Wall Street ends down, calls for AI slowdown pummel chipmakers
Market scorecard
US markets closed in the green yesterday. Both the S&P 500 and the tech-heavy Nasdaq closed up after AI-linked stocks fuelled a sharp rally. The information technology sector shot 4.5% higher, the sector's biggest one-day pop since November. None of the 10 remaining sectors in the S&P 500 gained more than half a percent though.
In company news, Marvell Technology is up 17% after-hours due to the semiconductor company projecting that its revenue will at least double from a year ago. Locally, yesterday was Mediclinic's (JO:MEIJ) last trading day as its sale to MSC, and subsequent de-listing, have been approved.
Yesterday, the JSE All-share closed up 0.73%, the S&P 500 rose 0.88%, and the Nasdaq was 1.71% higher.
One thing, from Paul
We added Nvidia (NASDAQ:NVDA) to our Vestact-recommended stock portfolio in New York in March 2017. We rated their technological prowess, their management team under CEO Jensen Huang, and their dominant position in chips for gaming and graphics computers.
At that point they traded at a (split-adjusted) share price of $25.38. It's done really well since then, broadening its business into chips that power a much wider range of high-end computers
Last night, Nvidia rose by over 24% in one day, closing at a new all-time high price of $379.80 per share. That happened because they projected revenue of $11 billion in the quarter from now to July, thanks to massive orders for chips from tech giants building generative AI apps.
At the close of trading on Wednesday, Nvidia's market capitalisation was "only" $755 billion. By the close last night (Thursday), that number was $939 billion. It's now the fifth most valuable fully-listed company in the world.
To do well in a managed share portfolio, you have to own concentrated positions in stocks that outperform the general index.
That $180 billion value uplift yesterday was enjoyed, proportionally, by all of its existing shareholders, depending on the number of shares they own. That includes all of us! I'm very happy.
Michael's musings
Yesterday the SARB raised interest rates by 50 basis points to the highest level since 2009. The Rand promptly fell out of bed, dropping to new lows and threatening to break the $/R 20.00 level. What?! That isn't suppose to happen. All the economic textbooks say that higher interest rates translates into a stronger currency.
In most cases, a higher interest rate leads to more international money flowing into the country to take advantage of the higher rates on offer. More money flowing in, means more demand for Rands and a stronger currency. That only applies to a certain point though. The government and corporations, who issue the debt with higher interest rates, need income to pay that interest. If the economy crumbles, then they can't repay the bondholders.
All of South Africa's inflation is imported, or due to the costs of loadshedding, it isn't due to too much demand, meaning that hiking interest rates is ineffective. South Africa is on its knees, and higher interest rates are just another blow.
Is the Rand saying that the SARB has gone too far? The SARB feels that the risks of undertightening are greater than of overtightening. I disagree.
Not helping our currency was the SARB stating that they think the Rand will weaken further. The statement appeared on Bloomberg's big red breaking news banner. When fear is around, and the central bank says the currency will fall, it will fall.
The SARB can't do anything about our weak and broken economy. Only our national government can implement policies to help the Rand improve.
Bright's banter
Live Nation achieved a record-breaking revenue of $3.1 billion in the first quarter of 2023, marking a 73% increase compared to the previous year. The company saw success as venues and markets reopened after Covid, with over 19 million people attending events across 45 countries.
However, Live Nation faced challenges due to potential regulation and fallout from Ticketmaster's mishandled sales for the Taylor Swift Eras tour. Despite the controversies, Live Nation's CEO credited the company's success to the high demand for stadium tours by popular artists like Beyonce, Drake, and Bruce Springsteen.
Live Nation surpassed analyst expectations and reported $320 million in adjusted operating income for the quarter. They're closely monitoring legislative developments and support the FAIR ticketing act, which aims to address ticketing practices and scalping issues.
The company believes that proposed legislation should help rein in scalpers and improve competition in the live event ticketing market. Despite facing a lawsuit and criticism regarding its monopolistic control, Live Nation's stock rose by 15% following the earnings announcement.
Signing off
Asian markets are mostly higher this morning, with the MSCI Asia-Pacific index snapping a three-day losing streak buoyed by the tech sector. Benchmark indices rose in Japan, India, and South Korea, while those in mainland China fell. Hong Kong is closed for a public holiday as they celebrate Buddha's birthday.
Data out this morning indicated that inflation is slowing in Japan, a boon for Japanese stocks.
US equity futures traded lower in early trade. The Rand is trading around R19.76 to the US Dollar.
Good luck to the Stormers in The United Rugby Championship final tomorrow.
