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Why Walmart Is Trading Like a Big Tech Stock On WSJ’s Take On the Week, co-host Telis Demos talks with Aaron Back, WSJ’s Heard on the Street column editor, about the latest inflation report and what it could mean for the Federal Reserve. They also discuss upcoming earnings from Chinese tech company Alibaba and retail behemoth Walmart.
Later on the show, Telis talks about all things retail with Dana Telsey, CEO and founder of Telsey Advisory Group, a brokerage firm focused on the consumer sector. They chat about what’s behind Walmart’s winning retail strategy—from its inroads with higher-end customers, affordable luxury offerings like the viral “Wirkin” bag, and its e-commerce play. They also get into what’s going on with the luxury market, including with high-end juggernaut Hermès, Louis Vuitton parent company LVMH, Chanel, Burberry, and others. Before they sign off, Telis asks Dana: What’s up with Target?
This is WSJ’s Take On the Week where co-hosts Gunjan Banerji, lead writer for Live Markets, and Telis Demos, Heard on the Street’s banking and money columnist, cut through the noise and dive into markets, the economy and finance—the big trades, key players and business news ahead.
Have an idea for a future guest or episode? How can we better help you take on the week? We’d love to hear from you. Email the show at takeontheweek@wsj.com.
Full TranscriptThis transcript was prepared by a transcription service. This version may not be in its final form and may be updated.
Telis Demos: Hey everyone. We would love to hear from you about what you think about our show. Leave us a comment on your favorite platform or just send us a note to takeontheweek@WSJ.com. Hey everyone, I'm Telis Demos. I write for the Wall Street Journal's Heard on the Street, and this is WSJ's Take On the Week where we give you a leg up on the worlds of money and investing. Each week we bring you conversations with insiders and from inside the Wall Street Journal's newsroom about all that good stuff. And this week joining me is my colleague Aaron Back. He's filling in while Gunjan Banerji is away. Aaron, welcome.
Aaron Back: Good to be here.
Telis Demos: Aaron is the editor of the Journal's Heard on the Street column, and so we've worked together a ton over the years.
Aaron Back: Indeed.
Telis Demos: This will not be our first conversation about markets, but it might be one of our most interesting. The hot topic. Let's start with what is trending this week. Inflation. The CPI report came in this past week and inflation, it's not slowing down anymore. What is going on?
Aaron Back: Yeah, so inflation came in at 3% up from 2.9% the prior month. Not a big difference, but the story here I think is for a long-time inflation was coming down, it peaked around 10% and it was slowing, but for several months now it's basically been stuck around 3% and that means that the Fed might have a hard time justifying cutting rates from here.
Telis Demos: So the last report, the December report was, I think that the headline number was 2.9% year-over-year growth.
Aaron Back: Yep.
Telis Demos: Now it's at 3% as of January, so not a huge pickup, but the wrong direction.
Aaron Back: So the Fed's target is two and for a long time they can make the case that it's moving down towards two, but it's been around this level for several months now at three. So it doesn't appear to be coming down anymore.
Telis Demos: Well, what's interesting to me is though the market's reaction initially was negative, it really hasn't derailed the bull market, which is what you might think would've happened given past history about how the market feels about how many Fed cuts are coming, right?
Aaron Back: Yeah.
Telis Demos: Usually the market is very bearish when it doesn't feel like the Fed is coming in with additional cuts. I mean, it seems to me, look, investors are greedy. They're still hoping for a big kind of fast growth deregulatory Trump agenda that will lead to more M&A that will unleash financial services and other industries. So it just doesn't seem like people are ready to give up on that.
Aaron Back: Yeah, that's right. And so far the tariff news hasn't been terrible. It's been on again, off again, and that's the one thing that could maybe derail this whole thing but hasn't yet.
Telis Demos: Yeah, yeah. Yeah, it seems like the market is still kind of in the mode where it thinks that what President Trump says about tariffs are more a negotiating tactic than this is actually the policy. But speaking of tariffs and China, I want to bring up a Chinese company's earnings that are coming up in this coming week, and that is Alibaba. I feel like that's a company we were talking a ton about a few years ago, but it's fallen off the radar a little bit. But Aaron, I know you're following that one closely. Why?
Aaron Back: Yeah. Well, there's been a renewed interest in Chinese tech stocks since this whole DeepSeek thing, which was, of course, a Chinese AI that appeared at least to make a lot of advancements on the cheap. And so since that news, Chinese tech stocks have rallied. Alibaba's up around 37% so far this year.
Telis Demos: Wow, okay.
Aaron Back: But that's particularly notable because a lot of these stocks were kind of dead money for years. There was a Chinese sort of regulatory crackdown on the tech sector. Those stocks were deeply out favor for a long time.
Telis Demos: And that's been true kind of across the Chinese market. I mean last, year the Chinese Stock Market, the CSI 300, one of the main indexes, had a little momentum, it was up like 15%-ish in 2024, but that was after several years of falling.
Aaron Back: Yeah, so a lot of the Chinese tech stocks are listed in Hong Kong or New York, not in the Mainland Shanghai index. That's a lot of state-owned enterprises and things like that in the Mainland indexes. So that's not really benefiting yet from this rally in Chinese tech stocks. But that's another reason why the Alibaba earnings may be interesting because their main business is this domestic e-commerce marketplace, Taobao. And so that'll give a read on the Chinese consumer who has been suffering for years from lower property prices and just a generally weak economy. So if the Chinese consumer is doing a little better, that would be a good sign for the broader Chinese market. If it's more of the same sort of struggling Chinese consumer, then not so much.
Telis Demos: Interesting. And, of course, the Chinese consumer is not just important to the Chinese economy, but to the global economy as well. I mean, they're buyers of imported goods from all over the world, especially in the luxury market, they've been a huge part of that. And speaking of retail, I wanted to also move on to one of the big things coming up in the coming week, and that is Walmart's earnings report. Walmart has reclaimed its crown as the king of retail lately. What has been going on with that stock? It's gangbusters, isn't it?
Aaron Back: Yeah, so Walmart is up around 80% the last year. It's trading like a tech stock and they're really the king of retail right now. They're gaining share in sort of high-end consumers, low-end consumers. They're doing well in e-commerce. It's maybe the biggest success story in retail right now.
Telis Demos: Is it something about the consumer or is it something about their business, do you think?
Aaron Back: It's something about their business. I mean, they're trading at around 33 times forward earnings. That's a tech stock multiple. It's not a retail stock multiple. So investors are excited about Walmart specifically.
Telis Demos: And you mentioned their e-commerce operations.
Aaron Back: That's right.
Telis Demos: I mean that's something that I think we should look closely for any sort of news on how much of their business now is coming in through Walmart.com and some of their other kind of digital offerings. So interesting. Aaron, this has been great. Thank you so much for joining me to talk about what's hot in the markets this week.
Aaron Back: Yeah, my pleasure.
Telis Demos: We're going to pivot to a conversation that I had this past week about the state of the retail industry. Dana Telsey is joining us. She is the CEO and founder of the Telsey Advisory Group, and she joined us to talk about how the consumer's doing and also what's going on with Walmart and also the broader luxury market and maybe whether Walmart is the real winner in retail these days. After all, if people aren't splurging on luxury goods and they're also paying 53% more for eggs than they were a year ago, yeah, that's a real number, that's from the Consumer Price Index, the January CPI, then maybe the basics are the sweet spot right now. So we're going to take a break and after we come back, let's have that interview with Dana Telsey. Today, it's great to have with me here, Dana Telsey. She is the CEO and founder of Telsey Advisory Group. Hi, Dana. How are you? Welcome.
Dana Telsey: Hi. Thank you so much for having me.
Telis Demos: Tell us about what is Telsey Advisory Group? How would you describe it?
Dana Telsey: Telsey Advisory Group has been around for nearly 20 years. We are the consumer research firm that basically covers all of consumer along with having a banking and asset management arm also.
Telis Demos: It's a great time to talk and I'm interested in now talking about the retail earnings season that's coming up. We have some big company earnings like Walmart and Target as well as just lots going on about the state of the consumer and in particular, I want to drill down a little bit into what's been going on in the sort of luxury market.
Dana Telsey: So just a little bit to frame it. Overall, what we saw during the pandemic is a real increase in luxury goods sales, partially because in the US, the stimulus payments that aspirational customers got, they didn't have anywhere to go, they were spending on luxury goods. Then fast-forward, pandemic kind of ends, luxury goods soar, and you saw many of the brands taking price increases. Some of them were definitely consumers rebelled and are not really accepting of the price increases and others where the exclusivity of the product makes the difference. Today, where we are is-
Telis Demos: Is so the fancier more expensive product you had, it was almost like you had more pricing power because-
Dana Telsey: You did.
Telis Demos: ... you had something that everyone wanted and they couldn't get anywhere else
Dana Telsey: And there's not enough supply.
Telis Demos: What's an example of that? What's an example of something that raised its price a lot during the pandemic?
Dana Telsey: So Hermès raised its prices, even post-pandemic, and it continues to be more demand where the double-digit sales increases are continuing.
Telis Demos: Hermès, the like a luxury French-
Dana Telsey: You can't access the goods because they don't produce enough. On the flip side, you've had others, potentially like the Chanels of the world, raise their prices almost to try to be similar to Hermès, but you're not getting the same reaction. And then you've had other brands in the luxury world, and a lot of these European luxury, where they may have raised prices, they don't have the same upscale nature in terms of price points that an Hermès has and the fact that the Chinese aren't traveling like they used to.
Telis Demos: Chinese consumers are not. Okay, yeah, yeah.
Dana Telsey: The Chinese consumers are not buying. That's been the impact of the LVMH as the world. So all of a sudden what you're seeing out there is the luxury world sales growth is moderating from what it had been, and you're still not seeing the consumer from China traveling. They're spending within China and potentially even on some local brands from China.
Telis Demos: So why has Walmart though been the sort of the superstar stock of the past year? I mean their shares are up way more than pretty much any of the other major players in shopping and retail and among the luxury brands and stuff like that. As people stop that kind of spending, are they doing more of Walmart type spending?
Dana Telsey: So a couple things in Walmart. First of all, they're really have a diversification of where they get their revenues, whether it's the Walmart discount stores, whether it's Sam's, keep in mind 60% of Walmart sales are grocery. So the essential spend that you have there, people are going there. In addition, for them where some of their highest growth has come from is some of their higher-income consumers. The ability of to get what you need when you need in a convenient format matters. Target is more discretionary than Walmart. But the other area that you've seen grow significantly is off price. TJ Maxx, Ross Stores, Burlington, brands at value prices matter, and you're certainly seeing companies like the off prices delivering that while Walmart's delivering value and essentials and really stepping up their pipeline of what's new and interesting. We still have work to do on Target because they're typically known as where they have collaborations that are very appealing on discretionary and there's more that's coming there.
Telis Demos: Yeah, I want to ask more about Target in a second because I think they're very interesting. And you mentioned Walmart having growth at the higher end of their consumer base, and so there are a couple of things that have been going on with Walmart that really fascinate me that I want to see if you can help explain what that might mean for investors. One is the Walmart+ membership I feel like has become a very successful product and it's sort of ubiquitous, right? So Walmart+, of course, is like a subscription kind of like Amazon Prime, many people are familiar with, and what's interesting to me about Walmart+ is that it really seems to be aimed, again, at both people who are on government assistance like EBT, they can get a Walmart+ deal, right? But also I know that American Express offers it, right? So you have consumers really at both ends of the spectrum kind of coming together and saying, "Yeah, we see value in Walmart+", which, of course, gives them access to the e-commerce as well as other things. Seeing those two barbells of the consumer succeed with that product, what does that tell us?
Dana Telsey: I think overall you can see higher-income consumers gravitate for the essentials. There is a convenience to having physical stores attached to the online sales too, both in terms of delivery and in terms of returns, and it shows the awareness of the Walmart name to consumers of all income levels in all regions. The data that Walmart has allows them to accelerate the community bond they have and really learn what should they be offering that consumers want. Marketplaces matter, the diversification of their sales and where they get it from is making them more essential to all different income and age groups of consumers.
Telis Demos: Marketplaces, you mean where lots of sellers can sort of sell goods through one website?
Dana Telsey: Yep. Where you can reach the most consumers.
Telis Demos: What has Walmart been doing to appeal more to higher-end or to wealthier customers? I know I've read a little bit about their sort of private labels and things like that. What else have they done? CEO, Doug McMillon has said that they're really making inroads with high-end shoppers. What's been behind that?
Dana Telsey: I think the awareness and the marketing, I think the physical store locations, I think the loyalty programs, the essential nature of their goods, the ease of shipments that they've been delivering, they've been on time, and they really showcase that this is not the Walmart of 30 or 40 years ago. Look what they did in their name. They took away the name Walmart stores because they're all channels in terms of appealing to the consumers.
Telis Demos: Yeah, the e-commerce seems like they've really succeeded there. And again, a few years ago, people would've said, "Oh, nobody can compete with Amazon," and yet here they are.
Dana Telsey: They can.
Telis Demos: One episode for Walmart recently that I want to get your thoughts on is the "Wirkin" bag social media moment. And it brings in a couple of themes. One, the sort of the dupe sort of theme in luxury, and I certainly don't want to call this particular product a dupe, but I'll just explain to people who weren't following it. There was recently a bag for sale, like a purse for sale on Walmart's website from a third-party seller, and it sufficiently gave kind of Birkin bag, the Hermès thousands of dollars bag. It sufficiently gave Birkin vibes that people flocked to it as an affordable alternative and it went viral on social media. People were TikToking about, it got a nickname. The bag is not called the "Wirkin", it's called something else, but people nicknamed it that. I also saw a couple of times the "Walmés" bag as well. What does that anecdote tell us about what's going on in luxury? And also, so it's got the e-commerce angle there and are people sort of dropping down from the... They're like, "You know what? I don't need an Hermès bag. I'll get this "Walmés" bag.
Dana Telsey: So imitation is always the most sincere form of flattery, and definitely the Hermès buyer who's buying that bag, that, as you said, is thousands of dollars, is not trading down to the "Wirkin" bag. The awareness of it. It gives others who want to view that style and that type an opportunity to access it at a much lower price. There's no need for a Hermès to even make any comments on it because when you look at other styles where there are interpretations of what is popular at higher price points, that's what this is doing. If anything, it only creates even more awareness of Hermès if it's a bag and a style trend that should be emulated. But what it also shows is you have value that matters, it is garnered a wider appeal. Social media has fast awareness that goes global and you're seeing trends be able to be deciphered quickly. I wouldn't necessarily say the Birkin is a trend given how long it's been around.
Telis Demos: Exactly, exactly.
Dana Telsey: It's been a desired item, not only by the wealthy, but those who aspire to have it also.
Telis Demos: I mean, I feel like that the Birkin bag and Hermès exist really at the very highest tier of luxury, right? I mean these are things that can cost many, many thousands of dollars.
Dana Telsey: And are even more valuable on resale.
Telis Demos: Exactly. So it's an heirloom item. So let's put that maybe in its own little tier. But I want to talk about what's going on in the rest of the luxury market. And that can include companies like Burberry, Kering, which owns Gucci, LVMH, which is, of course, the parent of Louis Vuitton. These companies have a more maybe diversified sort of luxury strategy where they have the very highest end and then a little bit of what you might call affordable luxury kind of micro luxuries that have been a little bit cheaper. What's going on with that market and what happens to people who don't necessarily have their Hermès' cachet but are still considered luxury?
Dana Telsey: So there's always that aspirational consumer who wants to be in that lifestyle. Yes, we had a slowdown in luxury sales recently, and we just actually put out a primer on luxury and are expecting an increase in luxury sales this year. We've had-
Telis Demos: Okay, so you think it was a short-lived slowdown maybe?
Dana Telsey: Yeah.
Telis Demos: Okay, okay.
Dana Telsey: It may not be at the same rates that it had been, but it should grow. And when you think about the lifestyle selling of luxury brands from entry points in cosmetics to high end, whether it's ready to wear jewelry or leather goods. But what's changing lately, we have a change in designers for some of them, a change in management teams. We have a customer base that's changing and also where they're opening stores. Many of these European luxury goods companies want to open stores in the US. Take a look on Fifth Avenue where there are these Louis Vuitton trunks that are on 57th and 5th where they're redoing their building. It is probably one of the most Instagram pictures and photos that's out there.
Telis Demos: That you see people always stopping.
Dana Telsey: You're seeing restaurants put into some of these luxury goods stores where there's waiting lists, so access to entry in the brand. Also, we're seeing in some cases, outlet centers. You look at Woodbury Commons here in the Northeast, you look at Desert Hills on the West Coast and they'll have entry points to luxury goods from the luxury goods brands at discounted prices. So styles value, but there's always a demand because of the aspirational nature that people want to interpret from others who they admire.
Telis Demos: If I'm driving past the strip mall and I see a Gucci sign, should I be thinking, "Uh-oh, they're going down market, time to sell my stock."? Or should I be thinking, "Wow, they've grown their audience here."?
Dana Telsey: They're controlling their customer base. It's less than 10 malls that they could open in. So that's what I mean. It's not ubiquitous.
Telis Demos: Got it.
Dana Telsey: But also wouldn't you rather have that than be shown in third parties?
Telis Demos: Yeah.
Dana Telsey: And some don't even ever discount their goods because they will reuse some of the materials and make it into something else?
Telis Demos: Yeah. I do have to talk about Washington and policy, and I know that tariffs are something that obviously matter for retail and luxury in particular, and import business, right? We're talking about European goods, European companies selling to China, Chinese consumers shopping in the US, et cetera. What does that mean for retailers and for how consumers might kind of feel the effect of tariffs?
Dana Telsey: It's a headwind. Tariffs are a headwind. They're a headwind to companies. The accelerated diversification of supply chains costs money and the element of increasing prices to the end consumer, which we saw last time, is a headwind and it's a concern.
Telis Demos: We're going to take a little break and when we come back, we're going to have one last question for Dana Telsey. Welcome back. So we talked a little bit about Target at the top of the show. We talked about how Walmart has been really going gangbusters lately. Their stock has been doing great, they're doing terrific with both the sort of the more kind of price-sensitive customer and the higher-end customer. But let's go back to Target. Target was once synonymous with kind of affordable luxury, right? You mentioned discretionary spending. Tar-Jay was the nickname I remember. But now it's struggling. The stock is not doing as well. It just seems to have lost some of its momentum of late. In 30 seconds or less, tell us, do you see a Target comeback in the near future?
Dana Telsey: Yes, I do see a Target comeback in the near future because I think the discretionary spend is getting more appealing for them. I think they're doing more innovative projects, doing more enhancements in their stores. I think it's going to make it more interesting as we go through the next year.
Telis Demos: Okay. A target for investors to consider. Dana, thank you so much for being here with us. This has been a great conversation.
Dana Telsey: Thank you so much for having me.
Telis Demos: Thanks so much. And that's everything you need to know to take on your week. This show is produced by Trina Mannino, Michael LaValle, and Jessica Fenton with help from Jess Jupiter. Michael LaValle and Jessica Fenton are our sound designers, and Michael also wrote our theme music. Aisha Al-Muslim is our development producer, Scott Saloway and Chris Zinsli are the deputy editors, and Philana Patterson is the head of news audio for the Wall Street Journal. For even more, head to WSJ.com. I'm Telis Demos.
Aaron Back: And I'm Aaron Back. Until next time.
Telis Demos: Alliterating anchors anxiously await. Okay. All right, here we go. Does anybody get that joke? I always do that. Broadcast News, any big fans?
Aaron Back: I wasn't listening.
Telis Demos: Don't worry about it.
Aaron Back: What was the joke?
Speaker 4: Say it again.
Telis Demos: Broadcast News, Albert Brooks.
Aaron Back: I don't know what you're talking about.
Telis Demos: Never mind.
Technical analysis for shorts & longs | Stock Discussion ForumsShare
At the 2 minute mark cash levels at the hedge funds are at record lows so they don't have the ammunition to drive the market higher. The need to do some profit taking. Observation outside of the video: We saw a bit of that today on META as we saw start to see off and then accelerate into the close on no news.
At the 4 minute mark there is the suggestion that recession only are triggered only after earning margins start peak and start to go down. There is only one time in the 80s where this was not true. So 40 years of data to draw from and it makes sense as margin contract mean pricing power has failed due to problems with the economy.
Technical analysis for shorts & longs | Stock Discussion ForumsShare
SP500 spent most the second half of the day on the defensive but managed to finish up to a new 52 week high. The key is whether there is a follow through day tomorrow with increase volume.
DOW still lagging the SP500 but it has managed to stay close to the 52 week high so it may follow the SP500 up if the move in the SP500 is confirmed and sustain. Note that the SP500 could also see off because as note most hedge funds are at record lows in cash.
Dow transports still playing catch up. It is on the verge of breaking one of the last two remaining resistance levels before the 52 week high. This current level is more significant than the minor one above it.
DOW utilities short term trend is up and intermediate trend is still down. Traders are having problems figuring out the direction of long bonds temporarily.
TLT still say long bond rates are head up over the next few weeks and maybe months.
USD bouncing near a major 106 support zone. Watch to see if is a dead cat bounce.
COMPQ also setting a new 52 week high. Watch to see if confirms tomorrow.
Semiconductor still in the mid-range of the sideways channel of the last few months.
Financials near the 52 week high. Watch to see if it also sets a 52 week high to confirm the SP500 and COMPQ new highs.
Energy still moving to test the top of the long term sideways channel. It has a little more ways to run before resistance.
Gold still managing to set a new 52 week high. The momentum is start if slow down though.
Consumer discretionary still on the defensive. It is on a short and intermediate sell signal still.
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Technical analysis for shorts & longs | Stock Discussion ForumsShare
Looking at the MAG7 as no new high is going to set with some of the MAG7 participating.
APPL negating the short and intermediate sell signal but it has some work to do to set a new 52 week high.
AMZN on a short sell signal and intermediate sell signal setup.
AVGO waiting near the 52 week high.
GOOGL setting new 52 week high.
META seeing some profit taking after 20 consecutive up days in a row.
Watch to see if the 693 level is broken to set up a short term sell signal setup.
MSFT on a sell signal in all timeframes.
NVDA looking to test the 52 week high. Earnings may cap the move till next week.
TSLA on a short and intermediate sell signal.
New 52 week high on SP500 and COMPQ indicates the strength in stocks in broadening as some of the MAG7 are weak. Expect some profit taking but not a black swan event yet. A 10 to 15 percent correct would health right now.
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Technical analysis for shorts & longs | Stock Discussion ForumsShare
Meta's (META) stock fell Tuesday, ending its 20-session winning streak on Wall Street. Shares of the social media giant fell more than 2.76%, its worst day since Dec. 18. The positive streak stretched back to mid-January and continued through President Trump's inauguration, which CEO Mark Zuckerberg attended, and the company's earnings on Jan. 29.
Meta's stock is up 17% over the last month and 22% year to date.
The company's stock continued to rally even as Zuckerberg said Meta will spend upwards of $65 billion building on capital expenditures related to AI data centers this year, a significant increase from $40 billion the company said it would spend in 2024.
Zuckerberg says plans include constructing a data center in Richland Parish, La., large enough to cover a massive chunk of Manhattan.
Meta's wins come as the rest of its Big Tech counterparts struggle in the early weeks of 2025. Shares of Google parent Alphabet ( GOOG, GOOGL), Apple ( AAPL), and Microsoft ( MSFT) are each down more than 2% on the year, while Tesla ( TSLA) is off more than 12%. Amazon's ( AMZN) stock is up more than 3% year to date but off 1.7% over the last month.
Meta has a few key elements going in its favor, chief among them a sense that the company's investments in artificial intelligence are paying off better than those of its Big Tech rivals like Google and Microsoft.
“They've used [their AI investments] largely to drive their business where … other companies have been trying to be a little bit more all things to all people,” Zeus Kerravala, founder and principal analyst at ZK Research, told Yahoo Finance in an interview last week.
Meta is pouring cash into technologies that help power its advertising business and keep users scrolling through their feeds.
“Improvements to our AI-driven feed and video recommendations have led to an 8% increase in time spent on Facebook and a 6% increase on Instagram this year alone,” Zuckerberg explained during the company’s Q3 earnings call in October.
And during Meta’s Q4 call, CFO Susan Li said 4 million advertisers are using the company’s generative AI tools to create ads, up from 1 million six months ago. All of that makes AI an easier sell for investors.
Meta also got a boost from AI startup DeepSeek, which revealed its own open-source AI model it says can rival the best of what ChatGPT and other high-value Silicon Valley AI companies have to offer. The fact that DeepSeek offers its AI as open-source software seemed to validate Zuckerberg's decision to do the same with Meta's Llama models.
Too soon to say it is a massive trend yet, but with the US making some many wave countries are going to be looking for others currencies or gold to settle trades in. An unreliable and volatile trade partner lead to a volatile currency of that partner. Also less trade due to tariffs means less demand for the currency.
The question right now is: "Did the US just accelerate the rate at which other countries will be migrating away from the US dollar?"
Oil is already being settle in gold and other currencies due to the sanctions on Russian and gold and oil being tied to the US dollar are two of the key drivers of the need for US dollars.
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China’s holdings of US Treasuries fall to lowest level since 2009 Beijing has been seeking to hold US debt through lower-profile accounts and diversifying into other assets
Unlock the Editor’s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
China’s holdings of Treasuries have fallen to their lowest level since 2009, as Beijing holds more of its US government bonds through lower-profile accounts and diversifies into alternative assets. The value of US sovereign debt held by Chinese investors fell by $57bn to $759bn in 2024, data published by the US Treasury on Tuesday showed. This does not include Chinese-owned Treasuries held in accounts in other countries. Analysts say the change partly reflects China’s desire to diversify its foreign reserves by buying assets such as gold. But they add that Beijing is seeking to disguise the true extent of its Treasury holdings by shifting them to custodian accounts registered elsewhere. “China made a decision around 2010 that holding Treasuries was a risk, it looked bad optically that so much of China’s wealth was in the hands of a geopolitical rival,” said Brad Setser, a senior fellow at the Council on Foreign Relations and former US Treasury official. The decline in China’s holdings was likely to have been exaggerated by some assets being moved to securities depositaries such as Belgium-based Euroclear and Luxembourg-based Clearstream, added Setser, which would boost those countries’ holdings in the official data. “It has become more difficult over time to track what China is doing and how Chinese flows are impacting global markets,” he said. Shifts in foreign ownership of Treasuries are closely watched given the US government’s need to finance a vast budget deficit at a time when its central bank is reducing its own holdings of government debt. China’s reported holdings of Treasuries have fallen by about $550bn since peaking in 2011. UK holdings climbed by $34.2bn in 2024, while Belgian holdings have increased by $60.2bn, and Luxembourg’s holdings gained $84bn. Japan remains the largest holder with more than $1tn.
“Not all US Treasuries held by China are directly hosted in the US institutions,” said a person familiar with the management of China’s foreign reserves. Beijing holds part of its reserve assets through entities such as Euroclear or Clearstream “for the purpose of risk diversification”, they said. “That said, China’s overall holdings of US Treasury bonds will slowly decrease, the trend is clear, as China continues to diversify its reserve assets,” the person added. Mark Sobel, US chair of the Official Monetary and Financial Institutions Forum, said the People’s Bank of China had been increasing its exposure to other assets such as gold, typically seen as a haven in times of economic and market stress. The price of bullion has jumped by about 12 per cent so far this year, in a sign of increasing demand among big buyers. Data from the World Gold Council showed China was the third-biggest buyer of gold in the final three months of 2024, adding 15.24 tonnes to its reserves. However, while the PBoC’s holdings of gold jumped 13 per cent over the past two years, bullion still represents a relatively small portion of the central bank’s total reserves.
Sobel said the fall in Treasury holdings did not necessarily mean China was selling out of dollar assets in general. Some analysts say China has been increasing purchases of other safe US debt such as agency bonds. Changes in the value of Chinese Treasury holdings also reflect fluctuations in the bonds’ market value. “Whether they have reduced overall dollar holdings I don’t know, but they are definitely investing in a broader array of instruments through different vehicles,” said Sobel. The jump in UK holdings of Treasuries had been driven by the flow of money from foreign sovereign wealth funds, wealthy families and hedge funds through London, said analysts, while a similar dynamic was also playing out in Belgium. Given that yields on gilts are above those on Treasuries, the buyers of Treasuries in the UK are unlikely to be British investors, but rather “it has to do with foreign money [including] Middle Eastern money”, said Andy Brenner, head of international fixed income at NatAlliance. Setser said hedge funds were likely holding US Treasuries in the UK as part of the so-called basis trade, a highly leveraged strategy in which funds buy US bonds and sell futures to profit from small price differences. Additional reporting by Haohsiang Ko
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How Western Tech Companies Are Avoiding China As U.S.-China tensions heat up, Western tech companies are migrating their supply chains away from China. Producer Julie Chang talks with China tech reporter and editor Liza Lin about what that means for everything from artificial intelligence servers to consumer electronics. Plus, why Meta’s AI-powered Ray-Ban glasses are gaining traction with visually impaired users. Charlotte Gartenberg hosts.
Full TranscriptThis transcript was prepared by a transcription service. This version may not be in its final form and may be updated.
Charlotte Gartenberg: Welcome to Tech News Briefing. It's Wednesday, February 19th. I'm Charlotte Gartenberg for the Wall Street Journal. Meta's artificial intelligence-powered Ray-Bans are designed for the general public. We'll hear about why they're gaining traction with visually impaired customers. Then, a growing number of Western tech companies are saying, "ABC, anything but China," as US-Chinese tensions rise and many multinationals shift production out of the country. But could this supply chain migration be permanent? Our China tech reporter and editor, Liza Lin, tells us what it means for both China and the US. But first, Meta's AI Ray-Bans are appealing to a growing group of blind users. The smart specs retail for $300 and look, well, like regular Ray-Bans, but integrated into them is a camera, microphone and speakers as well as an AI assistant. While users say there are benefits when it comes to everyday tasks, some critics have safety concerns. Tom Gryta, a tech editor at the Wall Street Journal is here now with more. So Tom, what are people using these glasses for?
Tom Gryta: Actually, a lot of people who are visually impaired, they're using them to see objects around them. You might use it to open your freezer or your fridge to help identify what's there so you don't need someone else to help you do that. They can identify the difference between regular Coke and Diet Coke simply by asking the assistant, and it uses the camera and the AI that's integrated to identify what's in front of you.
Charlotte Gartenberg: And this one woman, Allison Pomeroy, was talking about how she was using it for things like reading a menu.
Tom Gryta: Oh yeah, totally. You could read a menu, it can help you sort your laundry. Her in particular, she uses it to help her read books to her granddaughter as well as getting everyday stuff, what time it is, and what the temperature is outside by asking the assistant and then it would just tell her.
Charlotte Gartenberg: Wow, that sounds like a potential game changer. But what are some of the safety concerns according to some of the critics?
Tom Gryta: These glasses were not designed for medical use, right? This isn't like a medical device. So experts warn that you just have to be careful with that. They could be distracting, you could be using them and you're walking, and that could be dangerous because it takes up some of your brain power to be managing this thing. And also because it is powered by AI, AI is not perfect. So there could be errors or so-called hallucinations, as they say in the AI world. And unfortunately because your vision is impaired, you wouldn't know that. And so it might give you wrong information and you're acting on it, which could be risky. There's certainly some skeptics who think that this needs more testing. This is more of a consumer product being used for more of a medical use.
Charlotte Gartenberg: And what has Meta's response been to this new use of its glasses?
Tom Gryta: Meta told us that they try to build products with accessibility in mind, but they did not predict the impact that these Ray-Bans would have on visually impaired people. Once they started to hear about this from those kinds of users and their supporters, they saw that this was a use case that was important and started to look into ways to improve the product. Meta partnered with a company called Be My Eyes, that has a free app that connects people with poor vision through video calls using volunteers that can help them find what they need. What Meta did was integrate this app into the glasses itself so that people who are visually impaired can use the app through the glasses. So you would say, "Hey, Meta," whatever it is you're trying to do by using Be My Eyes, and the volunteer would see through the camera on the glasses and be telling you through the speakers on the glasses what is in front of you, so you could then be hands-free. You don't have to hold the phone anymore. For someone who's visually impaired, that's a significant advancement.
Charlotte Gartenberg: That was Tom Gryta, a tech editor at the Wall Street Journal. Coming up western tech companies are shifting production out of China, perhaps for good, how this could impact everything from AI servers to consumer electronics. After the break. Tensions between the US and China are heating up, and that's leading tech companies to accelerate their decoupling with China. In the past, companies moved only the assembly of products outside the country. Now, businesses are shifting whole factories making components. WSJ China tech reporter and editor Liza Lin spoke to TNB producer Julie Chang about this new anything but China trend among western tech companies. Here's their conversation.
Julie Chang: So Liza, before companies moved only the assembly of products outside of China. Now it sounds like they're shifting whole factories there. Is that right?
Liza Lin: Yeah, so Julie, I think we're seeing two different things happening here with the supply chain shift from China. The first thing we're seeing is companies who are moving assembly of their products outside. To give you some background, supply chains shifting from China isn't a very immediate and very recent thing. Supply chains have been pretty much starting to migrate since the first Trump Administration and just after the pandemic, we saw a huge wave of companies moving out because China's COVID lockdowns had caused production snarls in a lot of products, everything from iPhones to cars. What we're seeing this time around though that's hugely important is it's not just the assembly of products that are moving, it's the supply chain supporting that assembly that's also moving with it. So you think about if you're just making electronics, think about stuff like sensors that are moving, power electronics, printed circuit boards. All these are the components that go into consumer electronics such as laptops. So all these factories are moving out of China as well. And according to an analyst report, these moves pretty much make the relocation in supply chains away from China much more permanent and irreversible because of heavy upfront investment in machinery and parts. The second wave is really driven by geopolitical tension and friction. Because of the US imposing export controls on advanced chips to China, what you're seeing is certain products that contain such chips cannot be made in China anymore.
Julie Chang: What are some of the challenges associated with moving factories out of China?
Liza Lin: There are multiple challenges associated with this. Think about it. When you're moving the supply chain away from China, you're pretty much redrawing your entire supply chain, a supply chain that in the past has worked very efficiently for you and at a very low cost. So the first thing you need to think about is when you move your factories, you need to find logistic networks to bring your components in and to deliver your products out, you need to find new suppliers that can supply you at that new location. You need to adjust to a new working culture. So the challenges are multifold. Firstly, it's the cost of investment, the cost of moving, and then you have the additional things that rack up. If something goes wrong, you have production stoppages or delivery delays, and all these add cost as well.
Julie Chang: So a lot of these companies are moving their factories to Southeast Asia. Why there?
Liza Lin: So Southeast Asia is attractive for a few reasons. The biggest reason is the cost. Southeast Asia still isn't a very expensive place to manufacture in, and it's pretty close to China. That's the other reason. Southeast Asia is great for assembly, but it still doesn't have a component ecosystem. So a lot of the supply for the components still need to come from places like the south of China. So Southeast Asia has an edge because it's easy to ship components down from China to Southeast Asia. On top of that, you have lower energy costs, you have lower water cost, utility cost, so all that just makes Southeast Asia a very attractive region for manufacturers.
Julie Chang: And in your reporting, you found that many Chinese companies are also moving out of China and overseas. Why is that?
Liza Lin: It's because when you move factories, you also want to move your suppliers to the vicinity of a factory. And the supplier ecosystem, like the one you have in China, isn't easily replicated outside of China. It took China decades to become this manufacturing powerhouse, and China isn't just known for making one particular widget, it's known for making all sorts of variations of this particular widget. And you don't get that in Southeast Asia or Mexico or any of the other places that have become alternative manufacturing locations. So a lot of the Western manufacturers, for lack of better suppliers in the new places they're producing in, they've asked the Chinese manufacturers to move out and keep supplying the components to them. Let me give you an example of a company that I came across. And there many of these Chinese companies, you can see a lot of these statements in their filings to the stock exchange. One example I found was this company called Eoptolink Technology. It's a Chengdu based maker of optical transceivers for data centers. It expanded its Thailand factory just to increase supplies to overseas customers, and many of their overseas customers are major tech companies such as Meta and AWS. And the idea was to increase supply to them to avoid any fallout from worsening geopolitical relations.
Julie Chang: So companies moving factories out of China and to Southeast Asia. How big of a hit is this for China?
Liza Lin: It's hard to quantify the scale of the hit, but what's really important to note is that the Chinese economy, it's in its doldrums and it is actually suffering the worst economic growth in decades. And China's plan to get out of that slow down is to rely on more manufacturing. And in this case, manufacturing is leaving China and taking jobs that would've gone into China away to the new locations with them. All in all, it's not a good sign for China.
Julie Chang: And how big of a hit is this for American companies doing business with Chinese companies?
Liza Lin: Firstly, there's definitely the cost factor. I spoke to one supplier in Malaysia that supplies to chip equipment makers such as Applied Materials and Lam, and he says just getting his components and switching them from China to a different country will cost him as much as 15% more. The cost is the biggest thing. And the second thing, this just accelerates the decoupling between American companies and the Chinese manufacturing base.
Charlotte Gartenberg: That was WSJ China tech editor and reporter Liza Lin speaking with TNB producer Julie Chang. And that's it for Tech News Briefing. Today's show was produced by Jess Jupiter and Julie Chang with supervising producer, Katherine Milsop. I'm Charlotte Gartenberg for the Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.
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When it comes to Palantir Technologies ( PLTR), the bears have been losing the tug-of-war game in the market quite badly. So much so in fact that you’ll have to pay the fattest premium among large-cap companies if you want to have a stake in PLTR. Almost everyone can agree that artificial intelligence (AI) is driving this rally, but no one knows how long it can last.
Palantir stock is up 62% in the year to date. Analysts expect earnings to grow 287.5% this fiscal year and then slow down to 6.45% in the next fiscal year.
As such, PLTR has reached a forward price-earnings ratio of 216 times. Is the premium worth paying for the growth you’re getting? The market certainly thinks so, but some analysts are even more bullish and think that Palantir is far from its peak potential.
www.barchart.comBofA Analysts Bullish on Palantir’s Alignment With DOGE’s MissionAnalysts at Bank of America slapped PLTR with the highest price target yet at $125. Analyst Mariana Perez Mora said “The company sees the world ripe for an AI and technology revolution. We see PLTR enabling and leading this revolution in both Commercial and Defense markets.” BofA’s price target points to less than 2% upside potential here after the stock’s latest rally.
CEO Alex Karp called the Department of Government Efficiency (DOGE) a “revolution” that will expose inefficiencies and create opportunities for Palantir’s AI platforms. In general, he seems very upbeat about DOGE, and that’s for good reason. CTO Shyam Sankar noted during the company’s fourth-quarter earnings call that DOGE will expose “sacred cows of the deep state.” He believes Palantir can provide effective solutions to government customers at a fraction of the cost.
Essentially, analysts and the company’s management both think that the fat DOGE will be trimming will create gaps that can be exploited by Palantir. President Donald Trump and DOGE head Elon Musk are both on board with advancing AI technology, so that is an added plus here.
What Other Analysts ThinkAnalysts are far from having a consensus on PLTR stock. Their price targets range from the aforementioned $125 down to $18. People aren’t used to seeing such valuations since the dot-com era, so it’s understandable why some analysts think the real fat is in PTLR’s valuations.
www.barchart.comThe mean price target of $81.82 points to 31% downside risk from here. That said, you should keep in mind that most of these price targets have been trounced by PLTR as the company has continuously proven bears wrong, and even bulls have been surprised with the margins with which Palantir is beating analyst expectations quarter after quarter.
Whether or not this stellar execution will last for the long run is hard to say. In my opinion, PLTR’s fate in the near term is highly dependent on the fate of the broader AI rally. The longer investors keep piling into AI and tech stocks, the longer the PLTR rally will likely persist.
Even then, PLTR’s valuations are among the highest in the entire sector. Its price-earnings ratio is more expensive than 98% of software companies, and its price-sales ratio is more expensive than 98.4%. Among the big caps, PLTR is likely the most expensive stock you can buy.
Should You Buy PLTR Because of DOGE?The notion that DOGE will help PLTR is clear, and the bull case could see Palantir land several more big contracts to replace the federal agencies and projects being cleared out by DOGE.
If these contracts materialize and investors hold the premium they are paying now, this should translate into solid gains for Palantir stock in the coming quarters. Add better-than-expected commercial performance on top of that, and you have a dream scenario for PLTR stock.
Still, the primary concern would be the valuation here. A broader tech market correction would likely hit PLTR hard, regardless of any positive news related to DOGE contracts. I see no reason as to why investors will pay such multiples once the pendulum swings the other way. But until that happens, chasing the frenzy with the speculative portion of your portfolio is not a bad idea.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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Yes still have a small position in CTBB. My avg cost is $16.30/share w/ a small GTC Buy at/below $14/share and a GTC Sell on a few high cost shares at $18.75/share.
I see I got my last payment 12/2/2024.
Basically hold a 50:50 in LUMN and their bond. Total position size for both small in the ROTH at 0.05% of the ROTH portfolio but now generating income.
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The value of US sovereign debt held by Chinese investors fell by $57bn to $759bn in 2024, data from the US Treasury showed © AP
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