AI-Driven Financial Foresight

How did companies mentioning AI in their Earnings Calls perform over the past 5 years? LSEG's Haykaz Aramyan, PhD and our own Tiago Quevedo Teodoro created a thematic portfolio using our new Transcripts Analytics. See the report here: https://lnkd.in/eNdbDpdZ

Companies affected by the CrowdStrike outage ranked by their outage-associated sentiment in business media. Amazon, Zscaler, and FedEx look to benefit (note their positive associated sentiment), while Telstra, Delta Airlines, Tesla, and American Airlines are hit hardest by the software glitch.

Bitcoin's sudden drop was preceded by a fall in social sentiment. While there may be a short-term bounce, sentiment still hasn't completely shaken out the weak hodl'ers.

The LSEG MarketPsych Transcripts Analytics offers insightful perspectives into the focal points of a company. The accompanying graph, developed by our colleague Elliot Chung, illustrates this by detailing the proportion of mentions that various Apple products and services received during Apple's earnings calls. This is measured as a fraction of the total mentions of all products and services. In the early 2000s, the Mac accounted for nearly 50% of these references. However, post-2007, the iPhone emerged as the predominant topic of discussion. At its peak, the iPad nearly matched the iPhone in terms of mentions, though it has since seen a decline in focus. Although the VisionPro represents one of Apple's most significant recent launches, it is currently referenced only about as frequently as the AirPods and the Apple Watch. Finally, there is a long-term trend in the overall increase in references to services (such as Apple TV, AppleCare, iCloud, etc.)

Which companies are likely to benefit from Nvidia's incredible revenue surge? By scanning global news and social media over the past 30-days, we found the companies with the highest percent of co-references to the topic "Nvidia" in each sentence. In the image below, the company name is to the left and the blue bar length represents the percentage of sentences containing the company name that also contain the proper noun "Nvidia". 1. Dell supplies server hardware2. OpenAI (private) runs on Nvidia's H100 GPUs.3. Nvidia Corp is the legal entity4. Global Mofy is a declining penny stock being linked with Nvidia in social media (caveat emptor).5. Foxconn's stock rallied alongside Samsung and HK Hynix after Nvidia's blowout earnings last week.6. Astera makes components used in Nvidia GPUs.7. NetApp is partnered with Nvidia and provides software tools to manage data across Nvidia infrastructure....and many more (see image below)  

Stock prices of companies with the most positive earnings conference call hashtag#sentiment outperform over the following month. Below is a monthly updated example using past 90-day deciles. • UNIVERSE: All US companies with available transcript data• REBALANCING: Monthly at the close of the last trading day• LOOKBACK: 3 months (usually last available quarterly call) Note the stocks are bought at the beginning of the month, up to 90 days after the earnings conference call. The price drift is quite significant and long-term.

Better-than-expected results have appeared more frequently than not in this earnings season. LSEG (London Stock Exchange Group) Workspace data shows that about 56% of companies have beaten the mean estimate. Such strong performances have been reflected in the earnings conference calls. In the plot below, we compare the average financial sentiment (from the LSEG MarketPsych Transcript Analytics) of all available earnings calls in the quarter until today with that of the same period in previous years. This is looking to be the most positive sentiment earnings season since the start of the data in 2002. Year to date, the FTSE All-World Index is up 8%, which is above average for the same period in previous years, although not abnormally higher.

Over the past 20 years corporate sentiment on earning scalls has been increasing (blue line) alongside stock prices (Russell 2000, IWV, black line). Our research on quantile performance indicates that highly positive sentiment calls precedes stock price hashtag#outperformance (a post on that effect coming soon). But why is higher call sentiment occurring? Could it be that consistently improving corporate fundamentals are reflected in more positive call sentiment? Are analysts becoming more polite (or maybe only the friendliest are selected to ask questions)? Or is it a result of executive communication coaching to avoid gaffes and add more positive polish? Or maybe all of the above…