An AI-Heavy Week with Apple-OpenAI, Nvidia, and Microsoft's Build Conference

* Our take on an Apple-OpenAI relationship, and why two other portfolio holdings would benefit.

* Nvidia shares get some price target hikes ahead of this week’s earnings report.

* This week’s Microsoft’s Build developer conference to focus on AI and PCs, here’s what it could mean for Qualcomm shares.

As we kick off the week, one that ends with the start of the Memorial holiday weekend, we’re a bit slow getting out of the starting blocks when it comes to fresh economic data. Even though we will get the latest Fed meeting minutes Wednesday afternoon, we won’t have anything new in a meaningful way about the economy or inflation until Thursday’s Flash May PMI reports. 

In Friday’s Roundup preview for this week, we noted a lack of market-moving earnings reports out this morning. While the S&P 500 and the Nasdaq Composite aren't technically oversold given RSI's below 70, the market mood remains in Greed territory while Citi's Euphoria-Panic model is nearing Euphoric levels. We will tread carefully near-term with the portfolio and our cash. 

Let's take a look at some headlines that will stir some action with a few of our holdings today:

Apple and OpenAI

First, reports indicate Apple AAPL will add OpenAI’s technology to iOS 18 with an announcement slated for Apple’s upcoming WWDC event. We’ve been expecting Apple to make an AI splash at the event, and this not only supports that view it also helps address criticism that Apple would be left behind in the AI race. 

Our take is that the details will once again matter, including if the relationship includes MacOS, iPadOS, and other Apple platforms. As far as AAPL shares, following the move since late May that has them up ~155 with an RIS at 71.43 as we start the week, they are overbought. While they can remain that way, we will also be mindful of the gap in the $170s that we see in the chart.

A linkage with Apple and its install base of devices will no doubt help boost OpenAI’s valuation, which is an indirect positive for Microsoft MSFT, which according to the latest reports owns 49% of OpenAI. The other indirect beneficiary of an Apple-OpenAI relationship and the positive impact on iPhone volumes in the coming quarters would be Qualcomm QCOM.

Wall Street lifts some Nvidia price targets

We are also seeing a flurry of price target increases ahead of Nvidia’s NVDA earnings report after Wednesday’s market close. Stifel lifted its target to $1,085 from $910, Barclays’s target now sits at $1,100 up from $850, and Baird’s was boosted to $1,200 from $1,050. In Friday’s video, we discussed our thoughts and plans for Nvidia’s earnings report, and there was nothing over the weekend to change them.

Last week Google I/O, this week Microsoft's Build conference

Last week we had Google’s (GOOGL) I/O developer conference, and this week is Microsoft’s version, better known as its Build conference. It begins tomorrow, and we’re likely to see follow-through on comments made by CEO Satya Nadella earlier this year that 2024 will be the year when AI becomes the “first-class part of every PC.” Our thinking is the event will be a competitive response to Google’s event and one that could raise the bar for what Apple has to share at June’s WWDC event.

Tuning into Microsoft’s Build event, we’ll be assessing the AI playing field and how Microsoft’s announcement could accelerate the rebounding PC market, but also partnership announcements. On its recent earnings call, several times Qualcomm QCOM mentioned “upcoming launches of next-generation Windows AI PCs” powered by its Snapdragon chips. 

We’ll be looking for follow-through to those comments and if we get them, they would be reason for us to revisit our QCOM price target in the near term. As we discussed above, the Apple-OpenAI relationship could give us another reason to revisit our QCOM price target in June. 

At the time of publication, TheStreet Pro Portfolio was long AAPL, NVDA, GOOGL, MSFT and QCOM.