Market scorecard
US markets ended the day on a positive note, with the S&P 500 gaining ground after a volatile morning session. Oil prices climbed as Russia and Ukraine traded ballistic missiles, threatening energy infrastructure in that region. Bitcoin crept closer to the $100 000 milestone, because techbros are more enthusiastic about cryptocurrency since the US election.
In company news, Nvidia (NASDAQ:NVDA) gyrated wildly, starting lower, then hitting a fresh intraday record, before ending just 0.5% higher as investors reassessed the company's revenue outlook. Elsewhere, cloud-based data storage company Snowflake jumped 32.7% following its latest earnings report. Finally, MicroStrategy (NASDAQ:MSTR), the largest corporate holder of Bitcoin, saw its shares crumble 16% as questions arose about its value in relation to the number of Bitcoin it holds.
At the end of a busy day, the JSE All-share was up 0.29%, the S&P 500 rose 0.53%, and the Nasdaq was 0.03% higher. Nice one!
Byron's beats
Nvidia is now the largest company in the world, so every time it releases results they are described as "the most important earnings report in history". We are certainly witnessing history in the making because no company has ever grown so fast, to such size and scale.
The quarterly results out on Wednesday night did not disappoint. Revenues grew 94% off an ever-larger base to $35 billion, $30.8 billion of that came from the data centre division which grew by 112%. Gross profit margins came in at an incredible 74.4% and earnings beat guidance, growing at 103%, to 74 cents per share.
After these results and Nvidia's amazing share price rally, the stock now trades at 48 times earnings. As earnings grow that ratio comes down, making it seem more reasonably priced. The expectations are for another 50% growth in earnings next year.
When you browse the internet, scroll your Instagram feed, or hop on a video call, chances are that service is being hosted on datacentres that run Nvidia GPUs. Cloud service providers (CSPs) were huge capex spenders again this quarter. According to some analysts, every $1 spent on Nvidia GPUs by the CSPs generates revenue of $1.25 per annum. Why would they not buy more chips?
You might be concerned that Nvidia's competition is going to catch up, because normally this kind of market dominance does not last forever. But it just seems that Nvidia is constantly two steps ahead. They are already working on the generation of chips after Blackwell, called The Rubin Platform, which will yield even more improvements. As one analyst puts it, other chip makers are sprinting to catch up, but Nvidia are sprinting too, making it very difficult to close the gap.
We feel very fortunate we have been on the Nvidia train for nearly a decade now. Our first client bought the share in March of 2015. We are still buying Nvidia with new client funds.
One thing, from Paul
Friday advice: feeling secure comes from the money you don't spend. It's ok to live a good life, and spend money on interesting experiences, but you should not go wild accumulating unnecessary possessions.
You must consume less, and invest more. if you want long-term happiness, aim for the financial security that comes from owning a chunky share portfolio. Start when you are young and never stop.
Recent research at the University of Pennsylvania's Wharton Business School compared 33 000 regular Americans against ultra-wealthy individuals from around the world. The rich people were found to be significantly happier.
From the study: "The happiness gap between truly wealthy people and middle-income earners is 3 times as large as the happiness gap between middle and low-income groups".
Michael's musings
Elon Musk is a polarising figure. At one point, he was the hero of the left because Tesla (NASDAQ:TSLA) disrupted the energy and transportation industries. That has completely changed, he is now viewed as Donald Trump's right hand man. Some leftists have sold their Tesla cars, dumped their Tesla stock and quit X.
Social media sites that compete with X have seen a surge in new users. Since election day, Bluesky has grown user numbers by 500%, and Meta (NASDAQ:META)'s Threads has been signing up over 1 million people a day. This isn't the first time that users have left X in droves because of something Musk said or did. In the past, some of them have returned.
If Bluesky is new to you, like it was to me, here's some more info on the platform - Cool stuff you can do with Bluesky.
I've cut down my own X usage a lot. I used to like the real-time updates on events, and the insights from very interesting people. Now, I find the algorithm feeds me too many trending videos, and not enough stuff from the people I want to follow. If I go down the X rabbit hole, I don't emerge until an hour later, so it's best to just avoid it altogether.
Bright's banter
Elon Musk's AI startup, xAI, has secured $5 billion in a funding round, doubling its valuation to $50 billion. Backers include Qatar Investment Authority, Valor Equity Partners, Sequoia Capital, and Andreessen Horowitz. The company has raised total funding this year of $11 billion.
They will use the funds to buy 100 000 Nvidia chips to expand their Memphis data centre, which Musk touts as housing the world's most powerful AI cluster. xAI's Grok chatbot, launched in late 2023, is now available to businesses and premium subscribers on X.
It feels like xAI has come out of nowhere, but Musk's involvement likely turbocharged its valuation. The combination of his track record, aggressive fundraising, and the AI hype have created a perfect storm for sky-high valuations. xAI has $100 million in annual revenue and very bold plans but $50 billion seems like a hefty valuation for a company that only launched last year.
Signing off
Asian markets are up this morning, with benchmarks in India, Japan, South Korea and Taiwan advancing. Hong Kong and China lagged. In India, everyone is talking about Gautam Adani's fall from grace.
In local company news, Mr Price (JO:MRPJ) shares jumped 8% as they delivered a 7% earnings increase for the half-year, with revenue up 5.2% to R17.6 billion. Elsewhere, private education company AdvTech has acquired Flipper International School in Addis Ababa, Ethiopia, for $7.5 million. They aim to do more deals like this all over Africa.
US equity futures are steady pre-market. The Rand is trading at around R18.09 to the US Dollar.
Enjoy your weekend.