Nvidia’s Boulevard Of Broken Dreams
The bull market has come and passed — the easy money can never last. Wake me up when September ends.
Like Nvidia (Nasdaq: NVDA) has come to pass, regulations came on so fast. Wake me up when September ends.
Here comes the Chinese ban again, falling from the stars. Portfolios drenched in pain again, dropping down so far.
As my investments rest, I’ll never forget what I lost. Wake me up when September ends…
Great Ones, national security is back on the semiconductor sector menu today … and this time, Nvidia is squarely in the U.S. Commerce Department’s crosshairs.
In a filing with the SEC, Nvidia said that the U.S. government is restricting chip sales in China and Russia. Go figure…
At the center of the new restrictions are Nvidia’s AI-related semiconductors and software. Specifically, Nvidia’s A100 processors.
More specifically, the Commerce Department laid out specific performance thresholds that could bolster the capabilities of the Chinese and Russian militaries.
On a side note, these new restrictions also impact Advanced Micro Devices’ (Nasdaq: AMD) MI200 semiconductor — a competing AI-chipset with Nvidia’s A100.
Right now, the only way around these restrictions is to acquire a license from the U.S. Commerce Department. Without that license? No Chinese or Russian sales for you!
Here’s the Commerce Department’s official statement on the licenses and the crackdown:
Typical government rhetoric, but the point is that the U.S. is worried about China getting access to cutting-edge AI technology and using it to revamp its military.
It seems rather straightforward, until you realize that these chips are already on the market. “The barn door is already open. Too late to close it now,” as my grandfather would say.
China already has these chips and could probably reproduce them rather easily … you know, since we’ve been making the chips there for years already.
But these new restrictions aren’t meant to control what’s already out there. They’re there to keep China from accessing future improvements — and that’ll only work if China, you know, doesn’t copy what’s already there and improves upon it.
And that means … get ready for the new Mvibia BeFource AI graphics processor from some new Chinese company you’ll never be able to pronounce the name of.
As for Nvidia, NVDA stock plummeted more than 12% today on the news.
Specifically, Nvidia said that the new restrictions would cost it $400 million a quarter. Still, the company is working on ways to satisfy Chinese customers:
Personally, I don’t see this as a big deal for Nvidia.
The company will adjust and deal with these new government restrictions. It’s the nature of the semiconductor business, after all. And this isn’t Nvidia’s — or any other semiconductor manufacturer’s — first rodeo with national security restrictions.
That said, these regulations arrive at a rather inopportune time for Nvidia.
The company is already struggling with slowing GPU chip sales, and while Nvidia won’t admit it, that’s mostly due to the recent plunge in cryptocurrency prices. Lower crypto prices mean fewer crypto miners … and fewer crypto miners equal fewer Nvidia GPU sales.
Additionally, the global economy is struggling, and the U.S. economy is already in a recession. So while a drop of $400 million in revenue would normally be easily digestible for Nvidia, the current economic conditions make these new restrictions a bit more painful.
I’m not ready to sell NVDA out of the Great Stuff Picks portfolio just yet, but we’re getting kinda close to it at this point. It’s not that I don’t believe in Nvidia in the long run, but the odds of investor pain for the next year or so just took a major leap higher.
Keep a close eye on NVDA stock, Great Ones. It’s getting a bit dicey out there.
And remember! If you are no longer comfortable holding any stock in the Great Stuff Picks portfolio, don’t buy it or sell it and take your profits now.
Not everyone has the same financial outlook or risk tolerance. You do you and stay financially safe!
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Ah, Micron (Nasdaq: MU) — the other other semiconductor company. We might not give Micron its due in these here virtual pages all that often, especially with Nvidia and AMD always stealing the limelight. (Thanks, guys.)
But Micron? Oh, I remember you: All the tears that chip investors cried, that called Micron’s name … when we needed it, Micron came through.
Micron’s been investing billions of dollars into its business, upping its manufacturing capacity and basically becoming the master of memory.
That’s my favorite Sabbath album, by far.
I think you mean … never mind.
Micron just announced that, over the course of the next decade, it’ll put $15 billion into a new chipmaking plant in Boise, Idaho. Micron’s already announced plans to invest about $40 billion in facilities across the U.S. over the next decade, creating thousands and thousands of jobs in the process.
Is … is this what a feel-good ending is supposed to feel like?
Not really: None of that positivity stopped MU stock from falling 3% in today’s sell-off. If it’s related to chips, it’s in the red today.
The tough buy bulk? Sounds about right to me.
For those not cool enough to make it past the bouncers at Sam’s Club, Costco (Nasdaq: COST) has become the perennial favorite for shoppers looking to stretch their grocery bucks. That, or it’s a bit hard to calculate inflation when you’re buying 10 pounds of mozzarella sticks at a time.
Hey, don’t judge my life.
I’m not judging. I’m admiring. Anyway…
Costco’s August sales were down from July, but that’s still up 30% from those hazy pre-pandemic times. For Costco investors, that just means it’s time for some good ol’ fashioned speculation.
With the news that Sam’s Club is raising its membership fees from $45 to $50, many COST investors and analysts alike are wondering when Costco’s going to follow suit.
Now, Costco hasn’t raised its membership fees in years … but then again, neither had Sam’s Club.
In fact, it had been a decade since Sam’s Club last upped its club price. So it’s not out of the question that Costco will also raise its membership costs before long — especially given the company’s bottom-line battle against inflation.
A cost increase might put off some prospective Costco shoppers from joining the club, but if it brings Costco more money at the door … it’s only a matter of time before it happens.
Not if you ask Signet Jewelers (NYSE: SIG).
The parent company of Zales and Jared just delivered a quarterly report made of fool’s gold — yeah, the numbers are nice and sparkly. But when you look closer at it, things aren’t quite what they seem…
Signet’s earnings were solid, beating estimates with room to spare. And while the company reiterated its full-year revenue guidance, it wasn’t quite up to the Street’s expectations. Typical Wall Street … we’re knee-deep in recession and inflation fears, and analysts still think everyone’s bedazzling themselves with diamonds.
For the most part, though … they’re right.
People are still buying up enough jewelry to prop up Signet’s earnings this past year. You have the post-pandemic wedding boom to thank for that. But just like planning a post-pandemic wedding, things get a bit complicated when talking about Signet’s future quarters.
The company noted that “lower-income shoppers” are definitely feeling the inflation pinch, and Signet’s future lies in how many of us working stiffs want to buy diamonds.
Think about it: Who shops at Signet’s stores? Mostly the self-identifying “middle class.”
I mean, your uber-rich jewelry fiends aren’t stopping by a strip mall Jared anytime soon. That just doesn’t happen. If you’re Richie Rich rich, you’re looking at boutique or private, custom jewelers … not whatever’s on sale down at Zales.
Sure, middle-class folks might still be buying jewelry now, but what about when times get tougher? Signet doesn’t have an edge in the ultra-high-end jewelry market to rely on, and its lower-income shoppers are already priced out of the biz.
They’re just trying to buy soup, man.
Soup soup … expensive soup soup … a pricey carrot and coriander.
Chili chowder!
Thanks, I thought I was the only one singing the Soup Song today, that is … until Campbell (NYSE: CPB) reported earnings and sparked everyone’s inflationary fears again. No, Great Ones, not even soup is safe from inflation.
But how does one inflate a can of soup, exactly? Discuss amongst yourselves.
By the numbers, Campbell beat revenue expectations by a hair (in my soup? Ew.) and matched earnings estimates.
But when the company warned about supply chain hiccups and soaring costs for packaged foods, you might as well have told investors they’d be stuck eating soup for the rest of their days.
Soup is getting costlier to produce across the board (or across the cupboard, if you will … OK, I’ll stop). Campbell expects full-year sales to rise, but per-share earnings will come in between $2.85 and $2.95, compared to expectations of $2.92 for the year.
Campbell investors will be alright though — they come from good stock.
What do you think, Great Ones? If you have thoughts on any of today’s topics — and I know you do — write to us at GreatStuffToday@BanyanHill.com.
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Regards,
Joseph Hargett
Editor, Great Stuff
