To The Moon

Stocks eked out a victory Fri, 17 Nov 2023 as the major indexes recorded their third-straight win for the week.

This comes about as Wall Street digested latest happenings in:

• Retail stocks quarterly earnings updates.

• Oil's losses amid signals of a slowing economy.

By the time closed in mid-November:

• DJIA: +0.01% (+1.81 TO 34,947.28).

• S&P 500: +0.13% (+5.78 TO 4,514.02).

• Nasdaq: +0.08% (+11.81 to 14,125.48).

All three US indexes carried momentum from a roaring midweek rally, which came as the market grew convinced the Federal Reserve could ease back on interest rate hikes.

Cooler inflation and softer jobs data were taken as signs the central bank's tightening is finally squeezing the US economy.

In terms of the respective Composite Indexes moving averages:

• All 3 composite indexes are above its respective moving averages - 200-day, 50-day and 20-day.

• Also all 3 composite indexes 50-day moving averages are above its 200-day moving averages.

• Summarily, all 3 composite indexes exhibit "strong" upwards momentum, going into 2nd last week of November trading.

Retail Stocks Quarterly Earnings:

Ladies & gentlemen, there is an alternative method of weighing in, on the US economy.

That is look at US retails stocks' outlook to determine the health status of the US economy.

It is refreshing and might actually be "accurate" gauge.

Case in point:

Gap Inc, has posted a better-than-expected Q3 2023 results, thanks to:

• Easing supply expenses.

• Cost-control efforts.

• Improving sales at Old Navy.

In recent years, this once used to be sought-after apparel maker has taken a hit from changing shoppers' habits.

More importantly, Gap Inc expects Q4 2023 net sales to be "flat to slightly negative".

Other retailers - $Wal-Mart(WMT)$ & $Target(TGT)$, have forecasted similar "outlook" even though they have handed relatively "credible" report cards for their respectively quarterly earnings too.

Walmart & Target past 5 trading days performances

Walmart:

• Earnings per share: $1.53 adjusted vs. $1.52 expected.

• Revenue: Came in at $160.8 Billion vs market expecttions of $159.13; representing a +5.25 YoY gain.

Target:

• Earnings per share: $2.10 vs. $1.48 expected.

• Revenue: Came in at $25.4 Billion vs. $25.24 Billion expected; representing a +0.63% gain.

It is a similar echo that a falloff in consumer spending will hit the all-important December shopping season.

The most likely culprit is the "restart of student loan repayment" since 01 Oct 2023.

Strange as it may be, in this "Tale of 2 US retail stocks":

• Walmart faltered on its forecasted outlook.

• While Target flourished on its forecasted outlook inching up almost +17% upon its Q3 2023 earnings released. (see above)

Oil prices also hinted at a slowdown by sinking into a bear market ahead of the OPEC+ meeting later on Sun, 26 Nov 2023.

On Fri, 17 Nov 2023, both West Texas Intermediate crude and Brent crude advanced nearly +4.0%.

However, respective indexes for the week, loss after touching their lowest level in nearly 4 months.

Wall Street's AI darling $NVIDIA Corp(NVDA)$ is among the major names to report earnings on Wed, 21 Nov 2023.

This supplier of AI tech offers investors fresh data on the state of the industry, steering the case for or against the much-hyped AI tech boom that has elevated many of Big Tech's largest players.

Nvidia quarterly revenue - 2019 to 2023

Recap of Nvidia’s previous quarter earnings: (see below)

• Earnings: $2.70 per share, adjusted, versus $2.09 per share expected by Refinitiv.

• Revenue: $13.51 Billion versus $11.22 Billion expected by Refinitiv.

On 23 Aug 2023, Nvidia said it expects fiscal third-quarter revenue of about $16 Billion, higher than $12.61 billion forecast by Refinitiv.

Market watchers will be hawking over this to determine if Nvidia will be able to “better” its forecast.

Headwinds facing Nvidia:

As with any business/es, mounting challenges facing a company is nothing out of the ordinary.

More importantly, how is a company going to face it head on?

Nvidia’s possible challenges:

1) Nvidia’s H800 chip is a performance scaled-down version of its best seller H100 chip.

This is supposed to comply with US restrictions and allows continual sales to China.

However, with a revised ban-chips requirement already enforced, Nvidia has yet to announce, a further replacement of the H800. (see above)

2) On Wed, 15 Nov 2023, Microsoft unveiled two chips at its Ignite conference in Seattle.

• Maia 100 artificial intelligence chip. Will compete head-on with Nvidia’s highly sought-after AI graphics processing units.

• Cobalt 100 Arm chip. This chip is aimed at general computing tasks. It could compete with Intel processors.

• Both chips will come to Microsoft’s Azure cloud,

Like it or not, $Microsoft(MSFT)$ chips will have an impact on Nvidia’s sales volume, especially if both are at different price point.

3) It remains a fact that $Intel(INTC)$ has been a tad slow when it comes to all things artificial intelligence (AI) related.

As the idiom go “Better late than never”, this former tech giant is steadfastly making its presence felt in the AI-sphere.

For more in-depth details, refer to my post Invest in Intel ($INTC) now. — click to read. Thanks.

Apart from transforming its manufacturing plants with the latest technology, Intel is also making progress in its AI-race. Going solo in some projects and partnering others in the short term to achieve a win-win outcome.

Success of Intel’s endeavours also means a chip into Nvidia’s earnings and bottom lines.

How I see it:

• For the upcoming quarterly results, I think Nvidia will hand in a “more than stellar” earnings.

• One that exceeds analysts’ and Wall Street forecasts.

• However, faced with the Biden administration ever-tightening restrictions on Advanced IT technology export, especially sales that are semiconductor-related eg. AI chips, Lithography machines etc… will Nvidia be able to circum-navigate these restrictions and still come up tops?

• This is a short-trading week, with Thanksgiving on Thu, 23 Nov 2023 and Black Fri, 24 Nov 2023.

• Rally of Nvidia’s stock should persists well into next week.

• Do you think Nvidia will report a fantastic quarterly earnings on 21 Nov 2023?

• Do you think Nvidia will be able to forecast an even better Q4 earnings results, given all the challenges that lies ahead?

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