To The Moon

1. Performance of Global Equity Indices(in US Dollar)

Source: Bloomberg

2. Key Market Themes:

U.S. job market is weakening. Powell said “a bit more evidence” is needed for rate cut

• The United States added 275k non-farm jobs in February, slightly higher than the market consensus of 200k. However, the unemployment rate rose by 3.9% in February, higher than market expectations. Meanwhile, average hourly wages increased by only 0.1% month-on-month, and full-time employee wages year-on-year growth declined to almost 0, lower than market expectations. Taken together, this Feb NFP report further confirms that the U.S. job market is weakening.

Source: Wells Fargo

• Fed Chairman Powell said “a bit more evidence” is needed for rate cut in his testimony to congress, pushing the rate cut pricing by the end of 2024 to 4 times. Unfortunately, yesterday’s US CPI number is again higher than expected. Powell may not get the little bit more evidence yet. In addition, New York Community Bank wrote down $2.4 billion in goodwill last week, causing it to plummet 40%; However, Powell said during the testimony that New York community bank was only an exception. There will be bank failures but the risks of small and medium-sized banks are not universal and contagious.

Claude 3, the most powerful AI model was released. Be Careful of AI Server Speculations

• Recently, Anthropic released the latest AI large model Claude3, which surpassed ChatGPT4 in all evaluation data and became the most powerful AI large model. At present, the competition among major model manufacturers has entered a fierce stage, and the demand for AI chips is endless, which has further promoted the rise of $NVIDIA Corp(NVDA)$ .

• It is reported that one major Chinese Internet company has placed an order for NVIDIA H20, approximately US$2.5 billion. On the one hand, it shows that AI applications have begun to be implemented and the demand is strong. On the other hand, it also shows that China’s current domestic chips are still unable to replace NVIDIA. Chip demand from Chinese manufacturers remains huge.

• Recently, companies which producing servers for AI such as $SUPER MICRO COMPUTER INC(SMCI)$ and $Dell Technologies Inc.(DELL)$ have experienced significant gains on stock prices. However, looking at the entire AI industry chain, we believe that the competition in the server industry will be fierce, their profits are thin, and the ceiling is low. The AI server makers may experience short term boost, but their long-term valuation expansions are unlikely. Be cautious to speculate!

Source: Bloomberg