Welcome to another week of the best finance insights and trends! Summer isn’t the only thing heating up right now – the Federal Reserve’s next meeting in July could tell us a lot about whether the housing market will head for the Sun, or the cold of outer space.

 This week’s topics:

• Mediterranean madness: Does Cava’s IPO success mean a rising star, or a flash in the pans?

• Is it bright or just shiny?: Is OpenAI’s rising value a sign of growing AI competency or the market’s obsession with shiny cool toys?

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The Cava Caveat

Since its IPO last year, Mediterranean restaurant chain Cava has blazed onto the market, with consistently rising stock prices. It has been on par price wise with Chipotle – the cuisine may be totally different, but the business models are similar – but there are some key differences.

Cava’s stock opened at $22 at its 2023 IPO, but its popularity as a stock quickly ballooned the price to more than 4 times that. As of this writing, NYSE:CAVA stands at $95.39 per share.

So why has CAVA’s price risen and stayed high over the last year?

The largest reason may be the fact that similar stocks, such as Chipotle, have also been rising over the same period. Cava is not nearly as well established or as well known as Chipotle – some states only have one Cava location – but you can find a Chipotle just about everywhere. The two chains have a similar model: combining fast with fresh and healthy, global flavors, and customizable meal bowls.

Explaining Cava’s business model becomes fairly easy: “Oh, it’s like a Chipotle”. The simple description ties the two restaurants together in the average investor’s mind. It’s not a big leap to imagine that both restaurants have a similar chance of success and growth.

Cava’s financial report for the first quarter of 2024 was a positive one. They opened 72 net new restaurants, experienced a 52.5% increase in income from both new and existing locations. The company reported a net income of $2.0 million, compared to a net loss of $18.8 million in the prior year quarter.

Bright or Shiny?

OpenAI has been on everybody’s lips over the past few years. Not only have they consistently managed to improve their product from a glorified toy to a valuable work tool, but have also inspired countless alternative AI products that can do any number of other things, from imaginative art to job-threatening human-style creativity.

The AI hype has often seemed similar to the Internet explosion in the 1990s and early 2000s – it was so easy to get investors excited about any Internet-based company. Similarly now, mention that your company is developing AI tools and see an instant jump in the stock price.

All this has led to OpenAI’s incredible revenue jump of almost two billion dollars in six months, doubling its revenue from $1.6B in 2023 to an estimated $3.4B in first quarter 2024. The company currently stands at around $80B valuation. Keep up like this, and they’ll have crossed the trillion-dollar marker early next year.

Most of OpenAI’s revenue comes from the hundreds of applications for its large language model software. ChatGPT has made incredible leaps in capability since its launch almost two years ago, and has partnered with Microsoft, Apple, and other stellar corporate clients. However, the company has no intentions of stopping here. CEO Sam Altman has also been investigating different chip technologies to make OpenAI even more powerful. Developing their own processing chips to push the boundaries of what is possible with AI and computing could be an even more powerful way to expand their expertise.

The Deep Dive

Headline Roundup

• Brazil's Oil Production Surge Throws OPEC a Curveball.

• Retail Traders Bet on Yen Rebound Amid Currency's Decline.

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DISCLAIMER: None of this is financial advice. This newsletter should be used for discussion, education, and illustrative purposes only and should not be construed as professional financial advice, solicitation, or recommendation