Armed and dangerous
A big tech IPO chips in
Good morning, semiconductor enthusiasts. This is your Stock Market Rundown for September 20th, 2023. Thanks for reading. Let’s dig in:
TODAY’S TOP STORY: CHIP CHAMPIONS 📳
Tech IPOs are back, baby. The market for initial public offerings has been moribund since the drubbing of 2022. But now the biggest IPO of the year, Arm Holdings, has got investment bankers slobbering for deals.
Arm designs the chips that serve as the “brains” of 99% of the world’s mobile phones. The company doesn’t actually manufacture anything, just designs the blueprints, licenses the technology, and rakes in royalties.
And those royalties can pay out for decades. The chief financial officer of Arm joked to CNBC that Arm’s portfolio is “like the Beatles catalog”—the hits keep delivering, year after year. All you need is silicon.
Arm’s chips excel by being the most power efficient. That means they help your phone battery not conk out when you’re trying to summon an Uber while at 1% power after last call.
But Arm’s market-share dominance in mobile phones is a vulnerability, because phones are a stagnant market. Unless you’re a drug dealer or having a torrid affair, you’re probably not in the market for a second or third phone. Hence, their big push to diversify into designing chips for AI applications and data centers.
This IPO enlisted an army of twenty-four underwriters, including homies from Goldman Sachs and JP Morgan. I’m sure the investment bankers took a few deep cleansing breaths when the stock popped on debut day.
Fees on the Arm deal, and the slew of tech IPOs sure to follow, are gonna cover a lot of private-school tuitions and boat payments.
SO WHAT ELSE IS GOING ON?
Curb your enthusiasm: a top strategist says inflation is still too damn high and the Fed will probably keep raising rates. That’s not priced in—most observers think the Fed is done raising, so if it’s a September surprise, watch out below.
Cyberattacks are ramping up… they even hacked bleach. Clorox reported a network breach forced them to pull systems offline. Products like Glad trash bags and Tilex mold spray might be in short supply on grocery shelves while they clean up the aftermath.
Looking for a few good allocators: the pension fund for public employees in California is suffering a revolving door in the C-suite, as the head honcho steps down after only 18 months in the job. The role pays $1 million a year, so if you’re seeking a big title and a mess of unfunded liabilities, throw your resume on the pile.
The SEC has entered its shakedown era. Wall Streeters are complaining that the regulator is imposing extortionate fines as punishment for penny-ante technical violations, like chatting over WhatsApp. Is being dinged eight figures really an appropriate penalty for texting a few eggplant emojis?
That’s it for today, friends; see you at the crack of 9 AM ET tomorrow. Yours in capitalism, The Axe