Nvidia’s AI advances in focus today

Investors are preparing for ‘fireworks’

Semiconductor giant Nvidia’s stock price has risen steadily over the past year and a half, driven by investor expectations that artificial intelligence is a truly transformative technology. and This is due to the expectation that the company’s high-end semiconductors will continue to advance its technology.

But in recent days, the company went from being the third most valuable publicly traded company in the United States to falling to fifth place. Nvidia’s stock will face another big test Wednesday when it releases its latest quarterly results, with billions of dollars of investor money at stake.

Be prepared for big moves. With the stock more than doubling since May on the back of huge demand for Nvidia’s chips, investors are wondering if the stock is nearing its peak. Opinion on Wall Street appears to be divided. Bloomberg reports that option traders are piling up on both put and call options, which increase in value as stocks fall. This means Nvidia’s market capitalization could change by about $180 billion on Wednesday.

“The post-earnings move is expected to be 10.5% in either direction, so there could be fireworks in either direction across the market,” Deutsche Bank strategist Jim Reid told investors Wednesday. Please wait and see if this happens,” he said in a letter to investors.

it is rear Tuesday’s drop in NVIDIA stock wiped out $78 billion in market capitalization. It’s worth remembering that Nvidia has become one of the largest components of the S&P 500, and one of its most widely held stocks. The decline sent the index into the red on Tuesday, demonstrating Nvidia’s market-moving power.

Things to note: Analysts say NVIDIA’s fourth-quarter revenue will more than triple from a year ago and annual net income will rise about seven times, due to a booming data center business and strong demand for chips. Expect.

Investors will also be keeping an eye on the outlook for the year ahead, given how Nvidia is caught up in trade tensions between Washington and Beijing. China has been one of the company’s fastest growing markets, but it is now banned from selling its top-quality chips there. Chinese rivals are seen rapidly closing the gap between their products and Nvidia’s products. Similarly, Amazon, Google, Meta, and Microsoft are developing in-house AI chips.

• The market is also keeping an eye on the minutes of the Fed’s most recent meeting. Wednesday’s announcement could provide new insight into when the central bank will start cutting rates, as traders reduced bets on rate cuts after last week’s higher-than-expected inflation data. Borrowing costs.

what’s happening here

President Biden’s campaign is outpacing President Donald Trump’s. As of the end of January, Biden had spent $56 million on his re-election campaign, compared to about $30 million for the Trump campaign. This reflects both Democratic donors appearing to unite behind the president and President Trump’s mounting legal costs. Separately, New York Attorney General Letitia James said she would consider seizing Trump’s assets if he cannot pay the $354 million judgment in a civil fraud case against him.

The FTC and states reportedly plan to sue to block Kroger’s acquisition of Albertsons. According to Bloomberg, regulators and state attorneys general are preparing to challenge the $24.6 billion supermarket deal as soon as next week. They are said to argue in an expected lawsuit that the deal lowers wages for employees and increases costs for consumers.

HSBC’s profits plummeted after a $3 billion charge in China. Europe’s biggest bank’s fourth-quarter profit fell 80% after taking a $2 billion hit from a writedown on its telecommunications bank stake and the sale of its French retail business. HSBC shares fell on Wednesday on concerns that an economic slowdown in China, one of the bank’s biggest markets, could hurt its business.

Harvard University seeks to shut down new anti-Semitic controversy. Alan Garber, the university’s interim president, condemned social media posts circulated by two student and faculty organizations, calling them “vile and hateful anti-Semitic tropes.” I picked it up. Although the groups later denied the cartoon, the episode marks the latest controversy at Harvard University in the wake of the October 7 Hamas-led attack on Israel.

Enemies will strongly counter Capital One’s large-scale trade

Capital One’s $35.3 billion deal to acquire Discover Financial was always going to be difficult to get through financial regulators because it would create a new credit card giant.

Consumer advocacy groups are concerned about the merger of two major lenders, and public opposition to the deal is already proving strong.

The CEOs of both companies acknowledged that regulators may be skeptical. On a call with analysts on Tuesday, Capital One chief Richard Fairbank hinted that the company would be a strong competitor to both the big banks and the nation’s largest payment network operators, Visa and Mastercard. Ta.

• “The enhanced size and scope of our integrated franchise will enable us to compete more effectively with the largest banks and payment companies in the United States.”

• “American Express and Discover are the only two vertically integrated U.S.-based payment networks, and of course they compete with the much larger Visa and Mastercard.”

Worth noting: A merger between Capital One and Discover would surpass JPMorgan Chase & Co. as the nation’s largest credit card issuer, according to some estimates, and lenders will be able to transfer some of those cards to Discover’s payment network. is expected to move to.

Otherwise, Fairbank said little about potential obstacles. “We believe we are well-positioned for approval, but of course I cannot discuss discussions with regulators,” he told analysts. Of course, we kept them informed throughout the process. ”

Critics of the deal don’t seem convinced by Capital One’s arguments.and points to data points such as a recent report by the Consumer Financial Protection Bureau showing that large issuers (such as Capital One) charge borrowers more than their smaller rivals. Ta.

• “This Wall Street deal is dangerous and will harm workers.” senator elizabeth warren, the Massachusetts Democrat posted on social network X on Tuesday. “Regulators must stop it immediately.”

• “Capital One has a pattern of making deals that benefit banks but not customers or communities,” Jesse Van Tol, CEO of the National Community Reinvestment Coalition, said in a statement. .

The Justice Department has not said anything publicly and is not the primary regulator reviewing the Capital One deal (though it likely will). Still, bank watchers told Dealbook that a speech last year from the department’s antitrust chief, Jonathan Cantor, called competition for banks “essential” and that a review of such deals would require a review of such deals. He argued that there was a need to recognize the “reality of modern markets.”

Headlight DEI

The fate of corporate diversity efforts was already in doubt after the Supreme Court last year rejected affirmative action as a factor in U.S. college admissions. Now, an unusual move by an appellate court to review a challenge to Nasdaq’s move to increase board diversity is raising new questions about whether the Nasdaq exchange’s initiative can survive.

Nasdaq is seeking more data on board diversity than required by law. In 2020, the exchange asked the SEC to approve rules that would require thousands of companies listed on the exchange to disclose information about the composition of their boards of directors. Otherwise, it will be delisted. The SEC then approved it.

Two groups challenged the rule in court and lost in October before a panel of the U.S. Court of Appeals for the Fifth Circuit. Among the plaintiffs was a group founded by Edward Blum, the conservative activist behind another organization that filed the lawsuit that led to the Supreme Court’s affirmative action decision.

But the Fifth Circuit agreed Monday to fully reconsider the challenge. A full panel of judges is expected to consider the issue after a hearing scheduled for May. The court is known for its willingness to accept and endorse unusual legal theories.

Nasdaq declined to comment, but an SEC spokesperson said the agency continues to defend its actions. Blum did not respond to requests for comment.

It is becoming increasingly difficult for companies to understand changing circumstances. Republican state attorneys general are threatening companies that implement diversity initiatives, and companies are struggling to determine the legality of their programs.

That wariness is sometimes reflected in unexpected ways. At a Tuesday webinar hosted by the Aspen Institute’s Business and Society Program on the future of these efforts, speakers asked not to be named or quoted.

Quantifying the impact of the strike

The Department of Labor is scheduled to announce Wednesday the first actions of a “year of strikes” against U.S. companies, including disruptive work stoppages by major labor unions such as SAG-AFTRA and the UAW.

But labor experts say the effect will almost certainly be underestimated because the data does not reflect the new trend of organizing smaller workplaces.

Small-scale strikes are also a big problem. There were 470 work stoppages and lockouts last year, and about 25 million strike days, according to a labor action tracker by researchers at Cornell University and the University of Illinois at Urbana-Champaign. The hotel and food industry accounted for the largest proportion of work closures tracked by the study, but the smallest proportion of workers absent from work.

But Wednesday’s Labor Department statistics do not include closures involving fewer than 1,000 employees, so the impact is likely an underestimate. This disparity has appeared before. The Ministry of Labor counted 23 strikes in 2022, while the labor movement counted 433.

We believe that trade unions need to gain a foothold in smaller workplaces; Including divisions of large companies like Starbucks. Alex Colvin, dean of Cornell University’s School of Industrial and Labor Relations, said, “As employment in small businesses is on the rise, unions need to be able to organize these small workplaces if they are to be successful in representing workers.” There is a need,” he told Dealbook.

Changes in tactics are also a focus for labor watchers. Colvin said one-day strikes are on the rise. And the UAW caused problems when it organized shutdowns at some factories rather than an all-out strike. This strategy kept management guessing and helped the union target the Big Three automakers over time. That helped us win big in negotiations.