I. Performance of Global Equity Indices (in US dollars)
Source:Bloomberg,2024/06/03-2024/06/09
II. Key Market Themes
i. Contradictory US May Economic Data: Rate Cut Expectations Pushed Further Away?
Last week, the US released May employment data. The increase in non-farm payrolls was 272,000, far exceeding the market expectation of 185,000. The service sector maintained strong momentum, aligning with previous PCE and PMI data, and wage growth also rebounded more than expected, indicating that service sector inflation remains under significant pressure.
Interestingly, the unemployment rate also rose in May, reaching 4%, which was higher than market expectations and seemingly contradictory to the non-farm payroll results. However, this discrepancy is due to different statistical methods. The non-farm payroll data comes from a “business survey,” which counts the number of payrolls issued; the unemployment rate is based on a “household survey,” which counts the number of employed individuals. The divergence between the two suggests a significant increase in the number of part-time workers holding multiple jobs.
Historically, discrepancies between non-farm payrolls and the unemployment rate are not uncommon and should not be overemphasized. Currently, even though service sector inflation remains high, the job vacancy rate has significantly improved, now close to 2019 levels, and wage growth is expected to cool down in the future. Moreover, both Europe and Canada have recently started to cut interest rates. We believe the Federal Reserve will begin cutting rates in September, with 2-3 rate cuts expected for the year, maintaining the main path unchanged.
Source:Bloomberg
ii. Nvidia's Market Cap Surpasses $3 Trillion, Overtakes Apple to Become World's Second Largest Company: Can It Still Rise After the Stock Split?
Last week, “AI leader” Nvidia $英伟达(NVDA)$ surged over 10%, not only reaching a new high in its stock price but also surpassing a market cap of $3 trillion, officially overtaking Apple to become the world's second-largest company, just a step behind Microsoft. Nvidia is set to undergo a 1-for-10 stock split soon, which will bring its stock price back to three digits.
We have examined 10 stock split cases of major US tech companies over the past decade and found that: Overall, most giants performed better in the 10 days before the stock split, achieving an excess return of 2.46% relative to the Nasdaq 100 index; However, in most cases, the performance before and after the stock split is not consistently strong. If the performance is strong before the split, it tends to be relatively weaker after the split, and vice versa.
It is important to note that the stock split itself does not affect the company's fundamentals. Given the current AI development trends, we believe that Nvidia, Apple, and Microsoft, all part of the $3 trillion club, will likely exhibit a phenomenon of mutual catching up and progressing together in the foreseeable future. However, based on statistical results, Nvidia significantly outperformed the Nasdaq before the stock split, so caution is advised regarding the risk of a pullback in the near term.
iii. TSMC's New Chairman Starts with a Price Increase: Can AMD Overtake in AI?
On June 4th, Wei Zhejia officially succeeded Liu Deyin as the new chairman of TSMC $台积电(TSM)$ . On the same day, he announced that he had communicated with Nvidia's Jensen Huang and was considering adjusting the production service fees for AI chips. We believe that TSMC, with its advanced manufacturing process and cutting-edge packaging technology, is currently indispensable in Nvidia’s AI GPU lineup. Considering that the price of the GB200 cabinet is nearly $4 million, with TSMC's processing fee accounting for only 4.5%, there is still significant room for negotiation.
Recently, AMD's $美国超微公司(AMD)$ Su was featured at the Taipei Computer Show. Regarding AI-related GPUs, Su announced that the MI350, which targets the GB200, is expected to be released in 2025. From a product roadmap perspective, AMD’s products are updated annually, with architecture updates every two years.
Overall, AMD currently lags behind Nvidia by about 2-3 quarters in the GPU sector. In a market with rapid iteration, this gap is highly detrimental to product competitiveness. Without strong interventions, such as antitrust measures, AMD may find it challenging to secure significant gains in this AI boom.
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