Political wrangling over the US debt ceiling cast a long shadow over markets this week. Even a 26% jump in Nvidia (NVDA:NASDAQ) on the back of a big earnings beat and 50% guidance raise couldn’t push the Nasdaq into positive territory.
Credit rating agency Fitch put the US on negative watch on Wednesday saying although it expected congress to find a solution there was a heightened risk the government could miss some interest payments on its debt.
Revisions to US first quarter GDP showed the economy was stronger than first thought. The economy advanced 1.3% which is higher than the 1.1% preliminary estimate.
Consumer spending remains robust, rising 3.8% which is higher than economists had forecast. Bond yields pushed higher over the week with the 10-year yield finishing at 3.8%.
Key to whether the Fed pauses or continues to hike rates at its 14 June meeting will be the core PCE (personal consumption index) figure for April due later today. The consensus is for a small month on month rise of 0.3% and an annual increase of 4.6%.
NVIDIA
Ciao, Don Nvidia, it feels like the Godfather of AI was elected this past week, when the Santa Clara-based chip designer stole the show with news that shook the markets and took investors’ breath away.
Just how often does a multi-billion-dollar business jump 23% in a single session (it’s rare), but that’s exactly what Nvidia did, adding a staggering $175 billion to its market value and setting a share price all-time high of nearly $380 after blasting past first quarter (Q1) expectations and hiking Q2 guidance by more than 50%.
‘A trillion dollars of installed global data centre infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process,’ the company said.
‘Our entire data centre family of products is in production. We are significantly increasing our supply to meet surging demand for them,’ it added.
Yet even Nvidia must be stunned by how fast companies are jumping on the technology industry’s next big thing. This is evident from the firm’s Q2 guidance hike of more than 50%. Nvidia said it anticipated Q2 revenue of around $11 billion, ‘plus or minus 2%.’ Consensus had been pitched at $7.13 billion.
COSTCO WHOLESALE
Shares in Costco Wholesale (COST:NASDAQ) cheapened 2.4% to $487 over the week, though they actually rose 0.8% in after-hours trading following the Washington-headquartered retailer’s disappointing third quarter results.
Earnings per share came in shy of consensus at $2.93 per share, a 7.6% year-on-year decline. And Costco’s near-2% rise in sales to $52.6 billion also missed forecasts as hard-pressed consumers curbed spending on discretionary items and prioritised essentials such as groceries and packaged food in the face of persistent inflation and an uncertain job market.
The global membership retailer’s comparable sales were down in the US and Canada in the quarter, while e-commerce sales fell 10% as shoppers continued to return to stores following the pandemic.
ZOOM VIDEO COMMUNICATIONS
While Zoom Video Communications (ZM:NASDAQ) first quarter earnings to 30 April beat expectations (22 May) the 3% increase in revenue was the slowest quarterly growth on record.
EPS (earnings per share) rose 13% to $1.16 on a 3% increase in revenue to $1.105 billion. A year earlier, Zoom earned $1.03 a share on sales of $1.074 billion. Estimates had been pitched at $0.99 EPS on $1.084 billion sales, so a 13% and 2% beat versus forecasts respectively. Free cash flow, which is net cash provided by operating activities less purchases of property and equipment, was $396.7 million, compared to $501.1 million in the first quarter of fiscal year 2023.
An early surge for the shares off the back of the numbers failed to last as the company's guidance hinted at a slowdown for its enterprise business, which serves larger customers and had chalked up quarterly growth of 13%.
For the current quarter ending in July, Zoom said it expects earnings of $1.05 a share at the midpoint of its outlook, in line with estimates. The company forecast revenue of roughly $1.13 billion versus estimates of $1.11 billion.
