Thursday’s stock market roller coaster. These changes were mostly influenced by Nvidia’s new announcements and the anticipation of Federal Reserve Chair Jerome Powell’s speech at this week’s annual Jackson Hole symposium. Nvidia’s stock was down more than 1% today. This decline came after news broke that the company requested that many of its component manufacturers halt production of its H20 graphics processing units. This news raised alarm bells about the tech giant’s supply chain and upcoming product releases.
Well, Nvidia’s CEO, Jensen Huang, just recently made one big surefire answer official. The company is currently in negotiations with the U.S. government over the potential to ship a new, advanced alternative chip to China. Huang’s comments came during a visit to the Lawrence Berkeley National Lab, where he announced plans for a U.S. supercomputer powered by Nvidia’s forthcoming Vera Rubin chips.
Nvidia is reported to be designing a new artificial intelligence chip, the B30A. This chip is aimed at hurting the Chinese market in line with their long term strategic plan. This chip is expected to be better than the current top dog H20 GPU. Huang proved how complicated it can be to make the decision to sell new products to China, when he found that…
“Offering a new product to China for the data center, AI data centers, the follow on to H20, that’s not our decision to make. It’s up to of course the United States government. And we are in dialogue with them. But it’s too soon to know.” – Jensen Huang
At the same time, other large tech stocks are under downward pressure. Intuit dropped more than 6%, and Workday was nearly 6% lower. Workday’s stock lost 4% when it issued its Q3 subscription revenue guidance of $2.24 billion, in line with expectations from analysts. This guidance implies a year-over-year growth of no more than 14% to 15%, falling short of the 15.9% growth analysts were expecting.
Workday guided for an adjusted operating margin of 28% in Q3. This is 0.5 percentage point below the consensus estimate of 28.1%. These numbers have sparked concerns about the company’s growth prospects, as they face a rapidly increasing competitive set.
Bitcoin exchange-traded funds (ETFs) had a tough go in the crypto space. It was their fifth straight week of outflows, totaling a shocking $1.15 billion for the week! Ether ETFs had a powerful reversal on Thursday, drawing in $287.6 million in inflows. This ended a four-day run of outflows.
Market participants were looking forward to Powell’s speech at Jackson Hole. Analysts were eager to speculate on its potential impact on interest rates and economic policy. Here’s what Jim Caron, chief economist at Morgan Stanley Investment Management, had to say about the forthcoming speech.
“I think the Fed and what Powell is going to try to articulate and communicate is an explanation and a justification for the Fed to start a process of cutting interest rates starting in September.” – Jim Caron
The hype around Powell’s keynote address only serves to further heighten the uncertainty shrouding an already volatile market landscape. His comments would provide important guidance as to future direction of the Federal Reserve’s monetary policy. This occurs in what is arguably the most chaotic chapter in its history.
On the media side, Paramount Skydance came under fire when analyst Michael Morris cut its stock from buy to neutral. In particularly pointed comments, he suggested that recent movements in stock may be misleading and not represent the company’s actual reality. Morris touched on critical strategic questions such as how to achieve balance between linear and DTC economics. This focus area is especially important thanks to increasing competition from hundreds of direct-to-consumer apps.
“Bigger picture, we believe key strategic questions remain unanswered, particularly related to the balance of linear and direct-to-consumer economics as an increasing number of competitor DTC apps (ESPN, Fox One) are made available to pay-TV customers with their bundle subscription. Driving DTC growth without pressuring linear economics is an incremental risk to consolidated performance that we believe may be underappreciated by management.” – Michael Morris
Thursday’s market activity shows a nuanced landscape of tech innovation versus regulatory frameworks. Investors need to be able to navigate these micro level factors in addition to macro level economic policies when deciding where to invest. As Nvidia continues to develop its product offerings amid significant geopolitical considerations, and as Powell prepares to address pressing economic issues, market participants remain cautious yet vigilant in their strategies.