Focus on US PCE, Nvidia earnings

00:00:00: Falling crude oil prices and soft US data helped cooling hawkish Fed expectations pulled yields lower, gave equity valuations a welcome boost on Tuesday just ahead of two important releases.

00:00:12: The U.S July PCE Data and NVIDIA's second quarter earnings due after the bell.

00:00:17: Will the latter keep ball rolling?

00:00:19: Let's talk.

00:00:20: So welcome to Swiss Coats.

00:00:21: daily market talk is Wednesday, the twenty-sixth of August.

00:00:25: I'm Ipek Oskar Deschkeya and everything i will say here is based on my own opinion and analysis And this is not financial advice.

00:00:39: This show Is brought To you by swiss quote.

00:00:41: A nearly five percent fall in crude oil prices and a weakest US consumer confidence data today to this year helped cooling The hawkish federal reserve expectations.

00:00:51: yesterday pulled the yields lower and gave support to equity valuations.

00:00:56: Then US selling diplomats returned to Gulf countries, And Iran Oman's talks for interim reopening of the Strait of Hormuz.

00:01:03: keep market moot sweet this morning before two key announcements in coming hours.

00:01:07: First, The U.S will reveal its latest USPC update This afternoon European time, then every day we'll be publishing a second quarter earnings after the closing bell in the U.S.. So let's start with inflation.

00:01:19: The core PC index, the best favorite gauge of inflation is expected to have remains steady near the three point three percent level on annual basis.

00:01:27: That significantly above the federal reserves two percent policy target and it proves to be particularly sticky.

00:01:34: And that even before the war in Iran started.

00:01:36: now several inflation metrics especially headline figures have ease in July and that was thanks to lower energy prices during that month, and the fact that US crews' latest spike has proved to be limited somehow gave a certain peace of mind for Federal Reserve Watchers.

00:01:54: But I'm afraid without peace in the Middle East or Ukraine this letter may not last.

00:02:00: because look!

00:02:00: The U.S.

00:02:01: crew topped nearest hundred-day moving average earlier this month which was just around eighty nine dollars per barrel level while Brent crude returned below his own hundred day moving average after having.

00:02:18: But that was still lower than the earlier spikes.

00:02:21: The relatively subdued price action may have got you thinking that energy prices remain contained this time around, but actually they haven't.

00:02:28: Because despite the retreat we saw in crude oil prices, diesel prices in the US for example spiked to highest level since the war in Iran started!

00:02:37: That's near a five point sixty-five dollar per gallon level compare with the three and a half to three point eighty dollar range during most of two thousand twenty five.

00:02:48: In other terms that's more than fifty percent rise compared to last year prices, and it is diverging from crude oil prices due to the prolonged closure of the Strait of Hormuz.

00:02:57: That is amplified by Ukraine's drone attacks on Russian energy facilities.

00:03:02: And guess what?

00:03:02: Russia is one of the world's biggest exporters of diesel.

00:03:05: So even if the Middle East news are getting better all the Ukrainian-Russian news aren't so much.

00:03:11: And its higher diesel prices ripple through the economy because it has a key feel for transportation, and also accounts for three to five percent of production costs.

00:03:24: Now the good news is that, The co-inflation figures give direction to Federal Reserve and other central bank policies exclude volatile food and energy prices as long they don't show in road goods or services.

00:03:39: Bad news is rising energy costs sustainably are on their way of doing so And I'm not even mentioning tariffs.

00:03:46: So thats one problem.

00:03:47: My bigger problem is that we are no longer sure about bringing inflation back to the two percent level as a main Federal Reserve objective today or something it could achieve when the Treasury's out there trying to ease the bargain cost using other tools.

00:04:01: Yes, I'm talking about the Treasuries Bond buyback plans happening into this Treasury's general account at DeFet hands keeping financial conditions just too easy for DeFett to pull price pressures lower Can slower.

00:04:13: oil isn't enough?

00:04:14: It is not bad by durable peace and impact on the refined product prices.

00:04:19: A lot of many people still hope that a softish PC you read today, an positive reaction to Nvidia's earnings couldn't maintain optimism among investors.

00:04:38: Now, speaking of NVIDIA.

00:04:39: Of course expectations are enormous!

00:04:42: The second quarter revenue is expected to have risen to nearly ninety-two billion US dollars.

00:04:48: That's roughly ninety seven percent growth compared the same time last year And some Wall Street analysts see this number even higher within the US dollar range suggesting that effective whisper bar may be higher than published consensus and could eventually play against a positive reaction to stellar quarter.

00:05:10: That NVIDIA stock price fell on six out of eight latest earnings announcements while all of these results were absolutely stellar.

00:05:18: Brody, remember that chip makers stocks especially NVIDIA have been performing extremely well since the start of the AI buzz.

00:05:25: That was at the beginning of two thousand twenty three when open ai suddenly stepped into our lives and nvidia has become The mascot off this a i bus thanks to its GPUs are so adapted for AI trading.

00:05:37: but then the euphoria spread To CPU makers and late last year too memory chip makers.

00:05:43: Since then, the AI demand only grew faster for all of these companies chips but that meant that NVIDIA had to share its cake with competitors like AMD and Qualcomm But also other chip makers like CPU and memory chip maker.

00:05:57: So NVIDia gained roughly fifteen percent since the start this year And thats rather dim compared to Microns nearly two hundred forty percent gain or Intel's one hundred forty four percent rally.

00:06:09: Hello Monday, one of the reasons I kept the chip euphoria going.

00:06:12: The significant rise in memory chip prices thanks to prolonged supply shortage that led massive profit gains for these very memory chip makers.

00:06:21: all turned into white NVIDIA!

00:06:23: The company announced at the price of its products could cost fifteen percent more due to soaring memory costs especially their high bandwidth memory needed alongside Nvidia's GPUs.

00:06:34: In fact AI demand has created a severe memory supply squeeze and systems based on Grace Blockwell's upcoming Vera Ribbon architecture are extremely memory-intensive.

00:06:45: Now, NVIDIA has margin to pass these costs onto its customers.

00:06:49: But for how long?

00:06:50: Because NVIDia's biggest customers which are the big technology companies like Google, Meta and Amazon they're all running out of cash right now due to massive AI spending.

00:07:01: The second quarter earnings actually show that their free cash flow levels dive in sometimes negative territory due this massive AI Spending And also these same companies own home ground chips.

00:07:14: I would be more inclined to replace Nvidia Silicon by their Home Ground Chips as the latter hikes this crisis.

00:07:22: Also yesterday's news suggested that open AIs own homegrown chip called jalapeno chip perform better than NVIDIA and its current lineup rough now.

00:07:32: one right spot here is that nvidia has become relatively cheap.

00:07:35: today it has a reasonable P ratio of around thirty six-and-a half times, not close to the average stock in nasdaq hundred.

00:07:43: That has a p ratio of average thirty four times And that's because The company's massive net income growth expanded fast enough to compress SPE ratio.

00:07:52: But on the other hand, investors are increasingly spooked by the circular deals, financing guarantees and extras that company is taking on its shoulders And simply beating the US dollar.

00:08:10: expectations will not be enough to keep NVIDIA afloat after the bell, and any third quarter outlook below Wall Street's roughly one hundred four billion USD bar will likely leave investors focused on growing macro-led pain instead.

00:08:26: One that NVIDia cannot ease!

00:08:28: So, that's all for today.

00:08:30: I'm Ipeko Skardishkaya and thank you for joining me!

00:08:33: And Thank You For All Your Beautiful and Supportive

00:08:35: Comments!!

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