Finance

Ken Griffin speaks to Citadel and Citadel Securities interns during a discussion moderated by Citadel software engineer, and former intern, Bharath Jaladi.
Courtesy: Citadel

Ken Griffin, founder and CEO of Citadel, said he remains skeptical that artificial intelligence could soon make human jobs obsolete as he sees flaws in machine learning models applied in certain scenarios.
“We are at what is widely viewed as a real inflection point in the evolution of technology, with the rise of large language models. Some are convinced that within three years almost everything we do as humans will be done in one form or another by LLMs and other AI tools,” Griffin said Friday during an event for Citadel’s new class of interns in New York. “For a number of reasons, I am not convinced that these models will achieve that type of breakthrough in the near future.”

The rapid rise of AI has had the world pondering its far-reaching impact on society, including technology-induced job cuts. Elon Musk, CEO of Tesla, is among many who have repeatedly warned of the threats that AI poses to humanity. He has called AI “more dangerous” than nuclear weapons, saying there will come a point where “no job is needed.”
Griffin, whose hedge fund and electronic market maker have been at the forefront of automation, said machine-learning tools do have their limits when it comes to adapting to changes.
“Machine learning models do not do well in a world where regimes shift. Self-driving cars don’t work very well in the North due to snow. When the terrain changes, they have no idea what to do,” Griffin said. “Machine learning models do much better when there’s consistency.” 
Still, the billionaire investor thinks the power of advanced technology can’t be dismissed in the long term, and he even sees cancer being eradicated one day because of it.
“The rise of computing power is allowing us to solve all kinds of problems that were just simply not solvable five, 10, 15 years ago,” Griffin said. “This is going to radically transform healthcare. We will end cancer as you know it in your lifetime.” 

Citadel has long placed a great emphasis on hiring, not hesitant about putting responsibility into the hands of young employees and even interns, the CEO said.
The firm’s internship program has become one of the most competitive in the country. More than 85,000 students applied for about 300 positions this year, reflecting an acceptance rate of less than 0.5%, which is lower than that of Harvard University and the Massachusetts Institute of Technology.
“The people we hire today are going to be the leaders of Citadel not in 30 or 40 years, but in just a few years,” Griffin said. More

The 10 largest U.S. companies accounted for 14% of the S&P 500 stock index a decade ago. Today, they account for more than a third.
Tech euphoria has helped drive up the “Magnificent Seven” stocks: Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla.
Some experts fear that such concentration may put investors at risk. Others think it’s not a big deal.

Jensen Huang, co-founder and chief executive officer of Nvidia Corp., displays the new Blackwell GPU chip during the Nvidia GPU Technology Conference on March 18, 2024. 
David Paul Morris/Bloomberg via Getty Images

The U.S. stock market has become dominated by about a handful of companies in recent years. Some experts question whether that “concentrated” market puts investors at risk, though others think such fears are likely overblown.
Let’s look at the S&P 500, the most popular benchmark for U.S. stocks, as an illustration of the dynamics at play.

The top 10 stocks in the S&P 500, the largest by market capitalization, accounted for 27% of the index at the end of 2023, nearly double the 14% share a decade earlier, according to a recent Morgan Stanley analysis.

In other words, for every $100 invested in the index, about $27 was funneled to the stocks of just 10 companies, up from $14 a decade ago.
That rate of increase in concentration is the most rapid since 1950, according to Morgan Stanley.
It has increased more in 2024: The top 10 stocks accounted for 37% of the index as of June 24, according to FactSet data.
The so-called “Magnificent Seven” — Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla — make up about 31% of the index, it said.

‘A bit riskier than people realize’

Some experts fear the largest U.S. companies are having an outsized influence on investors’ portfolios.
For example, the Magnificent Seven stocks accounted for more than half the S&P 500’s gain in 2023, according to Morgan Stanley.
Just as those stocks helped push up overall returns, a downturn in one or many of them could put a lot of investor money in jeopardy, some said. For example, Nvidia shed more than $500 billion in market value after a recent three-day sell-off in June, dragging down the S&P 500 into a multiday losing streak. (The stock has since recovered a bit.)
The S&P 500’s concentration “is a bit riskier than people realize,” said Charlie Fitzgerald III, a certified financial planner based in Orlando, Florida.
“Nearly a third of [the S&P 500] is sitting in seven stocks,” he said. “You’re not diversifying when you’re concentrating like this.”

Why stock concentration may not be a concern

The S&P 500 tracks stock prices of the 500 largest publicly traded companies. It does so by market capitalization: The larger a firm’s stock valuation, the larger its weighting in the index.
Tech-stock euphoria has helped drive higher concentration at the top, particularly among the Magnificent Seven.
Collectively, Magnificent Seven stocks are up about 57% in the past year, as of market close on June 27 — more than double the 25% return of the whole S&P 500. Chip maker Nvidia’s stock alone has tripled in that time.
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Despite the sharp increase in stock concentration, some market experts believe the concern may be overblown.
For one, many investors are diversified beyond the U.S. stock market.
It’s “rare” for 401(k) investors to own just a U.S. stock fund, for example, according to a recent analysis by John Rekenthaler, vice president of research at Morningstar.
Many invest in target-date funds.
A Vanguard TDF for near-retirees has a roughly 8% weighting to the Magnificent Seven, while one for younger investors who aim to retire in about three decades has a 13.5% weighting, Rekenthaler wrote in May.

There’s precedent for this market concentration

Additionally, the current concentration isn’t unprecedented by historical or global standards, according to the Morgan Stanley analysis.
Research by finance professors Elroy Dimson, Paul Marsh and Mike Staunton shows that the top 10 stocks made up about 30% of the U.S. stock market in the 1930s and early 1960s, and about 38% in 1900.

The stock market was as concentrated (or more) around the late 1950s and early ’60s, for example, a period when “stocks did just fine,” said Rekenthaler, whose research examines markets since 1958.
“We’ve been here before,” he said. “And when we were here before, it wasn’t particularly bad news.”
When there were big market crashes, they generally don’t appear to have been associated with stock concentration, he added.
When compared with the world’s dozen largest stock markets, the U.S. market was the fourth-most-diversified at the end of 2023 — better than that of Switzerland, France, Australia, Germany, South Korea, the United Kingdom, Taiwan and Canada, Morgan Stanley said.

‘Sometimes you can be surprised’

Big U.S. companies also generally seem to have the profits to back up their current lofty valuations, unlike during the peak of the dot-com bubble of the late 1990s and early 2000s, experts said.
Present-day market leaders “generally have higher profit margins and returns on equity” than those in 2000, according to a recent Goldman Sachs Research report.
The Magnificent Seven “are not pie-in-the-sky” companies: They’re generating “tremendous” revenue for investors, said Fitzgerald, principal and founding member of Moisand Fitzgerald Tamayo.
“How much more gain can be made is the question,” he added.

You’re not diversifying when you’re concentrating like this.

Charlie Fitzgerald III
certified financial planner based in Orlando, Florida

Concentration would be a problem for investors if the largest companies had related businesses that could be negatively impacted simultaneously, at which point their stocks might fall in tandem, Rekenthaler said.
“I’m having trouble envisioning what would hurt Microsoft, Apple and Nvidia at the same time,” he said. “They’re in different aspects of the tech marketplace.”
“In fairness, sometimes you can be surprised: ‘I didn’t see that type of danger coming,'” he added.
A well-diversified equity portfolio will include the stock of large companies, such as those in the S&P 500, as well as that of middle-sized and small U.S. companies and foreign companies, Fitzgerald said. Some investors might even include real estate, too, he said.
A good, simple approach for the average investor would be to buy a target-date fund, he said. These are well-diversified funds that automatically toggle asset allocation based on an investor’s age.
His firm’s average 60-40 stock-bond portfolio currently allocates about 11.5% of its total holdings to the S&P 500 index, Fitzgerald said.

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Keith Gill, aka Roaring Kitty, hosting a YouTube livestream on June 7th, 2024.
Source: Roaring Kitty | YouTube

Shares of Chewy popped in premarket trading Monday after a Securities and Exchange Commission filing showed meme stock trader “Roaring Kitty” took a stake in the pet food e-commerce retailer.
The filing showed Roaring Kitty, whose legal name is Keith Gill, bought just over 9 million shares — amounting to a 6.6% stake in the company. That makes him the third-biggest Chewy shareholder, according to FactSet. Based on Friday’s close, that stake is valued at more than $245 million.

Stock chart icon

CHWY rallies

The stock was up more than 10% before the bell.
The SEC filing also included a section that read: “Check the appropriate box to designate whether you are a cat.” There was an “x” next to a response that read: “I am not a cat.” This line was included in Gill’s statement in a series of congressional hearings about 2021’s GameStop trading mania.

Arrows pointing outwards

SEC filing

Chewy shares took a wild ride last week after Gill posted a picture on social media platform X of a cartoon dog that resembled Chewy’s logo. Shares were up as much as 34% on Thursday but ended the day down slightly.
CNBC emailed Chewy PR seeking comment on the new shareholder.
Gill is known to be a champion of GameStop and has been stirring up trading in the video game company in the last few months. In mid-June, he disclosed a stake of 9.001 million GameStop shares after exiting his massive call options position. It’s unclear if he sold his GameStop bet to fund the purchase of Chewy.

GameStop shares fell over 7% in premarket Monday following the news.There’s a big connection between GameStop and Chewy. GameStop CEO Ryan Cohen was the founder and CEO of Chewy, who was instrumental in PetSmart’s takeover of Chewy in 2017 and its subsequent initial public offering in 2019.
Cohen joined the GameStop board of directors along with two other Chewy executives in January 2021, partly helping fuel the initial GameStop rally. He later took over as GameStop CEO in 2023, leading a turnaround in the brick-and-mortar video game retailer.
In a recent YouTube livestream, Gill said GameStop is in the second stage of a reinvention, and it has become a bet on Cohen himself, who’s been leading a turnaround and pivot to e-commerce.
Gill is a former marketer for Massachusetts Mutual Life Insurance. He came into the limelight after successfully encouraging retail investors to buy GameStop shares and call options in 2021 to squeeze out short-selling hedge funds. More

War is still exacting a heavy toll on Ukraine’s economy. The country’s GDP is a quarter smaller than on the eve of Vladimir Putin’s invasion, the central bank is tearing through foreign reserves and Russia’s recent attacks on critical infrastructure have depressed growth forecasts. “Strong armies,” warned Sergii Marchenko, Ukraine’s finance minister, on June 17th, “must be underpinned by strong economies.”Following American lawmakers’ decision in April to belatedly approve a funding package worth $60bn, Ukraine is not about to run out of weapons. In time, the state’s finances will also be bolstered by G7 plans, announced on June 13th, to use Russian central-bank assets frozen in Western financial institutions to lend another $50bn. The problem is that Ukraine faces a cash crunch—and soon. More

A bullish move may be ahead for both value and growth in the year’s second half.
VettaFi’s Todd Rosenbluth thinks value stocks, which have been market laggards, could get a lift from one of the biggest Wall Street events of the year: the FTSE Russell’s annual rebalancing.

“It’s worth paying attention to value,” the firm’s head of research told CNBC’s “ETF Edge” this week. “It feels like … [for a] long time that growth has outperformed value.”
On Friday, the Russell indexes underwent their annual reconstitution to reflect changes in the market as companies grow and shift. The iShares Russell 1000 Growth ETF is up 20% so far this year, while the iShares Russell 1000 Value ETF is up almost 6%.
“We do think there’s a place for both growth and value within a broader portfolio — just people are skewed more toward growth heading into the second half of the year,” he added. “There have been periods when the pendulum has swung back in favor of value.”
FTSE Russell CEO Fiona Bassett said on “ETF Edge” the indices are built to reflect the nature of the market.
“One of the benefits of the Russell franchise generally is our ability to provide different sleeves of exposure,” she said. “So, for those people who want to get concentrated exposure to value or to growth, we have the indices available to do that.”
As of May 31, FactSet reports the Russell 1000 Growth ETF’s top three holdings are Microsoft, Apple and Nvidia. Meanwhile, the Russell 1000 Value ETF’s top holdings are Berkshire Hathaway, JPMorgan Chase and Exxon Mobil.

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JPMorgan said it was raising its quarterly dividend 8.7% to $1.25 per share and that it authorized a new $30 billion share repurchase program.
Morgan Stanley said it was boosting its dividend 8.8% to 92.5 cents per share and authorized a $20 billion repurchase plan.
Citigroup said it was raising its dividend 5.7% to 56 cents per share and that it would “continue to assess share repurchases” on a quarterly basis.
Bank of America said it was increasing its dividend 8% to 26 cents per share.

(L-R) Brian Moynihan, Chairman and CEO of Bank of America; Jamie Dimon, Chairman and CEO of JPMorgan Chase; and Jane Fraser, CEO of Citigroup; testify during a Senate Banking Committee hearing at the Hart Senate Office Building in Washington, D.C., on Dec. 6, 2023.
Saul Loeb | Afp | Getty Images

JPMorgan Chase and Morgan Stanley said Friday that they were boosting both dividend payouts and share repurchases, while rivals Citigroup and Bank of America made more modest announcements.
JPMorgan, the biggest U.S. bank by assets, said it was raising its quarterly dividend 8.7% to $1.25 per share and that it authorized a new $30 billion share repurchase program.

Morgan Stanley, a dominant player in wealth management, said it was boosting its dividend 8.8% to 92.5 cents per share and authorized a $20 billion repurchase plan.
Citigroup said it was raising its dividend 5.7% to 56 cents per share and that it would “continue to assess share repurchases” on a quarterly basis.
Bank of America said it was increasing its dividend 8% to 26 cents per share. Its release made no mention of share repurchases.
The big banks announced their plans to boost capital return to shareholders after passing the annual stress test administered by the Federal Reserve this week. While all 31 banks in this year’s exam showed regulators they could withstand a severe hypothetical recession, JPMorgan said Wednesday that it could have higher losses than the Fed initially found.
Still, that would not affect its capital-return plan, the New York-based bank said Friday.

“The strength of our company allows us to continually invest in building our businesses for the future, pay a sustainable dividend, and return any remaining excess capital to our shareholders as we see fit,” JPMorgan CEO Jamie Dimon said in his company’s release.
JPMorgan’s dividend increase was its second this year, Dimon noted.

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Warren Buffett speaks during the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska on May 4, 2024. 

Warren Buffett on Friday made his biggest annual donation to date, giving $5.3 billion worth of Berkshire Hathaway shares to five charities.
The legendary investor, who’s turning 94 in August, converted 8,674 of his Berkshire Class A shares to donate more than 13 million Class B shares, according to a statement Friday. A total of 9.93 million shares went to the Bill & Melinda Gates Foundation, with the rest going to the Susan Thompson Buffett Foundation, named for his late first wife, and the three charities led by his children Howard, Susan and Peter Buffett.

The “Oracle of Omaha” has pledged to give away the fortune he built at Berkshire, the Omaha, Nebraska-based conglomerate he started running in 1965. Buffett has been making annual donations to the five charities since 2006.
After Friday’s donations, Buffett owns 207,963 Berkshire A shares and 2,586 B shares, worth about $130 billion.
New charitable trust
In an interview with The Wall Street Journal, Buffett clarified that after his death, the enormous fortune he amassed from building the one-of-a-kind conglomerate will be directed to a new charitable trust overseen by his three children.
“It should be used to help the people that haven’t been as lucky as we have been,” he told the Journal. “There’s eight billion people in the world, and me and my kids, we’ve been in the luckiest 100th of 1% or something. There’s lots of ways to help people.”
Buffett has previously said his three children are the executors of his will as well as the named trustees of the charitable trust that will receive 99%-plus of his wealth.

He told the Journal that the Bill & Melinda Gates Foundation will no longer receive donations after his death. Buffett resigned as a trustee at the Gates Foundation in June 2021 in the midst of Bill and Melinda Gates’ divorce.
At Berkshire’s annual meeting in May, Buffett spoke candidly to shareholders about a future when he’s no longer at the helm, appearing solemn at times as he pondered his advanced age and reflected on his late friend and business partner Charlie Munger.
Greg Abel, vice chairman for noninsurance operations at Berkshire, has been named Buffett’s successor and has taken on most of the responsibility at the conglomerate.
Buffett previously said his will will be made public after his death.
“After my death, the disposition of my assets will be an open book – no ‘imaginative’ trusts or foreign entities to avoid public scrutiny but rather a simple will available for inspection at the Douglas County Courthouse,” Buffett said in November.

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Apple’s mixed-reality headset began deliveries in China on Friday with a retail price roughly 18% higher than in the U.S. 
When asked by CNBC, a customer surnamed Chen in Beijing said his suggestion to Apple CEO Tim Cook was to make Vision Pro cheaper by about 10,000 yuan ($1,376).
Many of the most popular posts about the device on Chinese social media platform Weibo on Friday focused on the hashtag “is it worth paying for the China version of Vision Pro,” according to a CNBC translation.

HANGZHOU, China — Apple’s mixed-reality headset began deliveries in China on Friday with a retail price roughly 18% higher than in the U.S. 
The device starts at 29,999 yuan ($4,128) in China, compared with a $3,500 retail price in the U.S.

When asked by CNBC, a customer surnamed Chen in Beijing said his suggestion to Apple CEO Tim Cook was to make Vision Pro cheaper by about 10,000 yuan ($1,376). The customer, who did not share his first name due to concerns about speaking with foreign media, said that many people in China might prefer to buy a second-hand Vision Pro because of the discounted price that typically comes with purchases from sellers unaffiliated with Apple.
Many of the most popular posts about the device on Chinese social media platform Weibo on Friday focused on the hashtag “is it worth paying for the China version of Vision Pro,” according to a CNBC translation .
CNBC has reached out to Apple for comment.
Greater China accounted for about 18% of Apple’s revenue in the three months ended March 30, according to an Apple filing.
Over the last year, Apple has faced growing competition from Huawei devices and other domestic brands, amid greater attention on national security.

Chen pre-ordered his Vision Pro and was at a major store in Beijing to pick it up and receive some training on how to use it.
Store salespeople told CNBC that all of Friday’s half-hour training sessions for pre-orders of the Vision Pro were booked up at Apple stores in Beijing — from 8 a.m. to 10 p.m.
Chinese companies such as Tencent, Alibaba and JD.com have launched Vision Pro versions of their apps for shopping, playing games and watching videos. More