On the SPOT™ blog (02/08/2023) [M..]
Several Federal Reserve officials spoke today and there appeared to be a more cautious tone suggesting that they would have to maintain restrictive policies for some years and that depending on the data, they might need to continue raising interest rates. While I think that there was nothing materially different in these comments, it appears as if some people have started to consider a possibility that terminal rate could go past 6%. I think it is all speculative right now and I'd draw conclusion based on the data. That said, markets are obviously going to react to future possibilities so short-term investment environment might continue to remain uncertain. Add to this speculation was a Google/Alphabet vs Microsoft drama as Google demonstrated some of its generative AI "readiness". This was already rumored in the media so nothing surprising. However, there seemed to be "fear" about how this data could be "incorrect" sometimes and raised some -ve sentiment around it. Besides, MSFT's demo perhaps caused +ve sentiment and has clearly gained initiative from GOOGL at least in generating +ve sentiment in the media about it being a credible thread to Google's search and related advertising dominance. This is amazing because, Google had evolved its products in this phase perhaps even before Open AI came to be known but none of that showed up in its publicly known product roadmap. MSFT seems to have shaken up GOOGL and has perhaps triggered GOOGL to play some forced moves and come out of its defensive moves. MSFT is known for its marketing prowess. Remember the products like XBOX and how they gained market dominance eventually. It is perhaps more difficult to gain "search" market share from Google but it can't take rest on its laurels anymore as MSFT has already generated a lot of curiosity around how cool Bing will get with these new features. That said, it is a long battle but this salvo from MSFT has already taken down GOOGL stock today by a noticeable level. MSFT also seems to have made it clear why it enjoys higher valuation compared to some of its big tech peers.
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