Market Round-Up

Meta’s Q1 2024 earnings release has ignited investor concerns regarding cost controls at the company, after capital expenditure for the year was projected to increase from US$37bn to US$40bn. The firm, which owns Instagram and Facebook, is keen to accelerate artificial intelligence (AI) investments, in a bid to become “the leading AI company in the world.” For context, last year this figure stood at US$28.1bn.

Even though the AI frenzy spearheaded growth for US equities in 2023, Meta shareholders expressed anxiety about the extent to which Meta can monetise and profit from this technology, with the share price down 12% in early trading the following day. Mark Zuckerberg, Meta’s CEO, emphasised how the company could implement advertising into recently added AI chatbots or charge for use of its larger AI models, as a means of raising revenues.

Despite this, at time of writing, Meta Platform’s share price is still up 25% year-to-date, driven by a doubling of its operating margin and issuance of its first-ever dividend. Revenue has also risen by 27% (Year-over-Year); although, losses in Meta’s virtual reality arm, Reality Labs, remain meaningful, standing at US$3.85bn in Q1 alone.

FTSE 100 mining giant, Anglo American, has rejected rival BHP’s £31bn takeover bid. Australia-based BHP had initially proposed to buy up and restructure Anglo American, in order to increase exposure to “future-facing” minerals like copper and capitalise on Anglo’s 2023 share price slump.

The prospective deal valued each Anglo American share at £25.08, triggering a rebound in Anglo’s share price after a 19% one-day drop in December, following the announcement of a mineral production downgrade. Upon completion, BHP would have become the world’s largest copper producer, responsible for c.10% of the global mined supply. This would be particularly beneficial for the business due to the crucial role that copper plays in decarbonising the economy, with its applications ranging from electric vehicles to renewable energy technologies. The impact of the tie-up would have been seismic for the industry, matching Glencore’s 2013 acquisition of Xstrata.

However, Anglo American’s board unanimously rejected the proposal, perceiving it to be “opportunistic,” as it failed to value the upside that Anglo assets could generate from their alignment to major demand trends. A revised offer could be made at a later date, with a higher premium to better reflect the quality of Anglo’s copper mines.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the investments mentioned. Investments and income arising from them can fall as well as rise in value. The information and views were correct at time of publication but may have changed at point of reading.