Week in Review (Bears, Bricks, & Broken Records)

By Ryan O'Rourke on February 26, 2024

Happy Friday February 23rd!

Nvidia earnings propel global stock markets higher. After 34 years, the Japanese stock market sets a new high. Brickit applies AI to LEGOs. Pandas may be returning to the San Diego Zoo.

#1 – Weekly Market Recap – Stock markets powered higher during the shortened trading week as optimism from Nvidia’s earnings overcame early-week inflation angst. Through Thursday’s close, the NASDAQ had risen +1.7%, while the S&P 500 and Dow Jones were up +1.6% and +1.1% respectively.

Investors began the week with lingering concerns from last week’s hot CPI data, which cooled investor optimism for pending interest rate cuts. Investors appeared slightly apprehensive heading into Nvidia’s Wednesday afternoon quarterly earnings report.

Nvidia once again confirmed there was no need for investor concern. Its Q4 earnings beat elevated expectations and propelled the stock up +16.4% — adding $276 billion to its market cap. Nvidia’s one-day market cap increase shattered Meta’s record of $200 billion increase set just three weeks ago. Nvidia is viewed as a bellwether for Artificial Intelligence (AI) demand and its strong quarterly earnings pushed stocks up globally.

#2 – Nvidia’s AI Acceleration – Nvidia Corp. (NVDA) once again stunned investors reporting $22.1 billion in revenue in the fourth quarter, up 265% from the fourth quarter last year. Perhaps even more impressive, Nvidia posted 75% gross margins on a 75% market share in the Data Center Compute market.

Nvidia’s results pushed the stock price up 16% yesterday, setting the record for the largest single day increase in market cap with $276 billion added to the company. Nvidia now sports a market capitalization just shy of $2 trillion and is the world’s most valuable chipmaker.

The driving force behind Nvidia’s rise is the current insatiable demand for artificial intelligence accelerators — components for powering AI models. According to Nvidia’s CEO Jensen Huang, both accelerated computing and generative AI have reached a tipping point, experiencing surging demand across various global sectors.

Nvidia’s remarkable success has not gone unnoticed by investors, who continue to bet on the company’s ability to capitalize on the AI computing boom. Despite its stellar performance, Nvidia is not without its challenges. The company faces mounting competition and regulatory hurdles, including navigating new export rules for chips bound for China, a key market for semiconductors. However, Nvidia remains undeterred, actively seeking opportunities to expand its reach and maintain its competitive edge.

In light of its record-breaking sales forecast and unwavering commitment to innovation, Nvidia’s trajectory continues to inspire confidence among investors and industry observers alike. As the demand for AI technology continues to soar, Nvidia appears to be leading the charge, shaping the future of computing in the process.

Source: Yahoo Finance

#3 – Japan Sets New Highs, 34 Years Later – Japan’s flagship stock index, the Nikkei 225, set an all-time high on Thursday.

While this might not seem newsworthy for US investors with the S&P 500 also setting a new high, breaking the record in Japan has taken 34 years! On a personal note, I was starting my first year of law school in 1989…clearly a lot has happened since then!

In the late 1980s, Japan’s loose lending standards resulted in extreme increases in real estate prices sending stocks to dizzying new heights. Japanese stocks rose 500% from 1980-1989. The subsequent popping of the bubble in the early 90s caused Japanese stocks to fall 80% — leading to a generation of economic malaise.

It’s taken 34 years, but the Nikkei 225 has finally surpassed the 1989 high, driven by rising profits from Japan’s largest companies. One wonders if the US monetary policy adopted over the past 15 years to inject liquidity into the financial system to abate the crisis du jour will eventually lead to a fate of economic stagnation similar to that of Japan.

Source: Financial Times

#4 – LEGO Creations Using AI – What to do with the shoeboxes full of old LEGO bricks sitting gathering dust in the closet? If you (or your kids) want to breathe new life into those colorful old bricks, and your creativity needs a boost, there’s an app called Brickit for that.

Brickit uses machine learning wizardry to generate ideas on what to build from the available bricks and specific directions on how complete.

The app uses your phone’s camera plus AI to scan a pile of unorganized bricks, identifies each piece in the pile and then will show you a host of different building ideas you can create using the bricks in front of you. It will even show you the exact location of each piece you’ll need from the pile of bricks.

“The most impressive element of the app is its speed – the app is able to make sense of hundreds of bricks in a pile within seconds,” said Lucas Matney, Fast Company.

Brickit says their core audience is children ages 3 to 7 and their parents, “providing an educational and engaging activity that’s perfect family time.” But people of all ages love to create and build, so the app is for all.

Source: Local 3 News

#5 – “Panda-monium” – Pandas are making a return to the United States! In a gesture of renewed friendship, China plans to send a pair of giant pandas to the San Diego Zoo.

The adorable black-and-white bears, which are native to central China, have long been a symbol of US-China friendship since 1972 when Beijing gifted a pair of pandas to the National Zoo in Washington DC.

Since that time, China has beefed up conservation efforts of the vulnerable species and has loaned pandas to zoos to help breed cubs. The panda population has increased from fewer than 1,000 in the 1980s to more than 1,800 giant pandas now living in their natural habitat, with another roughly 600 living in captivity.

Over the past five years, as the relationship between China and the US soured, China had recalled nearly all of the iconic bears which were on loan to the US. However, last fall during a face-to-face meeting between Chinese President Xi Jinping and President Joe Biden, Xi signaled that China would once again start sending the US new pandas.

Pandas are not inexpensive. Typically, zoos pay a fee of $1 million annually for two pandas, with the money intended for China’s conservation efforts, according to a 2022 report by America’s Congressional Research Service.

Zoo officials said that if all the necessary requirements are approved, two bears, a male and female, are expected to arrive as early as the end of the summer.

“We’re very excited and hopeful,” said Megan Owen of the San Diego Zoo Wildlife Alliance and vice president of Wildlife Conservation Science. “They’ve expressed a tremendous amount of enthusiasm to re-initiate panda cooperation starting with the San Diego Zoo.”