Appreciate Newsletter

Hello subscribers,

Here’s what we’re covering in today's edition of the newsletter:

?? S&P 500 earnings for 2025 ???

?? OpenAI, Meta continue to expand AI user base ??

?? India’s consumer spending remains sluggish

So, let’s go...

Wall Street Expects S&P 500 Earnings to Expand In 2025

According to data from FactSet, the S&P 500 index's projected earnings per share (EPS) for 2025 is $275.24, a record high since tracking began in 1996.?

However, historical data shows these one-year-ahead predictions are typically off by 6.3%, usually overestimating the final number.

Looking at the past 25 years (1999-2023):

• Analysts overestimated EPS in 17 years and underestimated it in 8 years
• The 6.3% average error includes four outlier years (2001, 2008, 2009, 2020) with >25% differences due to significant events like 9/11, the dot-com bubble, the great financial crisis, and COVID-19
• Excluding these outliers, the average EPS overestimation is just 1.1%

Based on these historical patterns, the actual 2025 EPS might be:

• $257.82 (using the 6.3% average overestimation)
• $272.08 (using the 1.1% adjusted average)

Either scenario would still represent a record-high EPS for the S&P 500.?

OpenAI Targets 1 Billion Users in 2025

OpenAI (ChatGPT) has hit 300 million weekly active users, up from 250 million recently, as CEO Sam Altman announced at the DealBook Summit. The company is ambitiously targeting 1 billion users over the next year.

Here are some of the key business moves OpenAI made:

• Hired its first Chief Marketing Officer, Kate Rouch, from Coinbase
• Launched a ChatGPT search feature to compete with Google and other search engines
• Reached a $157 billion valuation, backed by $13 billion from Microsoft
• Recently closed a $6.6 billion funding round and secured a $4 billion credit line
• Offering employees an opportunity to sell $1.5 billion in shares to SoftBank

The company is positioning itself against major competitors:

• Anthropic (backed by Amazon)
• xAI (Elon Musk's company)
• Tech giants like Google, Meta, and Amazon

While Altman denied restricting investors from backing competitors, he noted that such investors wouldn't receive access to OpenAI's internal information and roadmap.

Meta AI is Expanding!

According to a social media post by Meta Platforms CEO Mark Zuckerberg:

?? Meta AI, or Llama, now has close to 600 million monthly active users.?

?? It will soon release Llama 3.3, a text model trained on 70 billion parameters that perform similarly to the current model with 405 billion parameters.

?? It is building a 2 gigawatt data center to train future Llama models.

ChatGPT Drives Big Tech Valuations Higher

No one predicted its meteoric rise when OpenAI launched ChatGPT in December 2022. Internal estimates of 100,000 users were dramatically surpassed as it became the fastest-growing app in history, now boasting around 300 million active users.

According to a Bloomberg report, the AI revolution has primarily benefited Big Tech companies. In the last two years ??

• The top six tech firms have seen a combined market cap growth of $8 trillion.?
• The S&P 500 index is up 56%.
• Nvidia has emerged as the world's leading chip company and is at the epicenter of the AI boom.
• Microsoft, Amazon, and Google have seen a significant rise in cloud sales.

Elsewhere, the consulting industry has capitalized on the AI boom. For instance,?

• Around 40% of McKinsey's business is now AI-related
• IBM generative AI business has raked in $3 billion
• Accenture topped $1 billion in AI bookings in the latest quarter

Is India’s Consumer Spending Under Pressure?

India's Fast-Moving Consumer Goods (FMCG) sector recently experienced significant market turbulence, primarily triggered by Godrej Consumer Products Limited's (GCPL) disappointing forecast.

GCPL’s shares dropped by 11% following their forecast of:

• "Flattish" underlying volume growth
• Mid-single-digit sales growth for the December quarter
• Subdued demand conditions in India

Key Factors Behind the Decline:

• Increased soap prices
• Unseasonal rainfall affecting sales
• A slowdown in the home insecticides segment

The announcement triggered widespread market reactions:

• Hindustan Unilever (HUL) and ITC fell ~4%
• Dabur, Marico, and Tata Consumer Products fell between 2% and 4%
• Overall, the Nifty FMCG index pulled back by 2%

The FMCG sector faces several headwinds:

• Weak consumer demand across urban and rural markets
• Rising inflation impacting consumer spending
• High raw material costs
• Competitive pressures affecting profit margins

Despite FMCG's traditional reputation as a defensive investment, analysts suggest recovery will depend on improved demand conditions and effective cost management strategies by companies.

The FMCG index is down 14% from all-time highs.

Headlines You Can’t Miss!

U.S. consumers spent $13.3B on Cyber Monday, an increase of 7.3% YoY

SpaceX seeks a $350B valuation

Disney raises annual dividend by 33%

Meme stock AMC tanks after selling 50M shares of stock

AT&T aims to return more than $40B to shareholders over 3 years