The China-U.S. race to lead in artificial intelligence is back in the spotlight. Chinese AI stocks look to be in demand again after e-commerce and cloud-computing giant Alibaba's earnings beat.

Ryan Cohen, the activist investor who helped trigger the GameStop meme-stock craze, apparently thinks so. He raised his stake in Alibaba to $1 billion according to The Wall Street Journal, which could have plenty of his retail investor followers wondering whether to emulate him.

There are tailwinds. Tech looks to be back in favor with Beijing after Alibaba founder Jack Ma was pictured at a recent meeting with President Xi Jinping, suggesting the regulatory crackdown on the sector is a thing of the past. AI start-up DeepSeek demonstrated Chinese models can compete with Western rivals. And China has a strong record of innovation -- look at the growth of "superapps" such as WeChat, or the rise of TikTok.

However, a more durable run might be tough. Alibaba's quarterly revenue growth might have been its quickest since late 2023 but a 13% increase in cloud-computing revenue isn't that impressive compared with Microsoft's Azure or Google Cloud, which are growing at 30% rates.

What about future growth? Alibaba said in the next three years its investment in cloud computing and AI infrastructure is expected to exceed that of the past decade. Analysts at Jefferies put that at more than $40 billion over the period.

By comparison, Amazon intends to spend $105 billion this year alone. Plenty of that money will be going on Nvidia's next-generation chips -- to which Chinese companies won't have access. Next week's earnings from the chip maker should show the pace of AI innovation in the U.S. isn't slowing down and China might have a hard time keeping up, even if its tech leaders can meet the changing demands of the ruling Communist Party.

-- Adam Clark

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Walmart's Outlook Stokes Worries About Consumer Spending

Walmart's softer-than-expected full-year outlook sparked worries of a slowdown in consumer spending and weighed down other retail stocks. Walmart sees current-year sales increasing by 3% to 4% from the prior year, and the low end of that range is below what Wall Street has forecast.

   -- Walmart executives said that while wallets have been stretched, consumers 
      are still resilient and looking for value. Higher-income households 
      account for most of its recent market share gains. CEO Doug McMillon said 
      they see a continued shift in demand toward lower-profit products such as 
      groceries and pharmacy items. 
 
   -- Fourth-quarter revenue rose 4.1% from a year ago to $180.6 billion, and 
      adjusted earnings of 66 cents a share was also a touch above 
      expectations. But Walmart's full-year adjusted earnings of $2.50 to $2.60 
      a share fell short of estimates. 
 
   -- Online furnishings retailer Wayfair reported a larger-than-expected 
      fourth-quarter loss of 25 cents a share, but revenue of $3.12 billion 
      beat projections. Management said current-quarter revenue is steady and 
      its gross margin forecast of 30.5% nearly matches expectations. Demand is 
      weak amid economic uncertainty. 
 
   -- Procter & Gamble CFO Andre Schulten said the company expects the 
      environment will be "volatile and challenging," noting slower consumption 
      and tariff-related volatility and higher costs. P&G maintained its 
      full-year guidance but said external factors could contribute to a 
      "slightly below guidance" outcome. 

What's Next: Weight-loss drugs could help Walmart offset weaker sales in general merchandise. CFO John David Rainey cited health and wellness sales growth in the mid-teens percentages thanks to GLP-1 medications, the type sold under brands by Novo Nordisk and Eli Lilly.

-- Sabrina Escobar, Karishma Vanjani, and Janet H. Cho

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Buffett to Address Key Berkshire Questions in Annual Letter

Berkshire Hathaway CEO Warren Buffett is due to release his eagerly awaited annual shareholder letter on Saturday morning and investors may be looking for a road map for the post-Buffett era. The letter will be issued in conjunction with the company's annual report and fourth-quarter earnings.

   -- This year is Buffett's 60th at Berkshire's helm and the company is 
      operating from a position of strength with record operating earnings in 
      the first nine months of 2024 and a record stock price. 
 
   -- There are several things Buffett may address including succession, the 
      company's huge cash position, investment opportunities, buybacks and 
      dividends, and the role of Berkshire's investment managers. 
 
   -- Berkshire was sitting on about $310 billion in cash at the end of the 
      third quarter, up from $167 billion at the end of 2023. And the 2024 
      year-end figure could approach $325 billion. Buffett wrote last year that 
      the cash was "far in excess of what conventional wisdom deems necessary." 

What's Next: Buffett turns 95 in August and his designated successor, Berkshire executive Greg Abel, is "ready to be CEO tomorrow," Buffett wrote in his letter a year ago. One possibility would be for Buffett to give up the chief executive job while remaining chairman, however he has given no indication he wants to take that step.

-- Andrew Bary

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FTC Inquiry on Censorship Weighs on Social Media Stocks

The Federal Trade Commission is seeking public comments about how consumers might have been harmed by technology platforms that limited their ability to share ideas and affiliations. The move weighed on social media stocks like Reddit, where users have complained about censorship. Reddit's growth depends on new users.

   -- Last week, Reddit reported slower-than-expected growth in new users. Its 
      stock sank 7.5% on Thursday, the worst one-day percentage drop since 
      March 2024, Dow Jones Market Data said. FTC Chair Andrew Ferguson, 
      appointed by President Donald Trump, is looking at how Big Tech companies 
      may be violating the law. 
 
   -- Other social media stocks also declined. Meta Platforms, owner of 
      Facebook and Instagram, closed down 1.3%, Snap fell 0.9%, and Alphabet, 
      the parent of YouTube, dropped 0.4%. Meta declined to comment, and the 
      other companies didn't respond to requests for comment. 
 
   -- People have debated whether removing false or offensive content is the 
      responsibility of social media platforms. Twitter, YouTube, Facebook, and 
      Instagram all banned Trump from their platforms after the deadly Jan. 6, 
      2021, attack on the U.S. Capitol, but later allowed him back on. 
 
   -- Tech companies have shifted since Trump's return to office. Meta has 
      stopped fact-checking on Facebook, Instagram, and Threads, and replaced 
      it with user-generated Community Notes. X owner and Trump advisor Elon 
      Musk claims that community notes on his own platform are "being gamed" by 
      governments and legacy media. 

What's Next: The FTC encouraged tech platform users who have been banned, censored, or prevented from making money off their feeds to share their comments. The comment period ends May 21.

-- Angela Palumbo and Janet H. Cho

***

IRS Job Cuts Could Be Largest of Any Federal Agency So Far

Probationary employees at the Internal Revenue Service began learning of their terminations Thursday as Elon Musk's Department of Government Efficiency wields its cost cutting ax at the tax-collection agency. The plan to fire some 6,000 IRS workers is also raising concerns about the tax filing season under way.

   -- The union representing the workers confirmed the "arbitrary and unlawful" 
      layoffs. National Treasury Employees Union President Doreen Greenwald 
      said they would "keep fighting until every wrongful termination is 
      reversed." National Economic Council director Kevin Hassett said of the 
      workers targeted for dismissal "not all of them are fully occupied." 
 
   -- The IRS had 94,562 workers as of last May, federal data show. At the time, 
      14,130 employees had been there for less than a year, a group most at 
      risk because they are typically on probation for a year. The Trump 
      administration cuts have focused on probationary workers. 
 
   -- Unemployment claims remain at low levels, but total U.S. jobless claims 
      should rise soon because of the federal government layoffs. New jobless 
      claims rose by 5,000 to 219,000 last week, but just 613 federal employees 
      applied for benefits in the week ended Feb. 8, the latest available data. 
 
   -- Fears of tax season disruption may be overblown. When the government 
      sought volunteers for its deferred-resignation program, IRS workers 
      deemed critical to tax season were told that they need to work at least 
      through mid-May. About 75,000 workers accepted the resignation offer 
      across multiple agencies. 

What's Next: The IRS began accepting 2024 tax returns on Jan. 27, two days earlier than in 2023. It has processed nearly 24 million returns, about 17% of the more than 140 million it expects to receive by the April 15 deadline.

-- Anita Hamilton

***

Vaccinating Commercial Flocks Could Ease Egg Prices, Hurt Exports

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February 21, 2025 06:55 ET (11:55 GMT)

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