Nvidia, it's all about Nvidia. The AI chip producer finished 0.4% higher while hitting a fresh all-time high of $805.55 earlier Friday to surpass a $2 trillion valuation. It is just one stock, and can this stock be responsible for carrying the US equity markets through record highs? The S&P 500 and the Dow Jones showed slight gains on Friday, whilst the Nasdaq turned red after reaching record levels earlier in the day. Nvidia trades on the Nasdaq, so follow-through needs to be backed up by more solid earnings from other companies. In the coming week, we will see what Dell, Hewlett-Packard (HPE), eBay (EBAY), and Dow Jones industrial component Salesforce.com (CRM) can deliver to help sustain this rally. On the commodity front, iron ore sank to below $125 per ton, the lowest since early November, as the deepening rout in the Chinese property markets fails to stimulate demand for steel to support the construction sector on a recovery story any time soon. Natural gas continues to slump even after a short covering rally that looked to cement a low. Is an important low in place? The USDJPY is back at its highs for the third time as the Yen approaches lows not seen for 34years. The Japanese Finance Minister Suzuki warns the market last week that authorities are closely monitoring the market and may have to intervene if the YEN started to deprecate quickly.
But first Nvidia a dominant force in the realm of AI chip production, has been the talk of the town lately. Its stock surged by 0.4%, reaching an unprecedented all-time high of $805.55 on Friday, catapulting its valuation beyond the staggering $2 trillion mark. This achievement has sparked a flurry of discussions within financial circles, with many pondering whether one stock alone, even one as influential as Nvidia, could bear the weight of carrying the entire US equity markets to record highs. According to prominent investment managers, Nvidia looks to be cannibalizing the growth of other "Magnificent Seven" companies. Nvidia's last two earnings reports show that it made almost a fifth of its revenues, about $12 billion, from a single customer last year, while its second-biggest customer accounted for 10%, or about $3.9 billion, in the nine months through October. These customers are likely to be Microsoft and Meta, who need chips to fill the AI computers. If they decide they have enough or make their own, then this will leave a large hole in Nvidia orders. So, need to add some cation if going long.
The chip maker's revenue surged 126% to almost $61 billion in the year to January 28, boosting its net income by nearly 600% to about $30 billion, it revealed this week. That included year-on-year revenue growth of 265% and net income growth of 769% in the fourth quarter.
As Nvidia basks in the glow of its remarkable ascent, the broader market painted a mixed picture on Friday. While the S&P 500 and the Dow Jones registered modest gains, the Nasdaq, home to Nvidia's trading, veered into negative territory after scaling record levels earlier in the day. This divergence highlights the importance of sustained momentum, underscoring the need for solid earnings performances from a diverse array of companies to support continued market buoyancy.
Nvidia's presence on the Nasdaq further underscores the significance of follow-through from other market players. While the stock's meteoric rise is undoubtedly impressive, a single entity alone cannot shoulder the responsibility of driving the entire market to new heights. Instead, sustained market growth requires a collective effort from multiple sectors and companies, each contributing their fair share to the overall rally.
Looking ahead, all eyes are on the upcoming week, as investors eagerly anticipate earnings reports from industry heavyweights such as Dell, Hewlett-Packard (HPE), eBay (EBAY), and Dow Jones industrial component Salesforce.com (CRM). These reports will serve as a litmus test, gauging the strength and resilience of the market rally and providing insight into its sustainability moving forward.
Shifting gears to the commodities market, iron ore prices experienced a notable downturn, sinking below $125 per ton, marking their lowest level since early November. This decline can be attributed to the ongoing turmoil in the Chinese property markets, which has failed to ignite demand for steel, thus hampering the prospects of a swift recovery in the construction sector. Important manufacturing data out of China Friday will help in providing a view of the state of the economy.
Similarly, natural gas prices continued their downward trajectory despite a brief rally driven by short covering. Lingering uncertainty surrounds whether an important low has been established in the market, leaving investors on edge as they await further developments.
In the realm of currency markets, the USDJPY pair surged to its highs for the third time as the yen approached lows not seen in 34 years. Japanese Finance Minister Suzuki issued a cautionary statement last week, warning that authorities are closely monitoring the market and may intervene if the yen depreciates rapidly. Investors are borrowing Yen at 0% and investing it in other higher-yielding plays. Inflation Data due Tuesday and Industrial production Thursday will help in determining the Yen weakness through 151.5.
On the position front, we have not taken on too many new trades as we see no clear trend. We have a recent small short in the Dow (38 576), and remain … the SPI (7505). In the currencies still … both the AUD/USD (US0.6770) and AUS/CHF (0.5707). Commodities, in the bullion market, … Silver (US23.19) with… in Gold (US2046).
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USDJPY: Fundamentally the market remains a net …
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Technically, this is the third time that …
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