Nvidia’s revenue forecasts surpassed analyst expectations by more than 50% due to surging demand for its AI chips.

This was a welcome relied after the series of bad news that hit the market recently, including fruitless negotiations over the US debt ceiling, fears of recession in the US and Europe, disappointment over Chinese growth and the continuing threat of inflation.

The Fed published last night the minutes of its last meeting on May 3 on rates. A meeting that resulted in a 25-basis point increase, but which left investors with the feeling that the central bank would take a break at the June 14 meeting. This feeling was confirmed by the minutes, and the probability of a pause remained roughly unchanged at 70%, according to the CME's FedWatch prediction tool. As for the next move, it remains uncertain. Some central bankers believe that more tightening will be needed later in the year to get inflation under control, while others believe that the effort is probably sufficient given the signals of a slowing economy already visible. All in all, we are not much further ahead...

But let’s come back to the results of Nvidia. I was just talking about it the day before, the group has entered the rather narrow world of trend setters, just like some well-known tech companies. The chipmaker’s breathtaking forecast is something that happens quite rarely in the sector. All thanks to artificial intelligence. I read the transcript of Nvidia's results and the term "AI" is present 209 times. I was asked yesterday why the company is at the heart of the industry's boom when it’s a graphics card specialist. The answer is simple: graphics processors have extraordinary computing capabilities. As a result, Nvidia has been at the center of video games and digitization, cryptocurrency mining, accelerated computing and lately, AI. Nvidia is still in the right place at the right time.

In other news, the Fitch rating agency has placed the "AAA" rating of the United States on watch for a possible downgrade, due to tensions over the debt ceiling. Investors are still waiting for progress on this front.

The US Bureau of Economic Analysis revealed today that the GDP expanded at an annualized rate of 1.3% in the first quarter. This was above the advance estimate and economists’ expectations of 1.1%.

Us weekly jobless claims came in slightly below expectation last week, at 229,000, versus 245,000 expected by economists.

 

Today's economic highlights:

Germany’s GDP reading for Q1 2023 showed the country officially is in recession. In the US, we have the second GDP reading for Q1 on the agenda, along with weekly employment figures and housing sales. All the agenda is here. 

The dollar is up to EUR 0.9333 and GBP 0.8102 Gold is trading at USD 1942. Oil is firm, with North Sea Brent crude at USD 77.17 per barrel and U.S. light crude WTI at USD 73.19. The 10-year US debt yield is strengthening 3.75%. Bitcoin is trading at USD 26,200.

 

In corporate news:

  • Medtronic reported lower-than-expected full-year earnings on Thursday as the medical equipment supplier expects the rising dollar to continue to impact its sales in international markets.
  • Best Buy reported a better-than-expected quarterly profit on the back of successful promotional campaigns. The stock gained 5% in pre-market trading.
  • Verizon held a meeting with its customer service employees to inform them of upcoming "restructuring" and "streamlining" measures that will likely result in numerous layoffs, The Verge reported Wednesday.
  • WeWork announced the resignation of its CFO Andre Fernandez, less than a year after he took the job and days after CEO Sandeep Mathrani announced his departure.
  • American Eagle Outfitters fell 20% in premarket trading after cutting its full-year revenue forecast as demand for non-essential goods slows with inflation still high.
  • Illumina - Activist investor Carl Icahn is on track to win enough support from Illumina shareholders to put at least one of his three nominees on the board of the gene sequencing biotech, two people close to the matter said Wednesday.

 

Analyst recommendations:

  • Cedar Fair: KeyBanc Capital Markets reinstated coverage with a recommendation of overweight. PT up 20% to $54.
  • Dish: Citi downgrades to neutral from buy. PT up 28% to $8.
  • Dycom: Wells Fargo Securities upgrades to overweight from equal-weight. PT up 24% to $120.
  • Indivior: Jefferies remains Buy with a price target raised from 2115 to 2330 GBp.
  • Nvidia: Bernstein keeps Buy rating. The target price has been lifted and is now set at USD 475 compared to USD 300 before.
  • Six Flags: KeyBanc Capital Markets reinstated coverage with a recommendation of overweight. PT set to $35, up 38% from last price.
  • Standard Chartered: Jefferies remains Buy with a price target raised from 980 to 1010 GBp.
  • Toll Brothers: RBC Capital Markets upgrades to outperform from sector perform. PT up 18% to $77.
  • Workspace: Numis Securities upgrades to buy from add. PT up 33% to 630 pence.