I. Performance of Global Equity Indices (in US dollars)
Data source: Bloomberg, 2024/08/26-2024/09/01, compiled by Tiger Brokers
II. Key Market Themes
i. NVIDIA Earnings Beat Expectations, Yet Stock Drops: What's Behind It?
Last week, the AI leader Nvidia $英伟达(NVDA)$ released its Q2 financial report. The data shows that the company's quarterly revenue was 30.04 billion, with AI-related data center business revenue at 26.3 billion, and the third-quarter guidance revenue at 32.5 billion, all of which exceeded market expectations. However, despite this, the stock price fell by more than 6% after the report.
The market generally believes there are two reasons for this. On the one hand, the gross margin that Nvidia announced this time is 75.1%, slightly lower than the market's expected 75.4%. On the other hand, some views believe that this performance did not exceed the most optimistic expectations of the buying institutions. They expected the Q3 guidance to reach over 33 billion to match the hype. Despite this, firms like Citi, JPM, and Goldman Sachs remain optimistic, maintaining "buy" ratings.
Objectively speaking, Nvidia's performance may not be explosive, but it must also be excellent. However, the capital market often likes to rely on the path, and it is easy to ignore the impact of the cycle. It must be admitted that Nvidia has already passed the 0-1 multiple explosion stage. Even if the B series of new products can successfully take over, it will be difficult to maintain a gross margin of nearly 80% in the future. But at the same time, as a company with a market value of nearly 3 trillion, if Nvidia can maintain a double-digit growth, plus the continuous progress of the AI trend. We believe that Nvidia's long-term upward logic and prospects have not changed, but the stock price fluctuation may increase.
Data source: Company data, compiled by Tiger Brokers
ii. Inflation Declines, Strong Economic Data: What's Next for the Fed?
Recently, the July PCE inflation data has declined as expected. On a month-on-month basis, both nominal PCE and core PCE rose by 0.2%, in line with market expectations; on a year-on-year basis, nominal PCE rose by 2.5%, and core PCE rose by 2.6%. The growth rate of both was the same as last month, which is better than market expectations. So far, the three-month annualized core PCE has dropped to 1.69%, basically in line with the Federal Reserve's 2% target.
Data source: Bloomberg, compiled by Tiger Brokers
At the same time, recent U.S. economic data has also been full of surprises. On the one hand, the second estimate of Q2 GDP growth was 3%, which was much higher than the first estimate and market expectations of 2.8%, mainly due to a significant increase in consumption; on the other hand, personal income and personal expenditure in July increased by 0.3% and 0.5% respectively, both of which exceeded market expectations, once again confirming that the income and consumption of American residents are still very strong at present.
As Powell expressed in his speech at Jackson Hole, the fight against inflation has been won, and the current task is to stabilize the economy. From the recently released data, everything is under the control of the Federal Reserve. Overall, although the inflation has declined more than expected this time, it does not affect the Federal Reserve's judgment on the path of interest rate cuts. At the same time, strong income and consumption have given the Federal Reserve more room for operation.
Even so, the market's concerns about a recession have not completely faded, and it still prices a 100bp interest rate cut by the end of the year. However, we believe that investors may have underestimated the resilience of the economy and the insight of the Federal Reserve. With the release of the FOMC's Q3 dot plot in mid-to-late September, this year's interest rate cuts three times, each cut by 25bp, may be the final version of the answer.
Data source: CME Group, compiled by Tiger Brokers
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