AI dominates the markets: Meta, Aspermont and SanDisk in focus

Meta: The next AI casualty

AI is the future, but investors are now scrutinising the figures very closely when hyperscalers such as Alphabet, Microsoft or Meta report their results. And so the inevitable happened. Meta reported fundamentally strong third-quarter figures. Revenue rose by 26% year on year to USD 64.6 billion, exceeding market expectations. On a GAAP basis, earnings per share reached a respectable USD 3.83. This all sounds very positive, yet the share price initially plunged following the announcements.

For one thing, Meta recognised a one-off special provision of USD 9.89 billion to prepare for related settlements tied to protecting minors. For another, the company's free cash flow slipped into negative territory for the first time since its IPO. In other words, it lost USD 2.12 billion here. This is mainly due to substantial investments in AI data centres. For this year, management expects capex in the range of USD 135 to 145 billion. It also intends to expand investment further next year.

This is good news for chipmakers, construction companies and energy groups. But it was bad news for Meta's investors. Analysts remain positive in their initial reactions. Wells Fargo lowered its price target only slightly, from USD 1,000 to USD 995, and maintained its Overweight rating. Bank of America has even raised its price target, from USD 810 to USD 845. Both firms praise the strong advertising business and the outlook, and see growth potential in Muse.

Aspermont: On the way to becoming an AI-powered publisher

In the public eye, AI is dominated by large language models (LLMs) from major providers such as OpenAI, Anthropic and Gemini. Yet even industry analysts are certain that USD 20 subscriptions cannot recoup the huge investments. Models need to be adapted, and that requires data above all. Mistral, France's European AI flagship, shows how it might be done better. The company primarily targets corporate customers who do not want to simply hand over sensitive data, but specifically want to use their own wealth of data for applications.

Aspermont, too, can capitalise on real data. The specialist publisher, whose roots date back to 1835, is working to digitally enhance its vast archive. The Australian media company specialises in mining content and publishes the Mining Journal and Mining Magazine, among others. Beyond specialist information, it has secured historical reports and technical analysis that few competitors can match.

Management aims to transform the traditional publishing business into a highly profitable Content-as-a-Service (CaaS) model for the entire raw materials industry. One of the mining giants has already taken the bait. Aspermont is working with Rio Tinto – no less than the world's third-largest mining group by market capitalisation. The partnership focuses on digitisation and training artificial intelligence with real data. The system is also being supplemented with data from external parties. Aspermont can benefit directly as a supplier through data-licensing deals and digitisation contracts. This can enable the transition from traditional publishing to a modern, AI-driven business model.

With this approach, Aspermont moved from a loss to break-even in the third quarter, ending late July. The company's revenue jumped by a quarter to AUD 4.5 million. Aspermont's market capitalisation is about EUR 8 million. GBC analysts see significant upside potential in the evolving business model and have set a price target of AUD 5.20. That would represent more than a quadrupling from the current share price.

SanDisk: Was that already capitulation?

Many investors have likely already become accustomed to extreme movements in AI stocks. Recently, these have mainly been downwards. SanDisk shares, one of the AI sector's favourites, have also been hit hard. The storage media specialist has now lost almost half its market capitalisation since its June all-time high.

The latest downward move from mid-September to today was particularly drastic. The question is whether the sell-off has run its course and capitulation has set in. If so, the stock could stage a short-term reversal, although much will likely depend on the Federal Reserve's interest rate decision this week.

From a technical perspective, the broader picture does not yet look dramatic. The mega-rally, which took the price from around USD 40 to about USD 2,350, has been followed by a sharp correction since mid-year. Although the primary upward trend has been broken to the downside, this is consistent with a consolidation. Investors should currently keep an eye on short-term support at around USD 1,200 to USD 1,228. The lower boundary of this move is further down at the round figure of USD 1,000, at July's low. Buyers last stepped in heavily here. Only if this zone is broken to the downside should investors head for the exits. The picture is similar on the upside, where the first resistance lies at USD 200 above the current share price. If the stock breaks above it, the downward trend is considered broken from a technical perspective.

Things should get interesting on Thursday, when SanDisk releases its Q3 figures after the market closes. Recently, results have consistently exceeded market expectations, yet the stock was sold off nonetheless. Should this happen again, a test of the major support zone around USD 1,000 looms initially.

Conclusion

Meta itself remains mega-bullish on the AI boom and wants to increase its investments further. That does not sit well with every investor and should be a warning sign. Aspermont is transforming from a traditional publisher into an AI-driven digital media outlet that aims to monetise its data trove. With SanDisk, investors are taking a high-speed ride. The Q3 figures should set the short-term direction.