🎙️ AI Tipping Point

New ATHs. Tech stocks are flying. Retirement accounts are sitting pretty.

Thank you, Nvidia.

The S&P 500 hit another fresh record high today, and the Nasdaq posted its best day (+2.96%!) in over a year after Nvidia’s blockbuster earnings.

In Japan, Nvidia’s results helped the Nikkei stock average surpass its 1989 all-time high. It’s Nvidia’s market right now, and we’re all witnesses.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the three biggest stories in markets:

• Nvidia sales reach new heights

• Breaking down the latest Fed minutes

• Kenya cracks down on access to crypto exchanges

All this, and more, in just 5 minutes to read.

Chart of the Day

In The News

📈 Nvidia Sales Soar as Company Forecasts Bigger AI Boom

“The most important stock on planet Earth,” that’s what Wall Street has to say about Nvidia, which keeps going up.

The computer chip giant posted bumper earnings that crushed Wall Street estimates (again), driven by excitement over artificial intelligence — Its chips train the huge AI models developed by places like Microsoft and Meta.

The low-down:

• Nvidia posted revenue of $22.1 billion for its fourth quarter, a 265% jump. Net income surged 769%.
  

• Its data center division, now its largest source of sales, generated $18.4 billion of revenue, up 409% from the same period a year earlier. Gaming chips provided $2.87 billion of sales.
  

• The company’s shares jumped 15% to a new all-time high, adding to its 60%-plus rally in 2024, 275% rally over the past 12 months, and its 1,850% rally over the past five years, making CEO Jensen Huang a very wealthy man, alongside many retail investors, too. 

More to come? Huang sees no signs of slowing down, forecasting revenue to hit $24 billion this quarter, way ahead of estimates. 

• “Fundamentally, the conditions are excellent for continued growth” in 2025 and beyond, Huang told analysts.
  

• Huang described AI as hitting “the tipping point” and indicated demand for the computing power that underlies AI remained astronomical. “Demand is surging worldwide across companies, industries, and nations.”

Why it matters:

Nvidia has quickly become one of the world’s most valuable companies and one of the market’s most important stocks. Its stellar earnings report once again helped send the entire market higher on Thursday, electrifying U.S. markets.

• Wedbush analyst Daniel Ives, a long-time Nvidia bull, said the results show that “the AI revolution is just starting and not peaked.”
  

• Huang said that even though sales more than tripled in the company’s fiscal fourth quarter from a year earlier, they’re projected to do so again in the current period.

Bottom line: Nvidia has one of the best problems a business can have: So much demand that your biggest worry is keeping pace. “Demand will continue to be stronger than our supply provides through the year, and we’ll do our best,” he said.

Read more

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💬 Fed Minutes Show Thinking on Interest Rates, Economy, and Inflation

The Fed rarely plays second fiddle to anything else in markets, but it came pretty close on Wednesday with investors keenly awaiting Nvidia’s earnings.

Meanwhile, the Fed released the minutes from its last meeting, revealing officials’ thinking on the economy, interest rates, and inflation.

The tone was cautiously optimistic, with Fed leaders feeling their policy decision in mid-2022 to raise interest rates had succeeded broadly in taming inflation. Still, for the central bank to cut rates, they suggested “greater confidence” that inflation has normalized is needed.

• Per the minutes, “In discussing the policy outlook, participants judged that the policy (interest) rate was likely at its peak for this tightening cycle.”

Translation: We remain in limbo. While chatter has picked up on the fringes of Wall Street that inflation could re-emerge, forcing the Fed to raise interest rates this year, we’re in a holding pattern favoring cutting.

• The Fed will be “carefully assessing” new data — a phrase it tossed around a few times, suggesting there may be internal debate over what recent data means for inflation trends, hence the desire to observe more data points on the economy and inflation.

Why it matters:

Of course, conclusive data is elusive — you can always want to see ‘one more data point’ to verify your thinking. But a stable economy growing 2.5% in 2023 despite 11 interest rate hikes and adding over 350,000 jobs in January gives the Fed more breathing room.

Only evidence of a sharp recession or surge in inflation would force them to respond one way or another. Otherwise, it’s a wait-and-see game.

• With the Consumer Price Index rising 3.9% year-over-year (excluding food and energy) in January, inflation certainly doesn’t seem to have been entirely vanquished.
  

• Yet, the Fed works on a forward-looking basis, not dwelling too much on what happened last year, focusing more on what they think will happen in the next 12 months.

Read more

More Headlines

☎️ AT&T customers report massive outage, disrupting phone service

💰 Tax evasion by wealthiest millionaires and billionaires top $150 billion 

😎 Small business confidence hits highest level since Biden took office

👀 Substack hits 3 million paid subscriptions

👉 Why Monster Beverage is the best-performing stock of the past 30 years

🏗️ President Biden directs $20 billion initiative to protect U.S. ports

❌ Nigeria Limits Crypto Access

Nigerians’ embrace of cryptocurrency is becoming a major headache for its government — outside India, Nigeria has the highest proportion of private wealth stored in cryptocurrency.

With the country’s currency, the naira, hitting record lows in foreign exchange markets, officials are desperate to “crackdown on currency speculation,” as the Financial Times reports.

• On Wednesday, the government ordered telecoms companies to restrict users’ access to the websites of major crypto exchanges like Binance, Coinbase, and Kraken, pivoting dramatically from previous “market-friendly reforms” meant to attract overseas investment.

No fans of competition: Digital assets like bitcoin are being seen as competition, pulling demand away from the country’s local currency.

• Part of the problem for officials is a widening divergence between the naira’s official exchange rate and the unofficial black market rate.
  

• The naira’s official exchange rate has been devalued twice in the past eight months, recently moving from ~900 naira per U.S. dollar to 1,600.

Meanwhile, crypto exchanges have become a hub for setting the unofficial naira exchange rate when buying/selling digital assets, spurring an advisor to Nigeria’s President to blame crypto exchanges themselves for setting the exchange rate and hijacking control of the naira from Nigeria’s central bank.

Why it matters:

That is, of course, not how things work. Investors are opting into transactions on crypto exchanges and elsewhere at what they believe is an appropriate exchange rate (and the crypto exchange companies have nothing to do with the process.)

Still, such power struggles are common when governments decree an exchange rate or actively interfere with exchange rates rather than accept the free market’s pricing.

• The Nigerian government official commented further, “Crypto should be banned in our country, or else this bleeding of our currency will continue unabated.”

The real problem: Regardless of one’s stance on crypto, the issue is that Nigerians do not wish to buy or hold the country’s weak currency. While access to cryptocurrencies provides a chance to escape Nigeria’s financial system, investors’ motivation to do so is a symptom of more chronic economic problems, like soaring inflation.

• But this isn’t Nigeria’s first creative attempt at defending its currency without fixing the issues causing its weakness.
  

• In 2015, the government’s solution was to chop down the trees lining the streets of its capital city to prevent black market money exchanges.

Read more

Quick Poll

Yesterday, we asked: Sentiment in the stock market right now is…

—For Team Greedy, one reader noted: “Holding cash at 5% seems safer than a market dictated by seven stocks.”

—Voting “fearful,” someone wrote: “Due to the elections coming up, dwindling trade, apprehension regarding the sky-high inflation in the past months, it can be said that sentiment is fearful.”

—After voting “neutral,” one reader wrote: “I tend to listen to my friends who don’t study markets. When I start to hear a lot of them talk stock — I get out. I haven’t heard a lot of talk…but I have heard some.”

See you next time!

That's it for today on We Study Markets!

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