Finimize - 😯 Nvidia pulled it off

What’s going on here?

AI super heavyweight Nvidia reported the most anticipated set of results of the year on Wednesday – and they were seriously envy-inducing.

What does this mean?

In the investing world, there seem to be two camps these days: those holding Nvidia shares and those wishing they were. Just a few months back, Nvidia left jaws on the floor, predicting a whopping $11 billion in second-quarter revenue – a cool 50% more than what the pundits had expected. And now the firm’s gone and delivered again: the tech giant not only reported a stellar $13.5 billion, but it also projected $16 billion in revenue for the current quarter. That’s a staggering 170% jump from last year, surpassing even the wildest dreams of Nvidia enthusiasts. The burning question now is whether there’s any ceiling to this success.

Why should I care?

For markets: Back-up engine.

There’s one riddle everyone’s trying to solve – and that’s whether AI, with Nvidia at the helm, is strong enough to fuel stocks’ ascent even if the broader economy runs out of steam. Consider this: corporate profit made up around 16% of the US economy last year, and that’s been above 17% in the past. So hypothetically, even if the consumer-driven US economy hits a bump, AI-enhanced company profit could still surge, taking a bigger slice of the overall economic pie.

The bigger picture: Here comes the cold water.

During the post-Covid tech boom, buyers struggled to get their hands on the semiconductors they needed – and that led them to over-order, which caused a chip glut when the tide eventually turned. And while AI chips are a different beast, Nvidia is also struggling to meet the current insatiable demand. So it’s plausible that some customers, desperate for Nvidia’s coveted chips, might be inflating their orders too. But here’s the catch: if – just if – this demand starts to wane, Nvidia could find itself nursing an all-too-familiar supply hangover.

What’s going on here?

Chinese delivery giant Meituan was raking it in last quarter.

What does this mean?

Meituan runs a kind of web-based shopping platform for consumer products of all stripes – plus a bunch of services like dining, delivery, and entertainment. And while the Chinese economy is looking pretty pale right now, that weakness is actually playing into Meituan’s hands. See, the slump in China’s vast and all-important property sector means that consumers are steering clear of big-ticket purchases, and splurging on experiences instead – from movies and dining to trips. And that shift, tapped into by Meituan’s masterful marketing, gave its meals and travel services a tidy boost last quarter, with transaction numbers jumping across its businesses. All in all, then, sales took their biggest leap in two years – up an impressive 33% from the same time last year.

Why should I care?

Zooming in: Robot wars.

Meituan’s not resting on its laurels. While the firm’s confident its service businesses will remain strong, it’s also dipping its toes into AI – which could help shape its long-term prospects. The firm bought generative AI business Light Year back in June, after all, which it’s hoping can spur growth. But mind you, Meituan has its work cut out for it: in the race for AI dominance, it’s lagging behind plenty of its peers.

The bigger picture: Hoping hesitantly.

Consumer spending is a key driver of China’s economy, and its underperformance is a big reason the country’s in hot water. But there might be some relief soon: two separate surveys showed that consumer sentiment ticked up in August – a welcome turnaround after several months on the slide – spurring hopes that domestic demand could be poised to improve. Still, it’s one thing to feel good and another to actually open your wallet. So it’s probably best to wait for some hard data before you take this news as gospel.