Latest news with #MagnificentSeven
Reuters
6 hours ago
- Business
- Reuters
Trading Day: Investors shrug off Nvidia caution
ORLANDO, Florida, May 28 (Reuters) - TRADING DAY Making sense of the forces driving global markets By Jamie McGeever, Markets Columnist Hawkish Fed minutes A day of drift - stocks lower and bond yields higher - was the hallmark of global markets on Wednesday as investors, in the absence of major fresh news on tariffs or developments in long-dated bonds, waited for Nvidia's results after the U.S. close. In my column today I look at why the United States may follow Japan in looking to shorten the maturity of its debt profile, as investors turn increasingly reluctant to hold long-dated bonds. More on that below, but first, a roundup of the main market moves. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. Today's Key Market Moves Investors shrug off Nvidia caution Nvidia on Wednesday was the last of the U.S. 'Magnificent Seven' tech giants to report earnings. It announced record quarterly revenue in the first quarter of fiscal year 2026 but warned that tighter U.S. curbs on exports of its AI chips to key semiconductor market China will hit second quarter revenue. Investors cheered the news though, sending shares up as much as 4% immediately after the release. The relationship between Nvidia's share price and its long-term revenue outlook has been tight, and both were near recent highs before Wednesday's results. Nvidia said on Wednesday it expects revenue this quarter of around $45 billion, almost $1 billion below analysts' average estimate. As Deutsche Bank's Jim Reid pointed out earlier on Wednesday, there is still a "significant growth runway" required to reach the current consensus for fiscal year 2030 of around $375 billion, underlining the volatile nature of the stock. Indeed, although U.S. 'Big Tech' has taken a back seat to trade wars, U.S. fiscal concerns and trouble at the long end of global bond markets as the main drivers of investor sentiment recently, Nvidia shares haven't stood still - since the market low on April 7, they have rebounded 50%, outperforming the Roundhill 'Magnificent Seven' ETF and broader Nasdaq. The 'Mag 7' shares account for almost a third of the entire S&P 500 market cap, less than the peak of 35% late last year but up from the April low and still an extraordinarily high concentration of wealth in so few stocks. Big Tech has been quiet lately, but that's unlikely to last. The other big focus for investors in the U.S. session was the minutes of the Federal Reserve's May 6-7 policy meeting. There is usually something for everyone in these releases, but if there is one indication of where policymakers are leaning amid the fog of tariff uncertainty it may be this: "inflation" was mentioned 85 times, opens new tab, while "employment" and "labor market" were mentioned 23 times and 16 times, respectively. Looking ahead to Thursday, investors in Asia will react to Nvidia's earnings and guidance from after the U.S. closing bell the day before. Other highlights should be an expected interest rate cut from the Bank of Korea, revised U.S. GDP figures, and a $44 billion sale of 7-year U.S. Treasury bonds. Pressure on U.S. to follow Japan in debt profile rethink In the face off between heavily indebted developed economies and increasingly wary investors, Japan has blinked first, announcing that it will reconsider its debt profile strategy amid plunging demand for long-dated bonds. The U.S. could soon follow. Japan has the second-longest debt maturity profile of the G7 nations, with an average of around 9 years. Decades of ultra-low policy rates allowed Tokyo to borrow huge amounts at very low cost across the Japanese Government Bond yield curve. But in recent weeks, 30- and 40-year yields have soared to record highs, as appetite for long-dated paper at JGB auctions has dried up, a one-two punch that has forced officials to consider reducing issuance of long-term bonds in favor of short-dated debt. Many of the debt pressures bearing down on Tokyo are also being felt in Washington. The U.S. no longer boasts a triple-A credit rating, following the downgrade from Moody's earlier this month, and the non-partisan Congressional Budget Office projects federal debt held by the public will rise to a record 118.5% of GDP over the next decade from 97.8% last year. Net interest payments will rise to 4.1% of GDP from 3.1%, it predicts. Finally, there is Trump's tax-cut bill, which is projected to lump $3.8 trillion onto the federal debt over the next decade, according to the CBO. All this is creating understandable unease among investors, and even though foreign demand at bill auctions has remained high, on average, demand at bond auctions is the lowest in years. The Treasury may be forced to grab a page out of Japan's recent playbook and shorten its maturity profile. The U.S. has the shortest 'weighted average maturity' (WAM) of all G7 countries at 71.7 months, according to the Treasury. That's due to a mix of factors, including rising deficits, Fed holdings of longer-dated bonds, and high liquidity and demand at the short end of the curve. But this figure has rarely been higher on its own terms. While the WAM reached a record 75 months briefly in 2023 and was elevated during the post-pandemic period, it has otherwise rarely exceeded 70 months. Indeed, the average going back to 1980 is 61.3 months. Shifts in the Treasury's WAM over the past half century have largely been driven by the interest rate environment, economic and financial crises and investor preference. While today's mix of market, economic and geopolitical trends is unique, it doesn't point to strengthening investor demand for long-dated bonds. The decades before the pandemic – the period known as the 'Great Moderation' – were generally marked by falling interest rates, flattening yield curves, and weak inflation. That era is over, or at least that's the growing consensus among investors and policymakers. This largely reflects the belief that inflation pressures in the coming decades will be higher than those seen during the 'Great Moderation' – particularly given the move toward high tariffs and protectionism – meaning interest rates are likely to remain 'higher for longer'. At the same time, America's apparent move toward isolationism and increased political volatility is apt to make global investors consider reducing their elevated exposure to dollar-denominated assets. That could make it harder for the Treasury to borrow long term at acceptable rates. These are broad assumptions, of course, and there are many moving parts. A sharp economic slowdown or recession could flatten the yield curve and spark an increase in longer-term issuance. But the curve is currently steepening, and the U.S. 'term premium' - the risk premium investors demand for lending 'long' to Treasury instead of rolling over 'short' loans - is the highest in over a decade and rising. This creates two problems. First, the Treasury may prefer to borrow longer term but not if yields are prohibitively high. Second, even though the U.S. can borrow more cheaply at the short end when the curve is steepening, this increases the 'rollover risk', meaning the government becomes more vulnerable to sudden moves in interest rates. T-bills' 22% share of overall outstanding debt is already above the Treasury Borrowing Advisory Committee's recommended 15-20% share, but it's hard to see that coming down much any time soon. Morgan Stanley analysts earlier this month outlined a "thought experiment" whereby low demand for notes and bonds could see the share of bills approach 30% by 2027. Ultimately, Treasury supply will largely depend on investor demand. If primary dealers indicate a preference for shorter-dated bonds, the 'WAM' will probably fall. Japan won't be the only developed economy rethinking its onerous borrowing plans. What could move markets tomorrow? Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, opens new tab, is committed to integrity, independence, and freedom from bias.
Yahoo
12 hours ago
- Business
- Yahoo
Nvidia earnings: What's driven the chip stock in the AI era
AI chip giant Nvidia (NVDA) is due to release its latest earnings report after Wednesday's market close, rounding out the last of the Magnificent Seven this earnings season. Yahoo Finance senior markets reporter Josh Schafer comes on Catalysts to outline several charts tracking Nvidia's stock performance around certain events, including the launch of OpenAI's ChatGPT and how the company outperforms its chip competitors. Catch Yahoo Finance's coverage of how the chip stock historically reacts to earnings and the areas that matter the most for the semiconductor titan. Tune in to Yahoo Finance's special live coverage of Nvidia's first quarter earnings here, beginning at 4:15 p.m. on Wednesday, May 28. To watch more expert insights and analysis on the latest market action, check out more Catalysts here. NVIDIA earnings do out after the closing bell today. I want to bring in our very own Josh Shafer. Steve Sosnik's still here with us, but Josh, I know that you're looking at a few charts that investors should keep top of mind heading into the print today. Yeah, Maddie, so we took a look at a list of charts since the launch of ChatGPT, which would have been November of 2022, and just tried to explain NVIDIA's performance. How do we get here two years later after really what was that big earnings report two years ago that sent the stock soaring, right, in May of 2023? First chart is pretty simple. It's just the top five performers in the S&P 500 since ChatGPT was launched. You can see NVIDIA far outperforming the others there. Interesting point on this chart as well, when you take a closer look at it, several of the stocks that are included in the best performers in the S&P 500 actually weren't even in the index when ChatGPT was launched. I'm looking at Super Microcomputers, Coinbase to name two of those. And then I think other interesting here is just how NVIDIA has sort of surpassed its competitors, right? So we took a look at simply market cap growth among three companies that really should sort of be in this AI race. You have, of course, have NVIDIA, you have AMD, and you have Intel, which its market cap has actually fallen over the last two and a half years. But I think the core question here, of course, is why, right? And you hear a lot about sort of the hype story with NVIDIA. You can go to a bar in Manhattan now and someone might talk to you about this stock and they don't really know exactly what it does, right? But when you look at the fundamentals and you look at simply the revenue growth that this company has seen since November 2022, it's absolutely skyrocketed, right? You were in revenue less than 10 billion. We're zooming in on that chart right now. Revenue closer to almost 40 billion from a total. That purple section there is data center revenue. Of course, that's the key metric. Steve, I look at a chart like this and it makes a lot of sense to me why a stock would rally as much as it has, right? You're looking at a massive rate of change in the fundamentals of the company. But I also look at that chart and I see it not growing as much every single quarter, right? And it makes me sort of wonder if I'm an investor, what happens next after this sort of rally and how do we think about the fundamental story of NVIDIA? The law of large numbers catches up to you sometimes. I mean, when you, when you think about it, you know, I, I before you came on, Maddie, and I, it's in the, in a prior segment that, you know, I, I contrasted the current AI gold rush with, let's say, with the, with the internet era, which, you know, and I said these companies make money. I mean, NVIDIA, NVIDIA's trading at about a 31 estimated PE, but it's PEG ratio, meaning the, the price earnings, the forward price earnings over its growth is about one. That's typically not a wor, you know, you, you start to worry when you see two, three, four, five, or infinite, but in this case, the earnings, you're, you're getting delivered earnings. You're getting delivered top line and bottom line. So of ultimately, yes, it's, it's hard to imagine that this, that this growth rate can continue just as the company gets so big. It's now the second largest component of the S&P 500. But, um, to your point, it's, it's there. Top and bottom line is there. Yeah, does make some sense. Well, another question I have to if we can pull up the second chart here that shows NVIDIA outperforming some potential competitors, the likes of Arm and Intel. Steve, is that bullish or bearish? Like, is that outperformance going to be justified going forward, or is that a valuation fear chart to you? The question is, can the other ones, is their lead insurmountable? Um, and, you know, tech is littered with companies who had insurmountable leads that, that got caught upon. I mean, you mentioned Intel among others. So, is it going to happen next week, next month? Probably not. Will some of these other competitors catch up? You know, or the flip side is, you know, does the deep seek, um, situation mean that people can get away with There's deep seek. Like, we're not talking about deep seek enough, I think, and you correct me. Exactly. No, it's the first time I've used the term in, in, in weeks, but you know, that was that a flash in the pan, or was that real? If it, you know, and I think we'll probably hear something from Jensen Huang, you know, tonight about that. But, um, you know, if, if there are alternatives to some of the more expensive, you know, NVIDIA chips, which to be fair, again, using my limited knowledge of, of chip set design, Blackwell seems to be the real thing in terms of the amount of calculations it could do, price performance ratio. But in term, you know, can do you need that sort of, do you need that to get to where you need to be in AI? That's a huge question as well. Well, and to the deep seek point too, I think the other question here is, so if I'm an investor and I just want to invest in the broad AI theme, do I then move from maybe semiconductors into something else, right? I was just at an outlook earlier this morning with the team over at Bernstein Private Wealth, and one of their strategists was saying, what we're telling investors, if they come to us and just say we're interested in AI as the theme, maybe look at a big box retailer that could benefit from AI, right? If we're thinking deep seek could disrupt the chip organization, and deep seek makes everything cheaper, well, where does that sort of fall, and who does that benefit? It would benefit the end user, right? And so where are the opportunities sort of outside this space? Steve's smiling like he probably already made this point earlier, right? But I think that's definitely one of the growing conversations that we've continued to talk about more and more, it seems like. Maddie elicited that comment from me earlier. So, yeah, this is exact, this is exactly what it is. Ultimately, a, for the same reason the internet worked and became a transformative technology, it was because companies could do stuff with it that, that really helped their bottom line. I work the company I work for, interactive brokers, we, we, we had this tiny little web brokerage division. And now as a result, you know, now we've completely, the business model of our company is completely different than where we were when I joined it in a good way, right? But, but so this is the, you know, there, there are going to be uses for AI. There's, you know, if, if this, if the promises is real, it's going to affect all kinds of companies, but it's not going to happen overnight, and we have to see that at some point because you can't just keep spending money, billions of dollars on stuff without it actually yielding some result. Well said, Steve. Thank you so much. And thank you, Josh, for bringing us those fantastic charts here. Sign in to access your portfolio
Yahoo
12 hours ago
- Business
- Yahoo
Nvidia earnings: What's driven the chip stock in the AI era
AI chip giant Nvidia (NVDA) is due to release its latest earnings report after Wednesday's market close, rounding out the last of the Magnificent Seven this earnings season. Yahoo Finance senior markets reporter Josh Schafer comes on Catalysts to outline several charts tracking Nvidia's stock performance around certain events, including the launch of OpenAI's ChatGPT and how the company outperforms its chip competitors. Catch Yahoo Finance's coverage of how the chip stock historically reacts to earnings and the areas that matter the most for the semiconductor titan. Tune in to Yahoo Finance's special live coverage of Nvidia's first quarter earnings here, beginning at 4:15 p.m. on Wednesday, May 28. To watch more expert insights and analysis on the latest market action, check out more Catalysts here.
Yahoo
16 hours ago
- Business
- Yahoo
What Nvidia's earnings mean for AI and the broader market
Palumbo Wealth Management CEO and CIO Phil Palumbo joins Catalysts with Julie Hyman and ProShares global investment strategist Simeon Hyman to talk about Nvidia's (NVDA) upcoming earnings report and the impact it could have on the rest of the "Magnificent Seven" as well as the larger market. To watch more expert insights and analysis on the latest market action, check out more Catalysts here. Well, as for Nvidia shares, they are on the rise ahead of its results. They're due out after the bell on Wednesday, and it looks to be lifting other magnificent seven names with it ahead of earnings. So what does all this mean for the AI trade and for the market more broadly, joining us now Phil Palumbo, Palumbo wealth management CEO and CIO who oversees more than half a billion dollars in assets under management. Among them Nvidia. Phil, thanks for being with us. So, you know, obviously we're watching the shares very closely, the company very closely, but we're also looking at the ripple effect here. So talk to us about sort of the importance for Nvidia for the rest of the market. Nvidia's the backbone of this AI movement that we're seeing, which I believe we're in the second or third inning and is there's more than just the AI, then there's robotics, the autonomous driving, which is all tied to chip development, and Nvidia has a leg up relative to their competitors, closest being AMD. So in my personal view, it's, you know, short term there could be volatility around all this, but, but longer term Nvidia's the biggest player then and that's not going to cease as we think about that space going forward. Phil Simmy and Hyman. How are you? I've been looking at the AI sector for the last couple of years and it's almost the upside down of the late 90s, where the benefits have been going to incumbent players rather than new disruptors, but we've been talking a little bit this morning about some of those disruptors starting to get some traction. Does that make it better for everybody or does it challenge some of the dominance of the incumbents? I feel that it's, you know, it's a it's an area right now where they're going to be a lot of players, especially the pure plays that are private, like Cerebrus, you know, which eventually go public. You know, they're going to be a big, big player in this particular space. So I think there's just a lot of room for other people to also thrive. It's not just Nvidia, but Nvidia for sure is the dominant player and I just don't see that stopping right now. Phil, if Nvidia, um I mean what we've seen recently is even if it reports strong numbers, the shares sometimes go down because the expectations are quite high. What then does that do to the Magnificent Seven trade? Is it lasting? Is that an opportunity on the flip side for people to maybe add to their positions? What do you think? It's not all tied together. I mean, everybody within the mag 7 does something different, right? Like Microsoft right now is dominating in the cloud business. Nvidia is dominating in the chip business. I mean there's they're they're all, it's all relative to AI, but they all do something different. So it doesn't mean if Nvidia is going to get crushed, that they're all going to get crushed in tandem. So, but I just don't think that's going to happen. I do believe that I think Nvidia is going to have a very strong print and I think that it'll, it'll put some, it'll be an engine behind the other mag 7s. I do think you'll see some of that, um, but I do think at this point it's going to be on an individual, uh, individual company basis. Um, sorry, go ahead. Go ahead, Simmy. The quality of the broad market, the S&P 500, we have return on assets, other quality metrics almost double than they were 20 years ago, driven in part and in large part by those magnificent seven. Is there anywhere else we can see some of that earnings and return on capital power coming from? I don't for now, because the, the growth behind this economy is going to be in AI and continue to be for some time. A lot of the investment today is, which is over 300 billion dollars and that's only going to grow going forward. So AI is definitely going to be a big, big part of that. In utility space, um you know, that's a particular space, you know, we need energy to drive these data centers. So we're seeing growth in the in the utility space and I think that will continue going forward. So so it's all kind of tied together in some way. Look at copper, you know, on the commodity side is starting to rally, you know, why is that rallying because electricity and copper is needed for that. So, so we're seeing different markets uh that's that that are going to grow as a result of this AI demand. So Phil, when you're talking about portfolio construction, how you know, everybody's talking about the sort of AI thesis these days. So how heavily do you sort of wait in that direction? How diversified should people be? What you know, what role should that be playing in people's investments? So I'm a big believer in quote unquote the Warren Buffett Munger style investment where you own a core group of really great businesses. You know, Berkshire Hathaway is one of them, Costco's another one, waste management, Johnson and Johnson as a couple of examples. And then, you know, you have your, we call elite tech, right? So elite tech, those that are dominating in an area that's really growing today and that's what you want to be involved with. You know, you mentioned before the the late 1990s, I would argue that when you think about these businesses and you think about the free cash flow generation, it's much different than the late 90s and those internet companies. We're talking about companies that have real strong growth. You have incredible free cash flow, I mean, Microsoft's at 70 billion, Nvidia's at like 80, 90 plus billion, margins are at 40% on Microsoft, greater on Nvidia. And their multiples are not nearly as high as they were back in the late 90s. So, so when you're thinking about building a portfolio, you want to have your core positions, you want to have your elite tech, which for me is the Microsoft, Nvidia, uh Netflix and Tesla. And then I do believe you want to have your emerging technology, companies that are going to emerge like the next Nvidias of the world and the next Amazons at some point in the next five or 10 years. And then we, we wrap that around using privates, you know, so because in the private market, there are, like I said before, pure plays that will perform really, really well over the next 5 and 10 years. So, so you don't want to, you want to make sure you're involved in a private market as well, which is really an area that's growing tremendously. Phil Palumbo, thanks so much for being here. Appreciate it. Thank you. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Time of India
16 hours ago
- Business
- Time of India
Apple shares face more pain as Trump's tariff threat looms
HighlightsApple Inc. shares have experienced their longest selloff in over three years, declining 22 per cent in 2025, amid escalating tariff threats from President Donald Trump, who has proposed a 25 per cent tariff on foreign-made smartphones if Apple does not move production to the United States. Analysts express skepticism regarding the actual implementation of the proposed tariffs, with some suggesting that if enforced, Apple may have to raise iPhone prices significantly, potentially by $250-$300, to maintain gross margins, which could lead to reduced consumer demand. The current political and economic climate has led to a reduction in earnings estimates for Apple Inc., with the consensus for net earnings in 2026 dropping by 5.1 per cent over the past three months, further complicating the company's financial outlook amidst ongoing trade uncertainties. Apple Inc. shares are coming off their longest selloff in more than three years, as escalating attacks from the White House threaten to further erode the company's profit outlook, suggesting the stock's struggles this year are far from over. President Donald Trump on Friday threatened to levy a 25% tariff on the company's products if it doesn't shift iPhone production to the US. Shares fell 3% to end the week, their eighth straight negative session, the longest such selloff since January 2022. Some analysts are skeptical that the tariffs will come to pass, but any movement in this direction will put the company in a position where it either has to absorb the higher costs, weighing on its earnings and margins, or pass along higher prices to consumers, which could erode demand at a time when Apple is already struggling with tepid growth and difficulties with its artificial intelligence offerings. 'The threat may be politically motivated but markets can't ignore the headline risk,' said Haris Khurshid, chief investment officer at Karobaar Capital. 'This kind of tariff rhetoric, even if it never materializes, chips away at investor confidence . You can't run a $3 trillion company with a trade grenade hanging overhead.' Apple is the worst-performing Magnificent Seven stock this year, and its 2025 drop of 22% stands in stark contrast to the 0.5% decline of the Nasdaq 100 Index. The stock has broken under key moving averages, but isn't yet at the level that would indicate oversold conditions, based on its 14-day relative strength index. The CBOE Apple VIX, which tracks a market estimate of future volatility for the stock, jumped more than 30% last week. The stock has endured political and tariff-related swings, though Friday's selloff was far milder than Apple's drop after the initial announcement of tariffs in April, when the stock underwent historic volatility, including its biggest four-day drop since October 2000. The Trump administration subsequently walked back several of its more extreme tariff pronouncements. It exempted key categories of electronics — including smartphones and computers — from its so-called reciprocal tariffs, while the US and China agreed to temporarily lower tariffs on each other's products. 'It would be probably a surprise to most investors if this actually happens,' Matt Stucky, chief portfolio manager of equities at Northwestern Mutual Wealth Management, said. He added that Friday's move in Apple shares underscored this point: if investors believed the 25% rate will be enforced, traders likely would have sent the stock down further. Trump's quickly evolving position was on display on Friday when, a few hours after taking aim at Apple on social media, he said the 25% tariff would apply to all foreign-made smartphones. Ironically, this could be to Apple's benefit, according to JPMorgan analyst Samik Chatterjee, who said that if all competitors in the industry face the same hurdle, 'Apple's pricing power with consumers as well as suppliers would position the company favorably relative to peers, rather than at a disadvantage.' Still, the situation is difficult for Apple because it has few obvious recourses to appease Trump. The idea of fully domestic iPhone manufacturing is 'a fairy tale that is not feasible,' according to Wedbush analyst Daniel Ives. Given the complexity of Apple's supply chain — including materials, assembly, labor, and machinery — Bloomberg Intelligence estimated it would take several quarters to move iPhone assembly to the US. Last month, Bank of America calculated that iPhone costs could rise 90% or more if they were made in the US. Apple was reportedly already considering price increases, though trying to avoid the perception they were related to tariffs, as Trump has also attacked companies that have raised prices due to the levies. Estimates vary on how significant tariffs could be to Apple. Bloomberg Intelligence estimated they 'might cut gross margin by 300-350 bps for fiscal 2026,' while Citigroup analyst Atif Malik estimated 'about 130 bps incremental gross margin impact, or 4% incremental EPS impact in FY26.' Wells Fargo Securities analyst Aaron Rakers is skeptical tariffs will materialize, but said Apple would have to raise prices by $250-$300 per iPhone in order to maintain gross margins. Ives at Wedbush said iPhones would cost about $3,500 if made in the US. Analysts have been trimming their estimates on account of the uncertainty. The consensus for Apple's net 2026 earnings has dropped by 5.1% over the past three months, while the view for revenue is down 3.9 per cent over the same period. Further cuts to estimates would have the effect of making the stock appear more expensive by shrinking the denominator in the price-to-earnings ratio. Apple currently trades around 26 times estimated earnings, above its 10-year average, and more than megacap peers that are expected to grow faster. The combination of a higher multiple and slower growth suggests a difficult setup, even outside of the tariff situation. 'We're in that ugly space because it's a bit of a no-win situation right now,' said Brian Mulberry, a client portfolio manager at Zacks Investment Management. 'There is probably a point where you can see the price becoming attractive enough for long-term investors,' but the valuation and uncertain backdrop means it isn't there yet.
