NVIDIA CEO describes Blackwell demand as `Insane`

On Wednesday, US and European equities stabilised amid escalating Middle East tensions and a U.S. port workers' strike. The S&P 500 was flat, with slight gains in the Dow Jones and Nasdaq, while the Euro Stoxx 50 also held steady at 4,959. Oil prices surged after missile attacks on Israel, boosting TotalEnergies and Eni, though higher energy costs pressured utilities and financials. Tech performed well on both sides of the Atlantic, with ASML and Prosus posting notable gains.

Summary for 03.10.2024

Asian equity markets experienced mixed results on Thursday, with the MSCI ex-Japan index declining 1.4% after hitting a 32-month high, largely due to a 3.5% drop in Hong Kong's Hang Seng following a rapid 30% gain. Meanwhile, Japan's Nikkei rose 2.3% as new Prime Minister Shigeru Ishiba signalled a continuation of loose monetary policy, causing the yen to fall to its lowest in a month.

European equity markets are anticipated to open lower today amid concerns over inflation and interest rate hikes. This negative sentiment is echoed in the U.S., where futures dipped slightly following Richmond Fed President Barkin's remarks that it is too early for the central bank to declare victory over inflation, reflecting ongoing uncertainty in global markets. Investors are focused on upcoming services PMI in Europe and US jobless claims data.

Oil prices rose this morning as tensions in the Middle East escalated, with Iranian missile attacks on Israel raising concerns over potential supply disruptions. However, swelling U.S. crude inventories helped ease some pressure. Analysts noted that global supplies remain ample, with OPEC's spare capacity tempering worries about the market's ability to withstand any disruptions.

US private businesses added 143,000 jobs in September, the highest increase in three months, surpassing forecasts of 120,000. The service sector led with 101,000 new jobs, particularly in leisure/hospitality and education/health services, while the goods-producing sector added 42,000 jobs, including 26,000 in construction. Year-over-year wage growth for job-stayers fell to 4.7%, and for job-changers to 6.6%.

The Euro Area's unemployment rate remained stable at 6.4% in August, matching record lows and market expectations. The number of unemployed fell by 94,000 to 10.925 million, while youth unemployment decreased to 14.1%. Spain (11.3%) and Greece (9.5%) reported the highest rates, whereas Poland (2.9%) and Malta (3%) had the lowest unemployment figures.

NVIDIA shares rose 1.5% after hours on Wednesday after CEO Jensen Huang described demand for its Blackwell product as "insane," with production proceeding as planned. Huang stated that "everyone wants the most, and everyone wants to be first" during an interview on CNBC. This followed the announcement of an expanded partnership with Accenture to help businesses scale AI adoption through the Accenture AI Refinery.

OpenAI has raised $6.6 billion from investors, potentially valuing the company at $157 billion. Key investors include Microsoft, Nvidia, Thrive Capital, and Khosla Ventures. Despite recent executive changes, enthusiasm remains high as OpenAI projects revenue of $3.6 billion this year, rising to $11.6 billion in 2024. The funding, via convertible notes, is tied to OpenAI's potential shift to a for-profit model.

Bernstein analysts warn that Tesla Inc is unlikely to grow annual sales this year despite price cuts, predicting deliveries of 1.8 million units in 2024, below the company's 2 million target. Q3 deliveries of 435,059 fell short of expectations. With stiff competition and regulatory hurdles for its robotaxi ambitions, Bernstein maintains an underperform rating on the shares ahead of an upcoming robotaxi event.

Northland Capital Markets upgraded Salesforce to Outperform after the launch of Agentforce, an AI platform that potentially surpasses Microsoft in AI capabilities. Agentforce facilitates the deployment of GenAI agents across various workflows and is expected to increase the software total addressable market from $0.8 trillion to $3.2 trillion. Consequently, the 12-month price target for Salesforce has been raised from $270 to $400.

HSBC has maintained a cautious "hold" rating on LVMH, citing short-term uncertainties impacting its performance, particularly in Q3 2024. While Louis Vuitton remains strong, other brands like Dior and divisions such as Wines & Spirits are experiencing weaker demand, especially in Asia. Analysts forecast subdued growth, with a target price of €750, urging investors to await clearer recovery signs, particularly in China, before late 2025.

Shares of Mercado Libre fell 4.6% on Wednesday after JP Morgan downgraded the equity from "overweight" to "neutral," citing limited upside potential following a 62% rally over the past year. Concerns include pressure on its credit card operations impacting net interest margins, increased short-term costs from new distribution centres, and unsustainable low tax rates. JP Morgan's outlook reflects scepticism about future performance given high valuations of 24x EV/EBITDA and 49x P/E for 2025.

Shares of Rio Tinto rose 1.6% yesterday following an upgrade by Berenberg from "hold" to "buy," with a new price target of 6,200 pence, up from 5,600 pence. Analysts cited Rio Tinto's strong positions in aluminium and iron ore, boosted by China’s economic stimulus. They highlighted the company’s operational efficiency and capital expenditure profile, positioning it as a medium-term winner in diversified mining.

Raymond James analysts downgraded T-Mobile shares from Strong Buy to Outperform but raised the price target from $208 to $221. They maintain a positive outlook, noting a significant share price increase and a fourfold rise in Free Cash Flow since 2020. However, uncertainty surrounds T-Mobile’s fibre strategy and pending deals, leading to slightly lower C-EBITDA estimates for 2024 to 2026.

Raymond James downgraded GE Vernova to "market perform" from "outperform" due to concerns over its recent share price surge of 94% since the spinoff. Analysts believe the excitement around AI-driven infrastructure modernisation has led to an overstretched valuation, with the equity trading at 46 times projected 2025 earnings. They suggest a period of consolidation is needed to reassess its trajectory accurately.

Bank of America has reduced its price target for Novo Nordisk shares to DKK1075 from DKK1150, reflecting a more conservative outlook on its products Wegovy and Ozempic due to slower growth. Q3 sales are projected at DKK69.4 billion, an 18% increase year-on-year, while BofA maintains a Buy rating, citing strong Phase III trial data for CagriSema as crucial for future performance.

Ulta Beauty's upcoming Analyst Day is anticipated to be a crucial turning point, with UBS predicting it will positively reshape market expectations. The company is likely to revise its growth targets to mid-single-digit to high-single-digit EPS growth, potentially reaching $24.30 for FY 2025. UBS also highlights new growth avenues and suggests a possible 1% dividend yield, enhancing the stock's appeal.

Jefferies has raised price targets on several Chinese internet shares in response to recent government stimulus measures aimed at boosting the economy. Notable increases include Alibaba from $116 to $142, JD.com from $43 to $54, and Pinduoduo from $151 to $181. Analysts expect improved valuations and stronger earnings visibility across the sector, highlighting potential gains for companies like Meituan and Kuaishou Technology.

Goldman Sachs analysts suggest their 6000 price target for the S&P 500 may be "too low," indicating a bullish outlook for U.S. equities despite near-term volatility. They predict a strong rally starting October 28 but warn of heightened market reactions to daily headlines. The upcoming corporate buyback blackout until October 25 could reduce support, but strong buybacks are expected in November and December.

HSBC raised its price targets on several Chinese real estate shares by an average of 36%, driven by optimism over government support for the sector's recovery. Analysts expect a turnaround as early as 2025, earlier than previously anticipated. Increased developer activity, particularly in key cities, signals confidence in the market, despite ongoing risks, such as potential instability in home prices.

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