Wall Street Lunch: AI Dominance Imminent?

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SoftBank CEO says AI is 'self-learning, self-training, and self-inferencing.' (0:15) Citi bears see oil prices falling to $70. (1:57) UK aims for a smoking-free generation with new rules. (4:10)

This is an abridged transcript of the podcast.

Our top story so far

Start your SkyNet countdown clocks.

SoftBank CEO Masayoshi Son says he thinks general artificial intelligence will top the collective intelligence of humanity - and that will come within the next 10 years.

Son said at the company’s world conference: "It is wrong to say that AI cannot be smarter than humans as it is created by humans."

"AI is now self-learning, self-training, and self-inferencing, just like human beings," he added, according to Reuters. He also touted advancements made by generative AI.

The 66-year-old delved deeper and said he is the only person who thinks artificial general intelligence will come in such a short time.

Conversely, Arm (ARM) CEO Rene Haas, also at the conference, said it would come within his lifetime.

In today’s trading

The bond market and the labor market remain in control, but the action is volatile and the reverse of what we saw on Tuesday.

In the previous session, longer yields shot up after August JOLTS showed an unexpected rebound in job openings. That pushed the 10-year yield (US10) to multi-year highs, peaking overnight just shy of 4.90%.

But a weak September ADP jobs report this morning pulled that yield back down to just above 4.75%.

ADP said private payrolls rose by 89K last month, well shy of the 150K consensus. The ADP report is notoriously unreliable for predicting the official jobs figures, which are out Friday. But strategists say it’s a question of shoot first and ask questions later with the bond market and, more recently, stocks. Any indication of economic softness will dent the higher-for-longer Fed narrative that has turned the Treasury selloff into what ING called “a rout.”

Stocks are mixed after Tuesday’s tumble.

The S&P (SP500) and Dow (DJI) are down slightly, while the Nasdaq (COMP.IND) is up. Consumer Discretionary (XLY) is the best performer, while Energy (XLE) is the weakest, down 3% with oil prices retreating.

U.S. WTI (CL1:COM) is below $88 to levels not seen since mid-September.

The OPEC+ Joint Ministerial Monitoring Committee did not recommend any policy changes at its meeting today. Saudi Arabia and Russia said they will maintain voluntary oil supply cuts to the end of the year.

Bearish analysts at Citi say they do not expect crude to stay at its lofty levels, forecasting Brent (CO1:COM) to average $82 per barrel in Q4 and $74 a barrel for 2024.

Analyst Ed Morse says, "The Saudi appetite to withhold oil from market, supported by Russia maintaining a certain level of export constraint, points to higher prices in the short term, all else equal, but $90 prices look unsustainable given faster supply growth."

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Among active stocks

But it added that while it “remains open to the possibility of working with the UAW on future battery plants in the United States,” ones under construction “are multi-billion-dollar investments and must operate at competitive and sustainable levels.”

And Tilray Brands (TLRY) traded higher after the Canadian cannabis company reported better-than-expected revenue and highlighted its recent efforts to diversify. It’s been on a recent buyout spree, snapping up Canadian rival Hexo (HEXO), Truss Beverage Co., and several beer and beverage brands from Anheuser-Busch (BUD).

In other news of note

UK Prime Minister Rishi Sunak proposed that the legal age for consuming cigarettes will be gradually raised, a move that will effectively set a future ban on smoking. Sunak said the changes in smoking laws would make it so that children turning 14 or younger this year could never legally be sold cigarettes in their lifetime. The UK government is also considering potential measures to restrict the availability of vaping products.

Sunak noted via X (formerly Twiter) that smoking is the number one preventable cause of ill health in England and causes 64,000 deaths a year. He said it was a large financial burden on the NHS and costs the nation about £17 billion a year.

And in the Wall Street Research corner

Wells Fargo argues that the separation between megacap stocks, which have led the stock rally so far in 2023, and the rest of the stock market will likely begin to narrow soon.

They said they expect the recent outperformance of marquee names “to eventually correct, as we’ve seen through history, either by the top names ‘catching down’ to the average stock or the average stock catching up to the top names."

For the latter scenario, the macroenvironment would need to improve. They say that’s unlikely given their base case for a recession.

As of September 27, seven mega-cap tech names—Apple, Amazon, Alphabet, Meta, Microsoft, Nvida, and Tesla—have been driving the majority of returns seen in the market. These stocks have popped 80.1% on average, compared to the typical stock measured by the S&P 500 equal weight index, which is essentially flat.

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