15.8 million shares, or nearly 10 per cent of the shares.
The deal would be financed through a combination of rollover equity and cash from the Nordstrom family and Liverpool as well as US$250-million in new bank financing.
With files from staff and wires