NVDA: Why curbs don’t bother me
Good morning! 👋
Futures are down in early going ahead of the Fed while the US10YR continues to track higher as the war in Gaza broadens. Meanwhile, NVDA is under pressure as the Biden administration accelerates tech curbs to China.
What’s it all mean?
The answer might surprise you.
I stopped by for a quick chat at O-dark thirty this morning with Maria Bartiromo and thought you might find my perspective helpful. (Watch)
Image source: FOX Business News
Here’s my playbook.
It’s the Fed (again)
Forget about whether the Fed pauses today or not.
The more important question is what it does next, and I think the answer is—sadly—very clear.
I believe the Fed is going to raise rates one more time this year and again in Q1 2024, a comment you’ve heard me make several times in recent weeks—including Monday during a conversation with the venerable Stuart Varney. (Watch)
We’ve seen this playbook so many times before, and it would be laughable if it weren’t such a travesty.
Clearly Powell is a smart guy, but he’s boxed himself into a corner. I think he’ll do everything he can to create the perception that he’s in charge and has things under control without sounding either too hawkish or too dovish.
The problem with that is that the market doesn’t want a “Goldilocks” moment.
What the market wants and needs is certainty.
If Team Powell says that the Fed’s data dependent, what he’s really doing is acknowledging that he and his staffers are looking in the rearview mirror. He should be looking forward and thinking strategically.
The mismatch sets up another once-in-a-generation buying opportunity, in my mind, a comment that’s being echoed by Richard Bernstein Advisors. (Read)
Be in to win or you won’t… win.
NVDA: why curbs don’t bother me
NVIDIA has announced that new US export curbs on the sale of high-end AI chips to China have been accelerated. The headlines, of course, are raging that this places $5 billion worth of Chinese orders at risk. (Read)
I’m not particularly concerned:
The global AI market is expected to grow at 38% every year between now and 2030, at which point it will be a nearly $400B market
AI is expected to create 130+ million new jobs within the next seven years
AI will contribute more than $15 trillion to the global economy over the same time frame
50%+ of large enterprise companies will use AI by next year in one way or another
25% of companies are already adopting AI, or plan to, as a way to address labour shortages and wage increases
Global AI funding is now over $45 billion and growing rapidly
If anything, this is an amazing buying opportunity, even at $400 a share.
Buy low, sell high is how you play the game.
Tactics are how you win.
Keith’s Quick Tip: if daily squiggles in news headlines like the one impacting NVDA today bother you—and I get that they might—take a deep breath. Then take a good, hard look at why you’re investing, what you hope to accomplish by doing so, and the companies you own. Contrary to what a lot of people seem to think, investing is not about “collecting” stocks but about accomplishing specific goals with specific results in your life.
Zillow’s days numbered or about to soar?
In what is being described as a landmark decision, a US jury found yesterday that the National Association of Realtors and some residential brokerages are guilty of conspiring to keep commission prices high.
Damages were awarded to the tune of $1.78B. Interestingly, that figure could potentially be tripled under US antitrust law, to more than $5.3 billion. (Read)
I’ve long felt that it’s a racket, and now the courts apparently agree with me.
Zillow comes to mind for obvious reasons, as does Redfin.
I could make the case that both stocks may benefit if the ruling holds, even though they’ve sold off in kneejerk fashion more immediately.
CA strikes again: Higher wages = higher prices to consumers
California governor Gavin Newsom recently signed higher minimum wages into law. No surprise, McDonald’s and Chipotle have both announced they’ll raise prices almost immediately. (Read)
Two things come to mind:
The push to fast-food automation will accelerate.
There are going to be a lot of franchise food owners who go out of business because the markets won’t support higher pricing where they operate.
Unfortunately, there really isn’t a way into the fast-food robot business yet, but that time is coming.
Meanwhile, companies to watch in this space include of course NVIDIA (for obvious reasons), Rockwell Automation (a leading industrial automation company that could easily cross into fast-food operations), and Teradyne (which specializes in industrial equipment that automates repetitive device testing tasks).
WeWork ready to file BK
WeWork, remember them?
Reports are swirling that the company, once valued at $47B, is apparently getting ready to file for bankruptcy. (Read)
Like this is a surprise.
Leasing space, spiffing it up with snazzy furniture, and calling it a “lifestyle” isn’t a business any more than putting an interactive tablet on a stationary bike is.
Or, ahem, was.
People ask me about hot stocks frequently.
That’s the wrong question.
Ask yourself which stocks will be there when you need ‘em and work backwards.
It’s a very short list.
As always, let’s MAKE it a great day—you got this!