By Swissquote Analysts
Nvidia Poised for Record Sales as AI Demand Kicks In
Topic of the day
Chip giant Nvidia is starting to capitalize on the craze for language-generating artificial intelligence, projecting a more than 64% jump in sales as the company rushes to get more processors in customer hands to satisfy booming interest in the technology. The company forecast a record $11 billion in sales for the current quarter, far above the $7.2 billion Wall Street was expecting and what would be the highest quarterly total ever for the company. Demand for computing power that drives language-generating tools such as OpenAI's ChatGPT is opening a huge new revenue opportunity for the company and others. Nvidia's chips are essential in creating these kinds of tools, analysts say, and building just one such AI system can require thousands of Nvidia's computing engines. Nvidia doesn't manufacture its own chips but farms out production to contract chipmakers including the world's largest, Taiwan Semiconductor Manufacturing Co. TSMC's shares, which trade in New York and Taiwan, rose by 7% after-hours in the wake of Nvidia's results. Nvidia on Wednesday said revenue fell 13% to $7.2 billion in its last fiscal quarter, topping forecasts from analysts surveyed by FactSet. Net profit rose 26% to $2 billion. The sales retreat was driven by a sharp decline in the graphics chips business for videogamers, who pulled back after the pandemic eased and are only beginning to resume buying. Nvidia's stock rose nearly 25% in after-hours trading on the New York Stock Exchange in reaction to the release.
Wednesday, the SMI lost 0.9 per cent to 11,383 points. Among the 20 SMI stocks, there were 18 share price losers and two share price winners. A total of 25.54 (previously: 24.89) million shares were traded. Among the weakest stocks in the SMI were financials. The worst performers were led by Partners Group with a minus of 4.2 per cent. However, Credit Suisse (-1.5%), UBS (-1.4%), Swiss Re (-2%) or Zurich Insurance (-2.2%) also trended weakly. The defensive heavyweights held up quite well. Nestle lost 0.2 per cent and Novartis as well 0.2 per cent. Roche even gained 0.8 per cent. Holcim shed 1.7 per cent. The building materials group is strengthening its market share with an acquisition in the UK. Holcim is taking over Besblock Ltd, a specialist in the production of sustainable building materials. Holcim did not disclose a purchase price.
European equities were sharply lower on Wednesday, as worries deepened about the stalled debt ceiling talks and after U.K. inflation data raised the prospect of even tighter monetary policy in the months ahead. Many investors believe that Washington will produce an 11th-hour agreement to avoid a breach of the debt ceiling. But the growing potential of a default may also entice some stock traders to unload holdings in a bet the "black-swan event" shakes up markets. The Stoxx Europe 600 index lost 1.8% to 457.7 points. In Paris, the CAC 40 and the SBF 120 were down 1.7% each. The DAX 40 in Frankfurt fell 1.9%, and the FTSE 100 in London dropped 1.8%.Fears about US debt and a sharper-than-expected slowdown in the economy weighed on a wide range of sectors, including automotive and technology. Faurecia (-5.7%), Stellantis (-4.1%) and STMicroelectronics (-5.4%) were among the biggest decliners within the SBF 120. Air France-KLM fell 2.8%, although Bernstein on Wednesday raised its recommendation from "underperform" to "perform in line with the market". Barclays lowered its recommendation for Vivendi (-3.3%) from "overweight" to "neutral weight" and its price target from €12 to €11.25. The sale of shares by Vivendi's largest shareholder, Groupe Bolloré, suggests that it will not pass the 30% threshold any time soon, the financial intermediary reckons. Marks & Spencer (+12.9% in London) announced an increase in pre-tax profit for the 2022-2023 financial year and the resumption of dividend payments when its interim results are published in November.
U.S. stocks extended declines Wednesday, reflecting rising anxieties about the debt ceiling as lawmakers continued negotiations to raise the borrowing limit. The Dow Jones Industrial Average had a fourth-straight session of losses. The Dow fell 0.8%, or 255.59 points, while the S&P 500 dropped 0.7% and the Nasdaq Composite slid 0.6%. Few stocks were spared from Wednesday’s price declines. Within the S&P 500, the information technology sector fell 0.6%, while materials dropped 1.1% and financials lost 1.3%. Agilent Technologies fell roughly 6% after the maker of laboratory instruments reduced its outlook for the year. Energy stocks were a bright spot, rising 0.5%, as a decline in U.S. oil inventories helped lift U.S. crude nearly 2% to $74.34 a barrel. Some individual stocks also bucked the downward trend thanks to strong earnings reports. Among them were the retailers Abercrombie & Fitch and Urban Outfitters, logging double-digit gains. Palo Alto Networks (+7.7%) performed better than anticipated in the third quarter and raised its outlook. Surprisingly good figures for the second and third quarters were also reported by Toll Brothers (+2.1%), a construction company specialising in homes, and Urban Outfitters (+17.6%), an apparel company.
Stocks in Asia mostly fell, while Japan’s Nikkei 225 is up 0.6 per cent. On the other hand, the Shanghai Composite is down 0.7 per cent and the Hang Seng Index drops 2.1 per cent. There is no trading here on Friday due to public holidays. The Kospi in Seoul loses 0.5 per cent. As expected, the Bank of Korea left the reference interest rate at 3.50 per cent. According to the central bank, the gross domestic product is expected to grow by 1.4 per cent in 2023 - in February, the forecast consisted of a growth rate averaging 1.6 per cent. Inflation is still projected to average 3.5 per cent in 2023.
The policy-sensitive 2-year U.S. Treasury yield finished at its highest in more than two months on Wednesday after minutes of the Federal Reserve’s May 2-3 meeting indicated some policy makers might be open to further interest rate hikes. The 10-year Treasury note yield climbed by 4 basis points to 3.736%. The 2-year Treasury note yield jumped 8 basis points to 4.367%.
Target price Julius Baer: Royal Bank of Canada lowers to CHF 69 (73) - Outperform
Target price PSP Swiss Property: Berenberg downgrades to CHF 110 (120) - Buy
Target price Sonova: Oddo BHF SCA lowers to CHF 248 (265) - Neutral
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