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Xi stood up

13 October , 08:57 am

Market scorecard

The market's winning streak hit a wall on Friday. President Trump rattled markets with a Truth Social post threatening fresh tariffs on China and a possible cancellation of his meeting with President Xi. The sharp selloff wiped out the week's gains for the S&P 500 and Nasdaq, a reminder that geopolitics still has the power to spoil an otherwise steady rally.

In company news, Tesla's Shanghai factory saw shipments rise in September as China's car market entered its busy season. Elsewhere, Google has become the first company in the UK to be designated "strategic market status", a new designation that puts its search and advertising empire under tighter scrutiny from regulators.

On Friday, the JSE All-share closed down 0.20%, the S&P 500 fell 2.71%, and the Nasdaq was 3.56% lower. Ouch!

Our 10c worth

Byron's beats

Investing in equities doesn't have to be complicated. I often speak to people in the industry who spin me with their theories about a small-cap uranium miner poised to grow 20-fold, as AI is expected to increase demand for nuclear energy, and they have discovered a deposit that no one yet knows about. Or some crypto mining company whose market cap trades at a discount to the Nvidia chips on their balance sheet.

There are so many moving parts to a company. Your theory might be true, but finding the right horse is the difficult part. That is why we like investing in large established businesses. Meta already has investments in nuclear energy solutions. They also already own billions of dollars' worth of Nvidia chips. These guys are at the forefront of the future, and they are investing their bucketloads of cash where they see the growth.

Let Zuckerberg, Jassy, Musk, Cook, Huang, Pichai, and Nadella worry about the future for you. They have access to the best talent, the most data, and have unlimited resources. Who can compete with that?

Michael's musings

For a product to be successful, it needs a very compelling answer to the question of 'why' does it exist. Early hybrid vehicles were built to offer better fuel consumption, but manufacturers quickly realised that their core customer was someone who wanted to drive a more environmentally friendly car. The vehicle price didn't really matter.

Fast forward a few years, and the focus shifted from hybrids to fully electric vehicles (EV), with wealthier people flocking to Tesla. They were the only large-scale EV maker around, and their cars looked cool. As with anything successful, competition soon arrived, and in this case, it was from the East. China had a smog problem in its major cities, so it gave out big incentives for the production and purchase of EVs. The price of EVs globally has been dropping.

The primary reason most people own a car is to get from point A to point B as cheaply as possible. Financial blogger Barry Ritholtz argues that the cheapest way to get around is by buying a second-hand EV. Thanks to rapid advances in battery technology, the cars generally have around 450 km in range, but more importantly, the battery will last longer than 10 years. In some cases, manufacturers now guarantee at least 300 000 km of battery life.

There is currently a global oversupply of second-hand EVs, meaning they are really cheap to buy. Ritholtz argues that the biggest cost saver actually comes from the fact that the annual maintenance bill for an EV is almost zero - a very important factor when buying a second-hand car.

The older the car, the bigger the concern of getting an expensive maintenance bill. A friend bought a secondhand BMW last year, and last week he had to send it in for repairs that cost around 30% of what he originally paid for it. You don't have that with EVs.

Ritholtz forecasts that the global middle class will embrace EVs, not for their green credentials, but because they will be the cheapest way to get from point A to point B. Read the full article here - Used EVs will go mainstream.

Bright's banter

Elon Musk's xAI just doubled the size of its funding round to a jaw-dropping $20 billion, pulling in heavyweight backers like Nvidia, Apollo, and Diameter Capital. This comes after the company raised over $10 billion in debt and equity back in July.

The deal is as creative as it is massive. A special-purpose vehicle will purchase Nvidia chips and rent them to xAI for its massive Colossus 2 data center in Memphis. Nvidia's putting in as much as $2 billion, and CEO Jensen Huang summed it up neatly: "Almost everything Elon's part of, you really want to be part of as well."

xAI has been burning through cash, roughly $1 billion a month, as it races to compete with OpenAI and others building frontier AI models. For Musk, this isn't just another moonshot, it's about owning the infrastructure that powers the next tech revolution.

Signing off

Asian markets opened the week deep in the red, mirroring Wall Street's Friday selloff as risk sentiment soured across the region. With Japan closed for National Sports Day, selling pressure hit Hong Kong, Taiwan, and Australia hardest, while the rest of Asia followed lower.

Shares in Treasury Wine Estates plunged nearly 14.9% after the Penfolds wine maker scrapped its earnings guidance and paused a A$200 million share buyback, citing disappointing sales in China.

In local company news, Adcock Ingram shareholders have approved Natco Pharma's R75-a-share offer, a 44% premium, paving the way for Adcock's delisting from the JSE. Bidvest will retain its 64% stake as the Indian drugmaker partners locally to expand in SA's healthcare market.

US equity futures are surging higher pre-market. The Rand is trading at around R17.37 to the US Dollar.