Finimize - 📉 Nvidia's could let Big Tech down

What’s going on here?

Nvidia’s lead as the world’s most innovative chip designer was threatened by production delays, the tech world’s equivalent to a pulled hamstring.

What does this mean?

Nvidia’s customers line up around the proverbial block for one reason: the chip pioneer hands out the most advanced AI semiconductors on the market. So when next-generation Blackwell chips were announced in March, companies saw stars in the shape of tech-propelled cost savings and profit enhancements. But despite being slated to launch this October, production problems look set to delay that date by at least three months – and because Nvidia’s financial year starts in January, an early 2025 launch means the chips won’t contribute a dime of revenue until the April quarter.

Why should I care?

Zooming out: A trouble shared is a trouble doubled.

That doesn’t mean Nvidia’s existing chips are chopped liver. Orders for the Hopper lineup are still coming in faster than the firm can fill them – so realistically, Nvidia can set the price and bide time until its next launch. See, Big Tech companies have spent billions jostling for the same parts from the same suppliers, and that’s jacking up prices. Although, they could have their heads turned soon. Up-and-coming chip companies like Cerebras and semiconductor start-up Groq are vying for Nvidia’s spot at the top.

The bigger picture: Big Tech, bigger headaches.

Production delays directly hamper Big Tech’s own timelines, potentially pushing product enhancements further out. But Alphabet, Microsoft, and Apple need to keep some energy unspent, because they’re currently tangled up in antitrust cases. This week, a US ruling declared that Google violated antitrust laws, setting the stage for another trial to hash out possible remedies. That might even include breaking up parent firm Alphabet, threatening the firm’s long-held online advertising supremacy. So investors need to keep an eye on the courts: these decisions could change the way Big Tech makes money in the future.

What’s going on here?

Investors’ nerves were tested during Monday’s stock market sell-off, and their hands are far from steady given predictions of more major moves in the coming months.

What does this mean?

The world’s markets tumbled on Monday, sparking a range of reactions from mild caution to full-out fear of a societal collapse, depending on your social media of choice. In fact, volatility – a measure of fear in the market – hit a level not seen since the start of the pandemic. But come Tuesday, many markets seemed to have recovered. Japan’s Nikkei 225 index dropped 12% on Monday, but picked up by 10% to land back within touching distance. Meanwhile, the Korean and Taiwanese markets ticked up 3%, making up some of Monday’s 8% downturn. The US market, too, is clawing back much of its loss. No wonder that measure of volatility has halved since Monday’s reading.

Why should I care?

For markets: The bear’s been poked.

It’s been nearly a year since the S&P 500 index last moved more than 2% in one day – but that streak was broken on Friday and Monday. That has a lot to do with investors closing “carry trades”. The strategy sees them borrow at a cheap rate, before investing in other assets offering higher returns. And with JPMorgan estimating that only around half of such trades, at least within the short-term trading community, have been closed, investors should brace for more ripples.

The bigger picture: So long, farewell.

Many investors and funds had been taking advantage of near-zero interest rates in Japan, borrowing in yen and investing in global assets with higher returns. But over the last month, the Bank of Japan has raised interest rates, while lackluster US data increased expectations of several stateside rate cuts. So with the gap between the two currencies narrowing, many investors were forced to buy the yen and sell their assets to limit their losses.