Chips, Charts, and Chubb

  • Market Overview

Market scorecard

On Friday, US markets drifted aimlessly. The S&P 500 edged higher, driven by energy stocks, while the tech-heavy Nasdaq Composite dipped slightly. However, the weekly performance was strong, with the S&P 500 gaining 1.3% and the Nasdaq advancing 1.7%.

In company news, Richemont (JO: CFRJ ) shares soared 5.3% after the luxury conglomerate reported sales that were better than expected. Elsewhere, GameStop (NYSE: GME ) fell 20% on Friday after the meme stonk reported slowing sales and announced plans to sell 45 million additional shares. The rally earlier in the week was clearly just driven by hype. A classic pump and dump, how absurd!

On Friday, the JSE All-share closed up a tiny 0.03%, the S&P 500 rose 0.12%, and the Nasdaq was 0.07% lower.

One thing, from Paul

Earnings season in the US is almost finished. Only one important report lies ahead - Nvidia (NASDAQ: NVDA ) on Wednesday, after the market close.

Expectations are sky-high for the chipmaker. Analysts expect quarterly revenue of as much as $26 billion (of which data center sales will be $22 to 23 billion) with more growth to come.

Nvidia stock is up more than 86% in 2024 and more than 200% over the past year. If you own them, you will have noticed!

If there is any sign of weakening sales or margin pressure, there could be a nasty sell-off, but that is unlikely. We like Nvidia's long-term growth prospects, given their product line and the sheer scale of the capital spending on AI infrastructure.

Here at Vestact we've lived through many such moments, so we are relaxed. We've owned Nvidia for nine years, and endured 36 of these quarterly earnings reports. There is always something new and interesting to see. I feel like Vladimir Nabokov, who once said: "One cannot read a book; one can only reread it."

Byron's beats

Charts are a great way to communicate large amounts of information, in a single picture. That's why I love to share interesting ones that I come across. The chart below compares the 2024 capex spend of the biggest 5 tech companies in the US, all of which are Vestact stocks.

The most striking observation is how little Apple (NASDAQ: AAPL ) is spending. Remember that Apple outsources most of its cloud services to Google (NASDAQ: GOOGL ), which means that they do not have to spend billions of dollars with Nvidia to build expensive data centres. As the headline of the image suggests, they will use partnerships to benefit from AI.

Amazon (NASDAQ: AMZN ), Microsoft (NASDAQ: MSFT ), and Google all offer cloud services to third parties, which I assume explains a big portion of their capex. Amazon is also expanding its own online retail footprint which is not cheap. Meta (NASDAQ: META ) hosts their own websites which, as you can imagine, need a huge amount of processing power, in other words, Nvidia chips.

There is a lot going on behind the scenes at each of these businesses; we are happy to know that they are working hard and not feeling too comfortable.

Michael's musings

Last week, Naspers (JO: NPNJn ) and Prosus (JO: PRXJn ) announced the appointment of a new CEO, to replace interim CEO Ervin Tu. In September 2023, former CEO Bob van Dijk abruptly left after about ten years at the helm. He had been criticised for spending hundreds of millions of Euros on multiple restructures to try to reduce the NAV discount, without any success. Shareholders were frustrated by van Dijk's large pay cheque, mostly based on the value of Tencent (HK: 0700 ), which was a success that dated back to the Koos Bekker era.

The new CEO is Fabrcio Bloisi. He was the founder of the Movile Group, a Brazilian ecosystem of technology companies with a team of around 5 000 people and companies operating in food delivery, payments, tickets, content and messaging.

Bloisi acquired iFood in 2013, when it only had 20 employees. He and his team have since grown it into the leading food delivery company in Brazil, and Prosus took full control of the company in 2022 for EUR1.5 billion.

I'm glad to see Prosus hiring the next CEO from within its own ranks. He is someone who has proven himself and understands the company culture already. Bloisi is a very successful entrepreneur, the correct type of person to be leading Naspers and Prosus. I look forward to seeing how he will shake up the group and if there is any major strategy shift.

Bright's banter

Warren Buffett's Berkshire Hathaway (NYSE: BRKa ) revealed a $6.7 billion stake in Chubb (NYSE: CB ), ending months of speculation about its undisclosed investment in a financial firm.

Berkshire has been accumulating this stake since 2023, with the SEC allowing it to keep the investment confidential until now. The conglomerate, which already owns several insurance companies like Geico, is increasing its focus on the sector while reducing investments in other areas.

Chubb, a major property-casualty insurer in the US, operates in 54 countries. Under CEO Evan Greenberg, Chubb expanded significantly through a 2016 merger, becoming a large insurer covering a range of risks, including cyber-attacks and marine shipping.

Signing off

Asian markets are in the green this morning as commodity-related stocks rise alongside copper and gold . Benchmarks rose in Japan, Hong Kong, mainland China, and South Korea. Indian markets are closed today because of Lok Sabha elections taking place in Mumbai.

US equity futures are in the green, but there are many hours of pre-market trading still to come. The Rand is at around R18.12 to the US Dollar, its best level in quite a while.

Enjoy the week ahead. It's an opportunity to do something useful, so give it horns.

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