Market scorecard
Most global markets went down yesterday. Strong economic data and rising commodity prices are shifting expectations about when major central banks will begin cutting interest rates. The current consensus is that the Fed's June meeting is a coin toss; not so long ago it was fairly certain rates would go lower by that stage.
In company news, Phillips 66, an oil and gas company, was up 3.8% thanks to analyst upgrades and upward momentum in the sector. The biggest loser in the S&P 500 was Humana (-13.4%) which fell with other health insurance stocks after the Biden administration declined to raise payments for Medicare Advantage plans.
In summary the JSE All-share index closed down 0.14%, the S&P 500 dropped 0.72%, and the Nasdaq fell 0.95%. Oof.
Our 10c worth
One thing, from Paul
Some people are worrying about Nvidia's high share price, but not me. I spoke to two long-standing Vestact clients yesterday and both were wondering if they should "take some profits". I persuaded them not to.
Their entry prices for Nvidia were $58.01 and $58.75 respectively. These purchases were made back in 2018. The current price is $896 per share, so they both have rather spectacular gains.
My argument is that Nvidia is not expensive, its move upwards is due to the surge in sales of their high-end chips for AI data centres. Their margins are great, and demand is off the charts.
Their new Blackwell chips are streets ahead of anything available from their competitors. They will have 1.4 exaflops of AI performance and 30TB of fast memory, whatever that means.
In related news, OpenAI and Microsoft are planning a $100 billion AI machine learning system, to be called 'Stargate'. As Ben Evans explained yesterday, "$100 billion is roughly the combined annual capex of Google, AWS and Azure last year."
I suspect that most of the spending on this 'Stargate' project will be on chips from Nvidia. Very good, carry on.
Byron's beats
The Tesla share price has had a torrid time lately. That's not surprising when you consider the first quarter vehicle delivery numbers they reported yesterday. For the first three months of 2024 Tesla delivered 387k vehicles, far below the expected 454k. This compares very poorly to the final quarter of 2023 when 485k vehicles were delivered.
There is no doubt that Tesla is facing both market and competitive pressures. Rival automakers are scaling up, and electric vehicle (EV) demand seems to be between growth waves. I'm still very confident that we will see a mass transition to EVs, but as with all things in life, this won't happen in a straight line.
If you own Tesla shares, you should hold on to them. If we sold stocks every time they went through a tough patch, or faced a demand cycle challenge we would churn through a new portfolio every 4 years. For example, we would have cut Nvidia loose in 2018 when chip demand from crypto miners fell sharply. We would have dumped Facebook (now Meta) when ad sales slumped in 2022. Those would have been huge mistakes.
We are in this for the long run and believe that Tesla remains at the forefront of a mass revolution in mobility, to EVs with greater self-driving capabilities. Let's keep focused on the big picture.
Michael's musings
Live sport is amazing. It has the unique ability to get the heart racing and bring people together, unlike any other form of entertainment. High-profile sporting events draw in fans and millions of viewers, so the value of sporting broadcast rights continues to rise. There have been some big headlines coming from the industry recently.
F1-owner Liberty Media just announced the acquisition of MotoGP for $4.2 billion. Liberty Media was able to produce a spectacular surge in F1's global appeal, and is hoping to do something similar to MotorGP.
Elsewhere, Private equity firm Arctos Partners, announced that they have just raised $4.1 billion for their second sport-focused fund. The firm will use the funds raised to take non-controlling stakes in sports teams around the world, planning to take advantage of the rising value of live events.
A growing global middle class has meant that millions more people are tuning in to watch their favourite sport personalities. More fans means higher broadcasting fees, more team-branded merchandise sold, and higher ticket sales, so teams are more profitable and valuable.
It also doesn't hurt that there is increased interest in ownership from billionaires and sovereign wealth funds. This has all culminated in record prices being set for team ownership sales.
Linkfest, lap it up
Innovation creates growth from new industries. The result is the emergence of new job types - Six out of 10 jobs people are doing at present didn't exist in 1940.
Aging populations are reshaping society. There are fewer deaths and fewer births - Japanese nappy maker shifts from babies to adults.
Signing off
Asian markets are lower this morning, taking their lead from US markets yesterday. Shares in Taiwan Semiconductor are lower as the company evacuated some factories following Taiwan's strongest earthquake in 25 years.
US futures are pointing towards a negative open later. The Rand is holding steady at $/R18.80.
It's already halfway through the week, doesn't feel like it. Have a good Wednesday.