By Matthew Gutierrez and Shawn O’Malley
The U.S. economy is humming along.
Household purchases accelerated ahead of the election. Inflation-adjusted gross domestic product increased at a 2.8% annualized rate after rising 3% in the previous quarter.
"There is almost nothing wrong with this picture,” economists at High Frequency Economics said in a note. “Steady normalization of rates at a moderate pace is what the economy needs, nothing more.”
— Matthew & Shawn
Here’s today’s rundown:
Today, we'll discuss the biggest stories in markets:
Breaking down earnings: Alphabet, AMD, and more
Wall Street cashes in on cosmetic procedures
This, and more, in just 5 minutes to read.
POP QUIZ
Chart of the Day
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In The News
📜 Tech Earnings Season in View: Alphabet, AMD, and More
Here’s what you need to know after earnings from Alphabet, AMD, and Reddit.
Alphabet
Google’s parent reported better-than-expected sales for its cloud-computing business, while its flagship search engine picked up the pace. Revenue grew 16% to $74.6 billion and net income of $2.12 per share also beat expectations.
The earnings beat is key for Google, which some believed has lost a step in the AI race as Microsoft and OpenAI gained momentum. But make no mistake, Google’s main search business keeps maturing, and its cloud division — computing power, software and services for other companies — is driving more customers.
Sales in cloud grew to $11.4 billion, a 35% rise. It’s third in that market behind Amazon and Microsoft.
“In cloud, our AI solutions are helping drive deeper product adoption with existing customers, attract new customers and win larger deals,” Alphabet Chief Executive Officer Sundar Pichai said.
Alphabet stock, up about 28% year-to-date, rose about 5% after the report. It’s gained ~177% over the past five years.
Investors were, understandably, concerned about when Google would get back some of the billions it has invested in AI infrastructure and research. Pichai tried to assuage those concerns, saying Google cut the cost of producing AI answers in search queries by over 90% in 18 months, “through hardware, engineering, and technical breakthroughs,” while doubling the size of Gemini.
Google is also heavily focused on new forms of power, notably nuclear, to handle the future needs of AI. Already, over 25% of Alphabet’s new computer code is done by AI to be more efficient.
Meanwhile, the U.S. government continues to evaluate Google’s business, as a U.S. judge said in August that Google's search business is an illegal monopoly. Pichai said the US government’s resolution of the antitrust cases could have “unintended consequences” for U.S. leadership in tech.
AMD
Advanced Micro Devices posted mixed results Tuesday, noting its data center business doubled in sales, but overall revenue was about in line with estimates. Relatively weak guidance likely drove shares down about 9% on Wednesday.
AMD has been a leader amid the AI craze. It supplies chips used to create and deploy AI tools that make human-like text, images and video. AMD competes with Nvidia, which dominates the AI chip market.
Yet AMD has built a sizable business of its own. Its stock has been a 50-bagger in the past decade, and CEO Lisa Su raised her projection for AMD chip sales to $5 billion from $4.5 billion, though, as The Wall Street Journal noted, “the company’s lighter-than-expected forecast for current-quarter revenue could signal momentum in its overall business is slowing.”
From Bloomberg
Shares in the social media operator surged 40% to a record high on profitability and rosy guidance.
Reddit, which was founded in 2005 and went public in March, posted sales of $348.4 million, beating estimates.
“Our hypothesis of Reddit, which is that every company’s customers are on Reddit somewhere, plays out,” said its CEO. “We’ve been more successful in helping businesses be on Reddit, find their customers on Reddit and land their messaging.”
Reddit continues to compete with other ad businesses like Meta and Alphabet. It’s adding new licensing deals with Google and OpenAI, which use the site’s data to train their large language models. It’s also launched new ad formats and signed content partnerships with pro sports leagues.
The strategies are working: Reddit averaged 97.2 million daily active unique visitors last quarter, up 47% from a year ago.
More Headlines
😎 Consumer confidence surges as election nears, while job openings move lower
☑️ Trump Media rally hits 330% as polls show election in dead heat
💼 Job openings fall to the lowest level since January 2021
🤔 How many active funds beat the S&P 500?
🤖 LinkedIn launches first AI agent to take on role of job recruiters
🏦 Goldman Sachs, Morgan Stanley CEOs see more dealmaking in 2025
💄 Wall Street Cashes in on Cosmetic Procedures
Wall Street is coming to plastic surgery.
More consumers are turning to financing options to pay for cosmetic procedures, from tummy tucks to lip fillers. Often, insurance won't fit the bill. The trend has caught the watchful eye of specialty lenders and Wall Street investors eager to profit from the lucrative market.
Plastic surgery costs are quite prohibitive for most Americans, many of whom live paycheck to paycheck. Prices for procedures like breast augmentations, Brazilian butt lifts, and facelifts have risen 13% to 22% over the past year. The average breast augmentation is now about $7,000.
But the demand is clearly there, and patients are opening credit lines or using buy-now-pay-later (BNPL) plans offered by healthcare financing companies to cover costs.
“You wouldn’t think that they would need to have this type of financing,” said the founder of Destination Aesthetics Medical Spa in Sacramento. “These are responsible people with their money, but they’re using this as an option to ideally get packages and higher-service treatments that have a higher ticket price.”
One 22-year-old social media influencer profiled by Bloomberg used an interest-free credit line to pay for her $7,000 breast augmentation, helping boost her TikTok following. A 32-year-old stay-at-home mom even served as a surrogate to help fund her tummy tuck and breast augmentation.
Why it matters:
Wall Street is definitely paying attention.
Earlier this year, $400 million in cosmetic procedure loans were packaged into a bond that was in high demand from investors attracted to the prime consumer profile of the borrowers. Around half had good credit scores between 700-850. Investors told Bloomberg they bought the bonds because of “their exposure to a prime consumer who can afford to spend money for Botox, dental work and other procedures.”
There are concerns that such easy access to financing may incentivize unnecessary or unaffordable procedures. Research shows buy-now-pay-later plans are disproportionately used by those in more fragile financial situations. (Many break down treatment bills ranging from $200 to $10,000 into smaller installments.)
After promotional periods end, the APRs on specialized credit cards can reach over 30%.
Some consumers have gone to great lengths to find more affordable options, like the content creator who traveled to Turkey for a $6,000 breast augmentation package.
Bottom line: The cosmetic procedure financing boom shows no signs of cooling — meaning there’s another lucrative new frontier for lenders and Wall Street.
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Quick Poll
Do you own AMD or Reddit stock? Why or why not?
On Monday, we asked: Which of the following do you believe is the most critical factor for Peloton's growth?
— Most respondents say Peloton should initiate more cost-cutting measures. As one investor wrote, “Cost-cutting measures directly affect the bottom line, giving cash to reinvest and help grow/improve the company in other ways.”
— One wrote that Peloton should partner with other fitness brands. “I wrote (founder) John Foley back before he was fired and mentioned the brand appeal (clothing & gear) and pivoting into fitness centers that would fill a void and allow for subscribers in person and online, growing the platform substantially larger.”
— Others wrote, “In the short term, cost-cutting. Then they need to grow their base either through a partnership (Apple?) or internationally.”
TRIVIA ANSWER
See you next time!
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