Nvidia Day!

00:00:00: geopolitical uncertainties persist, energy prices remain high global yields rise and market focus has been shifting from strong big technology earnings to rising borrowing costs across the globe.

00:00:12: So it's in this challenging context that NVIDIA is going through their earnings confessional today after the bell, and even strong results may not be enough to reverse a tide.

00:00:23: So welcome to Swisscoats daily market talk!

00:00:26: It's Wednesday, May the twentieth.

00:00:28: I'm Ipeko Skardeshkaya And we will talk about lot of things again today.

00:00:32: But before we do as always Please keep in mind that opinions are my own.

00:00:38: This is not financial advice.

00:00:48: Yes, it's the same story and different day again.

00:00:51: Donald Trump yesterday first called off an attack on Iran giving some optimism to the markets then said that he would resume strikes if they cannot agree on a deal.

00:01:00: NATO on the other hand said that they could help ships out of the strait of home as if traffic is not established by early July.

00:01:07: And Europeans are also considering easing sanctions on Russian oil because they need energy allows.

00:01:14: geopolitical uncertainties continue full speed.

00:01:17: The traffic in the state of Hormes is at a near standstill, the world oil reserves continues plunging at record pace and oil prices continued rising fueling global inflation expectations and pushing global yields higher on rising bets that the central banks around the world will have to step into five price pressures and that despite their worsening economic outlook globally in the OECD yesterday revised economic outlook down, factoring in their prolonged Middle East conflict and its global repercussions starting with higher energy prices.

00:01:54: In this context through a third year yield just rose to levels last seen before the subprime crisis.

00:02:02: The U.S ten-year yield approached a four point seventy percent mark as Japanese Ten Year Yields soared at two point eighty per cent level also a level that was last seen before two thousand.

00:02:20: Now the gap between the US and Japanese yields approached an uncomfortable zone to say the least.

00:02:26: Around one hundred ninety basis points for ten years spread there, and the latter increases their risk of a carry-on line that could eventually set another shockwave across global risk markets.

00:02:39: And I discussed why in detail yesterday's episode.

00:02:42: so please do not hesitate to have a look at it if you missed this one But put a number.

00:02:49: I believe that the two point nine to three percent range for a ten year JGB yield should eventually trigger a reverse carry trade, pulling the dollar yen lower along with global equities.

00:03:02: So on the FX front well dollar yet is softer this morning but not thanks to narrowing yield differential between U.S and Japanese bonds which makes US dollar returns less appetizing Thanks to the Japanese officials' renewed warning that David Intervene, if the pair went further up.

00:03:22: So a dollar yen is trading between his fifty-day moving average on the downside and one hundred fifty nine and ten level on upside.

00:03:30: today in its higher towards one hundred sixty level could trigger another intervention from the Japanese authorities Another short term relief to market giving traders a tactical trade without however providing the dollar yet a sustainable bearish shift to the downside.

00:03:47: On equities from S&P, it was down yesterday for a third session on the back of rising yields and the case is down by more than one point sixty-four percent at the time I'm talking this morning And The Korean Cosby Index retreats nearly two percent as investors focus turn from shiny technology earnings To geopolitical mess.

00:04:09: So in this chaotic market environment where earnings optimism has started to lose momentum and inflation angst has started gaining momentum that Nvidia will go to the earnings confessional after the US closing bell.

00:04:27: Now, expectations are high.

00:04:28: of course they are sky-high!

00:04:30: The company is expected to report around seventy nine billion U.S dollars in revenue In the first quarter this year which would be roughly fifteen percent higher than last quarter and nearly eighty percent above that same quarter Last year.

00:04:47: margins also expect it remain exceptionally strong five percent confirming that NVIDIA still enjoys enormous pricing power and that despite the massive blackwell ramp and rising competition among chip makers.

00:05:03: And what's interesting for this earnings season is that Nvidia's earnings do no longer carry the same existential weight they carried at the very beginning of the AI craze, meaning since two thousand twenty three back then markets were obsessed with training AI models AI models, chapter PT being the first one.

00:05:24: GPUs became essential because they are incredibly efficient at handling thousands of calculations simultaneously exactly what AI training requires.

00:05:35: Imagine trying to get from point A, two-point B by simultaneously testing millions of possible paths through CDF XYZ.

00:05:43: and so the GPUs are built for that kind of parallel processing power.

00:05:49: CPU's on the other hand handle straight forward computations.

00:05:53: One plus one equals two.

00:05:55: So once the AI models are trained with GPUs, they focus increasingly shifts toward inference which is running these trained AI models where TPU and CPU do a great job!

00:06:09: And memory chips are needed to store information.

00:06:12: That's why GPUs say more today about the raw power and evolution of AI models, while CPUs and memory chips saying more about real world AI adoption and scaling.

00:06:23: And the growing importance of CPUs and memory chips in AR infrastructure is exactly why traditional CPU and memory chip makers like Intel, Micron or the Korean chip makers have taken over the markets narrative recently.

00:06:37: That's also why NVIDIA is developing its own CPU called Vera CPU.

00:06:44: So today after the bell investors will closely focus on whether the company can maintain strong margins while scaling and preparing the transition toward next-generation Vera Rubin platform, which is designed for the next phase of AI.

00:07:01: Massive scale inference reasoning at AI factories while competition for running the AI models efficient their lower cost stuff to say the least.

00:07:10: besides traditional chip makers like AMD and Intel or Nvidia's biggest clients The big technology companies like Amazon Google and Metal Which make up to fifty percent of NVIDIA revenues are all working on their own home-cooked chips to build the most energy and most cost efficient chips that could do a comparable job, to NVIDIA's ultra powerful and ultra premium chips.

00:07:37: Now NVIDia closed near two hundred twenty dollars per share level yesterday some sixteen dollars lower than an all time high level of reach during course off last week.

00:07:47: options markets currently pricing in implied move of roughly six eight percent on both sides following the earnings announcement, but the direction is hard to tell because expectations are now so elevated that even a solid beat from NVIDIA may not trigger euphoric rally like the ones we've seen during early AR boom.

00:08:07: On the contrary!

00:08:08: Even if NVIDia has little debt while the markets haven't baked in and rising borrowing costs out may slow down global AR adoption by slowing down investments from other firms and weigh on chip demand.

00:08:23: Animarkis having based in possible Middle East supply chain disruptions that could eventually lead to higher costs and capacity constraints as well because of scarcity of some elements.

00:08:38: In this context, for example, Seagate Technologies which makes hard disk drives and data storage systems exploded over the past months fell after a warning that the company may not be able memory chip, so the capacity constraints will at some point start creeping in.

00:08:58: So to me and regardless of the strength of NVIDIA's results today three risks are piling up as big technology companies are valid for perfection.

00:09:09: One prospects of tighter financial conditions globally due to the Middle East war that could slow AR adoption and scale back revenue expectations, two capacity constraints do supply chain disruptions that can increase costs and limit raw materials and scale bag profit expectations, and three rising competition among the AI providers that could eat into margins.

00:09:35: And that's why even great results from NVIDIA today may not prevent profit taking.

00:09:40: That would feel so healthy at current valuations.

00:09:44: So voilà!

00:09:44: That is thinking.

00:09:45: I'll leave it here.

00:09:46: Let NVIDia investors say their last word.

00:09:50: So this is all for today.

00:09:52: I'm Ipek Oskar Deshkaya and thank you for joining me, And Thank You For All Your Beautiful And Supportive Comments!

00:10:14: threads, telegram and blue sky for regular market updates.

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00:10:30: So I will meet again tomorrow after Nvidia's results.

00:10:34: until then good day trading.

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