Let's get Physical AI!

00:00:00: Yesterday, after the closing bell in the US and media once again crushed expectations.

00:00:05: but this time around its announcement gave a bigger boost to the broader AI ecosystem especially to physical AI sucks than it's own stock.

00:00:14: Investors are increasingly captivated by the promise of physical AI.

00:00:18: yet rising global yields fragile market breadth and persistent geopolitical tensions suggest that the macroeconomic backdrop is becoming increasingly difficult to ignore.

00:00:30: Every step higher in tech now feels driven more by greed than conviction, if it doesn't broaden out to sectors outside technology.

00:00:40: So welcome to Swiss Codes Daily Market Talk.

00:00:43: It's Thursday, the twenty-first of May.

00:00:46: I'm Ipeko Skardishkaya and everything i will say here is based on my own opinion and analysis And this not financial advice.

00:01:02: So the beat goes on at NVIDIA for the fourth in straight quarter.

00:01:07: If I'm not mistaken, The company crushed expectations again.

00:01:12: revenue came and above eighty one billion US dollars up twenty percent from the previous quarter.

00:01:17: an impressive eighty five per cent From a year ago.

00:01:21: gross margins held near stunning seventy-five Percent right online with expectations And the company also announced eighty billion us dollar worth of stock buybacks.

00:01:32: Yet somehow, it still wasn't enough for investors.

00:01:35: The stock swung between two to three percent in both directions and after hours trading before settling around one person lower.

00:01:43: Some blame the May-July outlook on not being strong enough.

00:01:46: Others pointed to confusion about NVIDIA's new reporting structure that we will talk about in detail But honestly this looked more like a simple profit taking me off their enormous rally than lack of conviction overall.

00:02:00: Now we discussed in yesterday's episodes that Nvidia earnings no longer carry the same market moving power.

00:02:06: That day one step at the beginning of the AI frenzy, remember?

00:02:10: Because In early days GPUs were these story because training this AI models have been popping up required immense and parallel computing power.

00:02:20: but now that these models are up-and running And they're increasingly being deployed and used into real world cases The narrative is broadened.

00:02:30: Demand for CPUs and memory chips has storage alongside GPU's, allowing other chip makers to capture a bigger share of the AI spotlight.

00:02:38: In that sense Nvidia is no longer the sole barometer of AI enthusiasm.

00:02:43: And the good thing is, NVIDIA knows it and not resting on its laurels.

00:02:47: The company announced yesterday that it will change how it presents business to investors as it believes AI no longer just about selling chips to hyperscalers or cloud giants building massive data centers.

00:03:00: That's more than that!

00:03:01: NVIDia now wants investors focussing.

00:03:03: what comes next?

00:03:04: AI spreading into real economy.

00:03:07: That why it introduced a separate edge computing category covering robotics autonomous driving, AI powered PCs, telecom infrastructure and devices processing AI outside giant data centers.

00:03:21: In other words NVIDIA is making a big bet now on physical AI machines robots vehicles and connected devices interacting with the real world than just selling GPUs to hyperscalars.

00:03:33: It's basically Jason Huang saying that The next phase of AI won't Just live in the cloud.

00:03:38: it will live everywhere around us.

00:03:42: So every year's earnings announcement may have triggered little enthusiasm in its own stock price but LG Electronics in Korea rose twenty six percent today and beyond.

00:03:52: the mob is surged more than Twenty one person on the idea that AI will get a physical representation.

00:04:00: And if we stay in Korea, Samsung jumped more than seven percent today for averting a strike pushing the Cosby index.

00:04:07: Seven percent higher as well and I will talk about that curious correlation In just a minute.

00:04:12: but before We do.

00:04:14: If you look beyond The chip makers AI enthusiasm continues.

00:04:18: with Elon Musk space ex filing For IPO an open AI and Anthropik are also expected to go public Before this year ends.

00:04:26: could it get more exciting?

00:04:28: What's less exciting However, is the macroeconomic backdrop now?

00:04:31: oil dropped five percent yesterday.

00:04:33: That was good news as Donald Trump said that they're finalizing a deal with Iran But if history's any guidance be heard at before Global yields continue pushing to multi-decade higher levels and oil prices are not necessarily coming lower.

00:04:47: So if you look at the bigger picture, this story is somewhat less shiny than what the tech pretends.

00:04:52: The tech heavy market indices are actually diverging notably from their equal weighted versions Warning that the market rally is being built on the shoulders of a handful of technology companies That are priced too perfection today And every step higher feels more like greed.

00:05:12: That's exactly why the market cat-weighted Cospy Index, for example has become nothing else but a reflection of two companies Samsung and SK Hynex.

00:05:23: Take these out!

00:05:24: The rest in South Korean index are not necessarily doing as well faced with falling Korea won and rising energy prices.

00:05:33: And I'll swear the major European and US indices are flat this morning despite great results from NVIDIA looking more down to earth than Asian peers that enjoyed in nice rally this Thursday.

00:05:44: Again, the market swing between AI optimism and geopolitical chaos.

00:05:48: we will see which one take over today but optimism on Trump's wars is nothing stronger then pure speculation.

00:05:56: so I won't clap before Iran says something.

00:05:59: Now, of course the longer this situation drags on.

00:06:02: The bigger the consequences.

00:06:03: Oil bears.

00:06:04: yesterday blinded by Donald Trump's hopeful but one-sided comments again totally ignored One thing!

00:06:11: The data showing that U.S oil inventory so the commercial and SPR strategic petroleum reserves combined fell seventeen point eight million barrels last week.

00:06:24: That was the largest weekly fall since data is available starting in nineteen eighty two, meaning that if history repeats itself.

00:06:32: If a peace deal doesn't materialize in Iran?

00:06:35: The recent easing and oil prices will remain short-lived on.

00:06:38: prices will spike again under letter with continued fueling inflation expectations and global yields and the borrowing costs should wait at some point on equity valuations as well.

00:06:50: And speaking of inflation, yesterday's data confirmed that inflation in the euro area jumped to three percent on April back of rising energy prices.

00:06:59: But British consumer inflation came into softer than expected easing to the slowest level Now, but wait.

00:07:07: The letter was due to two major factors one the government measures to ease energy bills and Two quite an easy comparison with last April where inflation in the United Kingdom spiked on taxes and utility costs now?

00:07:21: Good news is yesterday's data is not expected to justify a No rate hike from the Bank of England in its next monetary policy meeting.

00:07:28: The probability of a BOE rate hike fell from around fifty percent last week to below twenty percent after the inflation data, pulling also.

00:07:40: But the bad news is inflation in the UK will rise.

00:07:43: Ladies and gentlemen, let's look at the PPI numbers that reflect rising energy prices quite strongly And That Will Bring The Uncomfortable Question Of Rising Interest Ways Back To The Table Sooner Rather Than Later.

00:07:57: So I would expect cable to remain under pressure.

00:08:00: Another Retreat To One Thirty Two Looks More Likely.

00:08:04: Then Arise Above The One Thirty Seven Level but infinite US dollar We'll Say The Last Word.

00:08:10: Anastasia trajectory is highly dependent on the Middle East developments and oil prices.

00:08:15: Expensive oil and rising inflation expectations around the world keep US dollars supported, and also published yesterday that a majority of Fed officials considered at their latest meeting raising interest rates.

00:08:29: if inflation continues to run above the two percent policy target next move could eventually be a rate hike.

00:08:43: Indeed, activity on Fed Fund's futures price is more than fifty percent chance today for the December rate hike which was quite hawkish.

00:08:51: Of course that would rapidly change if Middle East tensions ease and oil prices fall to ideally somewhere between sixty-to-seventy dollars per barrel range where they were before the war started in Iran remember?

00:09:05: And these are actually the levels that pointed at a Fed cut this year, earlier this year.

00:09:11: But until then... Until the dust settles in the Middle East The chances that the Fed could avoid a rate hike is diminishing by today.

00:09:19: So This Is All For Today.

00:09:21: I'm Ipek Oskar Deshkaya and thank you for joining me And Thank You for all your beautiful and supportive comments!

00:09:28: I hope this episode of Market Talk has been helpful.

00:09:32: It's been insightful to you so please do not hesitate To leave Your Comments your reactions and your questions below as usual.

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00:10:00: So I will meet again tomorrow and until then good day.

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