Nvidia Chip and Chase


Market Scorecard

Asian markets are up for the second day in a row, putting aside the tensions in Hong Kong. It seems the focus is more on global economies reopening, where Japan has lifted its state of emergency. Looking at South Arica, the yield on our government debt has continued to drop, now back below the level before our debt downgrade. During March our debt yields jumped from 9% to 12%. Ouch! Since the end of March, with the fear of the downgrade out of the way and with global interest rates falling, the yields on our government debt started to ease. Through April and May our yield has dropped back to around 9%. Coming into the year, our debt cost us around 8%, so we are still off of that level.

For reference, Brazil who are also in junk status, has a yield of around 7%. Brazil has a worse debt to GDP ratio than South Africa, but their debt levels stabilised last year where South Africa, thanks to our SOE’s and poor economic growth, saw our debt levels jump higher. As the year goes on, hopefully our debt yields will decrease further. In a world where there is over $10 trillion of government debt with a negative yield, our positive rate looks very attractive. Will that lead to enough demand to bring our yield down further though?

Yesterday the JSE All-share closed down 0.15% and the US market was closed.

Company Corner


One thing, from Paul

Nvidia is another Vestact-recommended stock holding that is currently trading at an all-time high, despite the Covid-19 pandemic. The company produces fancy computer chips that are used for high-end applications like gaming, robotics, automotive control systems and data-centres. These chips are commonly referred to as graphic processor units (GPUs).

Nvidia had first quarter results out last week and they were very good. Their forecast for second-quarter revenue was strong, mostly due to surging demand caused by all the working and gaming from home. The company also said that the forecast for Q2 includes contributions from its recent purchases of Israeli chip firm Mellanox and Mountain View, California-based Cumulus Networks. Michael wrote about those deals here: Nvidia purchases two data-centre companies.

They recently introduced a new line of A100 GPUs for data-centres, based on the 7nm Ampere architecture. If you already know what that means, well done. But it sounds good, right? Ok, I went and looked it up on the Nvidia website, so here goes. The A100 offers the largest increase in performance over the prior eight generations of Nvidia GPUs, with a 20X performance improvement over the previous generation V100 series (those are now three years old). The A100 is the first Nvidia GPU to feature multi-instance GPU capability, which allows each A100 to be partitioned into as many as seven independent instances for inferencing tasks. Hmm?

I suppose that all that matters is that lots of cloud service providers and systems builders are planning to incorporate A100 GPUs into their capital projects. Nvidia says that this is their customer list: Alibaba Cloud, Amazon Web Services, Atos, Baidu Cloud, Cisco, Dell Technologies, Fujitsu, GIGABYTE, Google Cloud, H3C, Hewlett Packard Enterprise, Inspire, Lenovo, Microsoft Azure, Oracle, Quanta/QCT, Supermicro and Tencent Cloud. That should do the trick!

It was not all plain sailing, and some of Nvidia’s market segments were hurt by the pandemic. The company expects sales to automotive customers to fall 40% next quarter. But Nvidia CEO Jensen Huang said in an interview that some of those companies were also investing in robotics for the future, with Nvidia supplying the chips.

The gaming business is doing ok, although the second half of the year will depend on overall consumer spending trends. You may have more time to game if you are unemployed, but you also won’t have the money to upgrade your rig. The new Ampere generation Gaming GPU will be launched later in the year.

Goldman Sachs reckon that Nvidia can be bought all the way up to their 12-month price target price of $370. It closed at $361.05 on Friday. Hang on, that is not much of a gap! Whatever, just buy them, they are going higher.

Bright’s Banter

Alibaba passed $1 trillion in gross merchandise volume for the first time ever during the 2020 financial year end. The e-commerce giant released their fourth quarter earnings on Friday showing that their retail business did well under the pandemic as people were buying more groceries and fresh foods online under lockdown.

Alibaba’s fourth quarter revenues were up 22% to 114.31 billion yuan, beating expectations. Profits tanked 88% year-on-year, as the coronavirus was in full force in China which led to the value of its public investments taking a big hit. The net investment loss was $1.09 billion as share prices went down due to the pandemic, but net income came in at $447 million for the quarter.

China’s most valuable technology company said that their cloud business climbed 58% as educators and students were rushing to secure online solutions as an alternative to face-to-face interaction. However, this is the slowest growth in two years for Alibaba’s cloud business, while the media and entertainment side grew by 5%.

The good news is that Alibaba’s been slowly recovering in the month of April, with transaction volumes and user activity in their Chinese retail businesses returning to levels last seen in October-December 2020.

Infographic: China's Amazon Is Not Quite Amazon Yet | Statista You will find more infographics at Statista

Our 10c Worth

Byron’s Beats

Facebook is coming in hot for online shopping. Adverts are by far their biggest revenue stream but it makes good sense for consumers to just buy the goods advertised straight through the platform.

Last week the company introduced Facebook shops. This is a single online store for customers to access on both Facebook and Instagram. The Shops feature can be accessed through a Facebook business page. You can browse catalogues, save products and place orders. Of course your address and payment details will already be loaded so it will be quick and easy.

Facebook has been talking about this for a while. Lockdown has probably sped up the process. With billions of users and millions of businesses already accustomed to the platform this could be a very profitable venture.


Michael’s Musings

Tomorrow, weather permitting, SpaceX will launch its first astronauts into space. Bob Behnken and Doug Hurley are on their way to the International Space Station. This is a huge achievement for Elon Musk and his company. It is one thing to launch satellites into space, it is completely different taking responsibility for human lives.

This is the next step in Musk’s vision of sending people to Mars. In the short-run, having reusable rockets, safely sending people into space, means that space tourism is one step closer. NASA envisages having a few stations operating in low-orbit, where people will be able to buy tickets to have a short stay in space.

Adding to the significance of the event is that the US hasn’t launched astronauts into space from its own soil since 2011; they have been reliant on Russian launches.

Read more here – Nasa SpaceX launch: Astronauts complete rehearsal for historic mission.

Linkfest, Lap it up

Here is an interesting piece on how antiviral drugs work and why it is so difficult to make medicines to target viruses – Remdesivir Works Against Many Viruses. Why Aren’t There More Drugs Like It?.

As work and schooling moved to our houses, there was a shortage of readily available tech devices. With many supply chains temporary suspended, the second had market boomed – The market for refurbished tech is shining like new.

Signing off

US futures are green at the moment, the S&P500 looks set to break above 3 000 points again. South African companies continue to report their numbers this week, so we will get a clearer picture of how the lockdown has hit our economy. The JSE All-share is higher this morning and the Rand is holding steady at $/R 17.57.

Sent to you by Team Vestact.

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