Market scorecard
US markets dipped yesterday, marking the second consecutive day of declines for all three major indices. Nvidia was the standout, surging 9.3% after impressive quarterly results. The S&P 500 fell the most yesterday, with ten out of eleven sectors down. Only the information technology sector managed a modest 0.6% gain.
In company news, the US Justice Department has sued to break up Live Nation, alleging that their Ticketmaster subsidiary illegally inflated concert ticket prices and harmed artists. We suspect that ticket resellers might be the real issue. Live Nation shares fell 7.8% on the news. Meanwhile, Amazon announced a $17 billion investment in Spain to expand its cloud business across Europe. Lastly, Apple is contesting a $1.9 billion fine from the European Union, which accuses the company of stifling competition from music streaming rivals like Spotify.
At the end of the day, the JSE All-share closed down 0.67%, the S&P 500 shed 0.74%, and the Nasdaq was 0.39% lower.
Our 10c worth
Byron's beats
The highly anticipated Nvidia results came in on Wednesday night and boy did they show up. Revenues came in at $26 billion, versus consensus of $24.6 billion, earnings per share was $6.12, consensus was only for $5.58 and guidance for next quarter is for a whopping $28 billion in sales versus previous expectations of $26.8 billion. The growth of this business has been nothing short of incredible.
These sales numbers represent a 261% year-over-year growth. Data centres, which now makes up 87% of total sales, grew 427% year-on-year. The likes of Microsoft, Amazon, Google, and Meta are spending huge amounts on processing power for AI and cloud storage. And they are not stopping any time soon. A bulk of that money is spent on Nvidia equipment.
There is more. Due to the marvellous share price rally, they are doing another stock split. They did a 4-for-1 split in July 2021 after the lockdown rally. Next month, they will be doing a 10-for-1 split; on the 10th of June, you will see the change on your statements. They also increased their dividend by 150%, although the yield is still very small, at 0.04%. Who cares when you have given shareholders 2 600% in 5 years?
The share popped 6% on the news and closed up 9% on the day. We love it when shares we own do well for the right reasons - fabulous results. Analysts are scrambling to increase their price targets for Nvidia. Goldman Sachs expects them to make nearly $40 a share by 2026. That is only 18 months away and puts the stock on a forward multiple of 24. We are still very happy holders at these levels.
Michael's musings
A nifty use for AI is to bring someone back from the dead. Well, not their physical body but their mind. If you fed an AI model enough information about a person, including things like diaries, thoughts and conversations, the AI model would theoretically be able to recreate a person's mind. The more information that the AI model has to draw from, the more accurate its version of someone would be.
In China, they haven't waited for their supreme leader to die before making an AI model around his view of how the world should be. China is working on a program that will answer questions relating to Xi Jinping's political philosophy. The model is still in testing phase, and access is by invitation at the moment. The plan is to make it broadly available though, to help China get one step closer to a perfect society.
You can be sure that when the model is released to the public, people will spend countless hours trying to trip up the AI logic to make an embarrassing mistake. Imagine if a program trained on Xi's world views said that Taiwan should be an independent country or maybe that a political leader shouldn't be in office for more than two terms.
Bright's banter
Oaktree Capital has taken control of Inter Milan after the club's Chinese owners, Suning, failed to repay a EUR400 million loan. Oaktree, a major distressed debt investor, announced it had "assumed ownership" of the Italian league champions following the loan's expiration on the 21st of May.
Granted in 2021 to the Luxembourg-based vehicle through which Chinese conglomerate Suning controls Inter Milan, and guaranteed by Suning's stake in the club, this arrangement gave Oaktree the right to take control of Inter Milan in the event of a default.
Suning tried to refinance the loan with Pimco but failed. Oaktree claims Suning had ample time to refinance the loan and that seizing control was a necessary step to protect their investment.
Suning acquired a majority stake in Inter in 2016 and secured a EUR275 million emergency bridge loan from Oaktree in 2021, which has since grown to EUR395 million due to high interest rates. Despite Inter's financial troubles - it made a EUR86 million loss last year - the club reached the 2023 Champions League final and recently won the Serie A title.
This takeover is another setback for Suning, which has faced financial struggles amid China's property crisis and pandemic-related challenges. In hindsight, they shouldn't have ventured into vanity assets so quickly.
Founded in 1908, Inter Milan is one of the most iconic clubs in Italian soccer, boasting 20 league titles. The team is home to top players such as Lautaro Martinez and Nicolo Barella.
Linkfest, lap it up
Can forgetting help you remember? A neuropsychologist says that we're thinking about memory all wrong - Why we remember.
Waymo is seeing success in robotaxis. The company operates Waymo One which makes 50 000 weekly trips in Phoenix, San Francisco, and Los Angeles - The rise of autonomous vehicles.
Signing off
Asian markets retreated this morning with the MSCI Asia-Pacific index heading for its worst day since 8 May and its first decline in five weeks. Benchmarks fell in India, Hong Kong, Japan, mainland China and South Korea.
Locally, Bidcorp posted strong 10-month trading results, overcoming weaker economic conditions as easing food inflation boosted sales across most of its operations. Meanwhile, Tsogo, the casino operator, saw a 13% drop in profit due to stalled revenue growth. On a positive note, Investec reported an increase in earnings, driven by improvements in its loan book and heightened client activity.
US equity futures edged higher pre-market. The Rand is trading at around R18.48 to the greenback.
Have a wonderful weekend.