Nvidia results set record again
Nvidia once again beat analysts' estimates and showed record sales in Q1. The stock responded by breaking the All Time High and is currently trading around $1,100 per share. It should also be said that we are looking at a 10:1 split on June 7, which means that an investor who owns one share at USD 1,100 will get 10 shares worth USD 110. This is to attract more smaller investors psychologically. As an example, we can look at Apple and Tesla, whose similar splits have subsequently helped the stock regain a little bit of value. Nvidia needs "only" $250 billion to surpass Apple in market capitalization.
Needless to say, it's quite likely that this parabolic ride may be coming to an end, and a correction may come just as quickly as these surges. We need to be really vigilant now and remember that any reaction in the stock market is often an overreaction.
Chinese games around Taiwan
While the markets are still balancing in Risk-On mode, which means investors are willing to take bigger risks with their investments, once again geopolitical intervention has added a little fuel to the fire. This time China, which wants to make it clear to the world that Taiwan belongs to China. For a few days, China deployed its military forces around the island to demonstrate its strength, calling it a war exercise. Unfortunately, we have already seen a few such exercises in the world in recent years.
Stocks have not reacted to this as much, although Taiwan in particular is an extremely sensitive topic for chip stocks. If there were to be any conflict, it would quite possibly result in quite a washout in technology, especially in this AI chip mania.
Inflation in the US is more or less standing still
Important indicators such as the CPI (Consumer Price Index), PPI (Producer Price Index) and PCE (Personal Consumption Expenditure Index) showed slightly better than expected numbers, but still not enough for the Fed to commit to cutting interest rates, a lot of investment banks and analysts are expecting the first cut in September this year. Either way, it doesn't look like inflation is in retreat yet, and this increases the risks in terms of unrealized losses for many regional banks in the US. This is something to watch, with as many as 63 regional banks and approx. $500 billion in USD at risk of insolvency.
Chicago PMI at lowest since pandemic 2020
And yet on the other hand, some macroeconomic data like the Chicago PMI (Chicago Purchasing Managers Index = what is the activity in industry and manufacturing in the region), which is a pretty relevant indicator of how the broader US economy is doing in real terms. And currently, unexpectedly, in May the PMI fell to its lowest level since the 2020 pandemic at 35.4 points. If you look at the figure below, you will see that virtually always this phenomenon has led to recessions in the US. So I guess we have something to look forward to.
