GM and BRRR.

Volatility suppression continues, as earnings have been good this summer. Over half (54%) of companies have beaten expectations by at least 1 standard deviation (vs 48% historically).

As we covered in a standalone post last week, Facebook reported particularly impressive results for their core advertising business. And as we cover today, they’re becoming a central player in the AI race with their open-source approach.

Elsewhere, the critical banking sector has remained quiet overall, although “an isolated incident” caused failure at Heartland Tri-State, a small midwest regional bank on Friday.

We continue to monitor SPDR’s regional bank ETF (ticker: $KRE) as the potential canary in the coal mine for sector weakness. The ETF has performed well since bottoming in May, in the wake of turmoil earlier in the year. While still down 20% from its pre-crisis levels, it has surged 36% from the bottom.

Today’s email is brought to you by the AI Tool Report. It’s an amazing free resource to help you stay on top of the tech world with the most impactful stories.

Please consider subscribing and opening their emails - it’ll support us at The BRRR. 👇

AI & The Future

Meta Is OpenAI’s Top Competitor

Meta has introduced Llama 2, an open-source, large-scale language model that could accelerate the AI industry by making high-powered AI systems more accessible to entrepreneurs and developers. Initially released under controlled conditions, the first version of Llama was leaked, triggering massive adaptation and innovation within the community. The sequel, Llama 2, has been released as open-source from the beginning, and is being made freely available for commercial use. The move is seen as a potential counterbalance to proprietary models developed by companies like OpenAI, and could foster greater innovation and improvement of AI products and services.

• Llama 2 is made with 40% more data than the original model, and Meta claims its performance is on par with OpenAI's ChatGPT.

• Key AI startups like Hugging Face, Databricks, and OctoML, along with major tech companies like Microsoft and Amazon's AWS, are already supporting and offering Llama 2 to their customers.

• Eight out of ten models currently trending on Hugging Face, a number of which are made to generate conversational text, are variations of Llama 2.

• Nathan Lambert, an AI researcher at Hugging Face, argues that Llama 2 is possibly the "biggest event of the year in AI." Despite the current advantage held by proprietary models, he believes that later versions of Llama will eventually catch up, and possibly surpass them.

• Jon Turow, an investor at Madrona Ventures, compares Meta's release of Llama 2 to Google introducing the Android OS in 2007 as a rival to Apple's iOS. He anticipates this move will foster new levels of creativity among developers and entrepreneurs.

• The pace in which the open-source community is innovating with Llama’s model lead Google to write a code-red memo, fearful their approach was falling behind.

  Read more

Our take: Meta is firing on all cylinders with its core advertising business and now its AI project while ironically failing at its namesake project, the metaverse. We’re adding the stock to our watchlist and paying close attention.

Macro News

Earnings: By The Numbers

• The Q2 earnings season began with pessimistic forecasts, causing low expectations. However, since then, S&P 500 has risen 100 points.

• As of now, 252 members of the S&P 500 have reported Q2 earnings, which accounts for 65% of cap.

• Earnings this season have generally been better than expected, with 54% of companies beating consensus estimates by at least 1 standard deviation (SD), against a historical average of 48%.

• However, companies beating consensus estimates by >1SD are only outperforming the S&P 500 by 22bps in the trading session following earnings, significantly lower than the typical outperformance of over 100bps.

• Read More

  
  Leaning Into AI
  

• Companies reporting Q2 earnings have increasingly highlighted artificial intelligence (AI) in their discussions, even more so than the previous quarter.

• Over a third of S&P 500 corporations mentioning AI at least once on their Q2 conference calls, up from about a quarter in Q1.

• For example, Intel's recent call featured 58 mentions of AI, up from 15 in their previous call in April, reflecting their push to catch up with rivals like Nvidia in AI computing.

• Alphabet's recent analyst call mentioned AI 62 times, up from 52 mentions three months ago. Microsoft's call mentioned AI 58 times, up from 35 in its previous call.

• The term "AI" or "artificial intelligence" has been said 827 times on 76 calls out of a total of 221 calls held in recent weeks, more than double the mentions per call compared to last quarter.

  Read More

Today’s Reader Poll

Vote and leave a comment - we’ll feature the top comment tomorrow!

AI Art of The Day

Zuck leading an army of open-source robots

The BRRR’s Portfolio Update

Tech stocks propel Wall Street to new heights with Microsoft and Apple leading the charge, up 1.8% and 1.5% respectively. A robust economy and strong economic data, including a surge in consumer confidence and new home sales, fuel the rally, dispelling recession fears.

On Watchlist:
$AMD: NVDA’s strongest competitor
$ASML: They make the machines that make AI machines
$ISRG: Robot Surgeons
$OPRA: Growing web-browsing solution

Got feedback? Follow the writer on Twitter @frank_locascio and send a message.

Join our Facebook group to connect with the community.

The BRRR is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.