25 August 2023
|Index / Fund / Rate||Start of Year||Last week||This Week||% change YTD|
|Lunar BCI WW Flexible Fund||141.43||176.65||175.87||24.35%|
|JSE ALSI||73 049||73 081||73 836||1.08%|
|NASDAQ Composite||10 467||13 291||13 591||29.84%|
|S&P 500||3 840||4 370||4 406||14.73%|
|Prime Lending Rate||10,50%||11.75%||11.75%||11.90%|
|Brent Crude ($’barrel)||85,95||84.79||84.89||-1.23%|
Weekly Stocktake with Danyaal
Nvidia: Where to from Here?
Nvidia released the most anticipated results of the earnings season last week. Since the beginning of the year, Nvidia’s stock price has increased over 220% which resulted in their market capitalisation reaching $1.1 trillion by Friday last week. During the year, the market became ever-more optimistic about Nvidia. For the recent quarter, revenue increased by 101% to $13.5 billion compared to the same quarter last year, with the gross profit margin reaching 70%. Nvidia’s quarterly net profit increased by 843% to $6.18 billion.
The primary cause behind these results largely stemmed from Nvidia’s sales of Graphic Processing Units (GPUs) used in AI (Artificial Intelligence) data centres. The main buyers of these products include Alphabet, Microsoft, and Amazon; all of which already had extensive data centre infrastructures. The most sort after chip for AI infrastructure is Nvidia’s H100 chip, which costs around $40,000. Since ChatGPT’s debut last year, companies have been adjusting their budgets to accommodate AI expenditure. These tech companies have been allocating substantial resources to acquire these chips so that they can try get ahead in the AI race.
Although Nvidia performed strongly this quarter, there are concerns about the sustainability of these results, and the strategies that companies will implement to provide AI services. Microsoft, who owns a stake in OpenAI (the creators of ChatGPT) have recently incorporated Large Language Models (LLMs) in some of their products such as Office365. In terms of hard numbers, the long-term implications of this implementation still remains unclear. Investors will be looking for concrete returns on investment on AI spending. Without adequate returns, AI infrastructure spending will reduce, impacting the share prices of companies like Nvidia.
Nvidia, Microsoft and Amazon are held in the Lunar BCI Worldwide Flexible Fund. They are also held by Lunar Capital’s Offshore Portfolio Clients.
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This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.