NVDA showcased a more powerful chip platform with an O/S for generative AI and accelerated computing. Stock is down today ahead of the Fed meeting. Super Micro is down hard today after announcing a 2mm share offering (to make 58mm in total), and after joining the S&P yesterday. Folks are taking profits.
What’s up with Snowflake? Post CEO-departure-announcement in late Feb, the stock is down roughly -30%. The cloud-based platform lets folks store, process, and analyze data. Redburn faults a lack of AI edge (also hitting MongoDB). Analysts are talking about cloud software buyers reigning in their spend, as well as reallocating. Net revenue retention is down from 158% in 2020, to 131% in Jan. Altimeter shows that the median net retention rate is declining for the software industry.
The BoJ finally dropped the world’s last negative interest rate, finishing up the most aggressive monetary stimulus policy in our lifetimes. They’re going from -0.1% for short-term rates to between 0-1%. Also, the Yield Curve Control program is out, and buying long-term gov bonds is still in. The yen was down because they didn’t talk about future rate hikes, so equities were up. But we should see the yen pop back as FX hedge ratios are reset. Then what happens? Lapsed hedge ratios go up, and co’s have to buy more yen, driving the cycle further. That happened back in 2016. Also, folks bring more capital back to domestic markets, which could drive equities further too, which will require more hedges. You get the point.
Commercial real estate CLOs (whereby they bundle debt too risky for conventional MBS) are driving up delinquencies. Folks are trying to rework $80bn in loans, and short sellers are picking their targets. In turn, resale values will decline. There’s a lot of short-term, floating-rate loans for properties doing renovations/expansions…but the underlying buildings are worth less than before because you’re working from home in your leisurewear still.
How far can the Fed go, before it goes too far? They’re still trying to figure that out with their balance sheet shrinking activities called QT. They’ve been working down the $7.5 trn portfolio of assets, but they can’t keep letting $60bn UST and $35bn agency-backed mortgages keep maturing every month without finding the scary edge at some point. They remember the funding squeeze back in 2019, when the lending rate jumped 5x, and the fed funds rate was above the target range.
Gotta give Saylor at MicroStrategy his props for not just doubling down but going all-in on their bitcoin plan. The co now holds >1% of all the cryptocurrency that will ever be issued, per BBG. The co sold over $600mm of convertible senior notes in mid-Mar to fund its activities. The experiment is bold and public.
Novo and Lilly are lovin’ their lady Oprah today. She was pumping their weight loss…I mean diabetes…medicines yesterday via the special on ABC. Lilly didn’t even plan to market Zepbound when it launched back in Dec. Imagine how powerful that is. Not having to pay for lame commercials showcasing mom jeans. Related interesting tidbit? Nvidia and Novo will partner to build a supercomputer in Denmark to help research and innovation in healthcare.
BofA’s mo fund survey showed that bulls invested in EZ and EM equities, shifting out of US tech, per Reuters. If you’re like me, you’ve seen the new AI-themed ETFs, driven in part by the NVDA rally, per Reuters.