Before the Bell: Activist Investor Takes a Run at Salesforce; Nvidia Up 22% YTD; Western Digital to Spin Off Flash Business?

Premarket action on Monday had the three major U.S. indexes trading lower. The Dow Jones industrials traded down 0.08%, the S&P 500 was down 0.16% and the Nasdaq was 0.15% lower. After a couple of rough days, growth stocks may be set to make a comeback.

All 11 market sectors closed higher on Friday, with communications services (3.96%) and technology (2.72%) posting the largest gains. Health care (0.57%) and consumer staples (0.81%) added the least. The Dow closed up 1%, the S&P 500 up 1.89% and the Nasdaq up 2.66%.

Friday’s trading volume was above the five-day average. New York Stock Exchange losers led winners by 2,500 to 640, while Nasdaq advancers led decliners by a margin of nearly 3 to 1. Among S&P 500 stocks, SVB Financial Group Inc. (NASDAQ: SIVB) added 16.56%, while the Goldman Sachs Group Inc. (NYSE: GS) dropped 2.54%.

A solid earnings beat Thursday night by Netflix Inc. (NASDAQ: NFLX) and the firing of 12,000 workers at Alphabet Inc. (NASDAQ: GOOGL) lit a fire under investors. The major indexes pared their losses for the holiday-shortened week following Friday’s gains.

The economic calendar for the week includes Thursday’s advance report on fourth-quarter gross domestic product (GDP) and Friday’s release of personal consumption expenditures (PCE) data.

Enterprise software company Salesforce Inc. (NYSE: CRM) added about 3.3% on Friday and traded up more than 5% Monday morning on reports that activist investor Elliott Investment Management has taken a “substantial” stake in the company. Jesse Cohn, managing director at Elliott, told The Wall Street Journal, “We look forward to working constructively with Salesforce to realize the value befitting a company of its stature.”

Earlier this year, Salesforce announced that it was cutting its workforce by 10%, or roughly 8,000 positions. Co-CEO and Chair Marc Benioff said the company had hired too many people during the pandemic-driven surge in revenue and profits at many tech firms.

Salesforce also has suffered recently from a reshuffling at the top. Co-CEO Bret Taylor is leaving at the end of January, and Stewart Butterfield, who joined the company as part of its $27 billion acquisition of Slack, is also leaving. Other major takeovers in the past two years included the $15 billion acquisition of Tableau and the $6 billion acquisition of MuleSoft.

Chipmaker Nvidia Corp. (NASDAQ: NVDA) added 6.4% to its share price on Friday and was up by about 1.3% in Monday’s premarket. The company has begun shipping its latest graphics chip, the H100 (aka, Hopper), at just the right moment. H100 is reportedly nine times faster than its predecessor and can perform the inference calculations that power artificial intelligence apps like ChatGPT 30 times faster.

Nvidia’s first CPU, code-named Grace, is designed to work with Hopper and the company’s speed networking chips. While it is too early to declare AI the next big thing (think metaverse and Web 3.0), there is little doubt that AI is going to be this year’s marketing buzzword. If a tech company does not have it, well, the marketing department better get busy. Nvidia was up about 1.2% in Monday’s premarket trading.

Last Friday, Bloomberg reported that disk drive and flash memory maker Western Digital Corp. (NASDAQ: WDC) was holding advanced discussions with Japan-based Kioxia related to a spin-off of WD’s flash memory business to form a new flash memory giant. Kioxia was spun out of Toshiba in 2018, and the electronics giant still holds a stake of around 40% in Kioxia. If the deal happens, the new company would list shares in Japan and the United States. Western Digital stock added 2.4% on Friday and traded up another 2% in Monday’s premarket.

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