Nvidia’s AI gains will be in the spotlight today

Chip giant Nvidia’s share price has risen steadily over the past year and a half, driven by investors’ hopes that artificial intelligence is a truly transformative technology. and for his hope that the company’s high-end semiconductors will continue to drive that technology.

But in recent days, the company became the third most valuable public company in the US, only to fall back to fifth place. Its stock will face another big test on Wednesday, when Nvidia announces its latest quarterly earnings, with billions in investor capital at stake.

Get ready for a big move. After seeing the stock more than double since May due to high demand for Nvidia chips, investors are wondering if it is close to peaking. Opinion on Wall Street appears divided: Bloomberg reports that options traders have been stockpiling put options, which rise in value as a stock’s price falls, and call options. That means Nvidia’s market capitalization could be around $180 billion on Wednesday.

Those bets “suggest the post-earnings move is estimated at 10.5 percent in either direction, so watch for potential fireworks in the markets in either direction,” Deutsche Bank strategist Jim Reid wrote to investors on Wednesday.

That is after Tuesday’s drop in Nvidia shares wiped out $78 billion in market value. It’s worth remembering that Nvidia has become one of the largest components of the S&P 500, making it one of the most widely held stocks. That drop helped send the index into the red on Tuesday, demonstrating Nvidia’s power to move the market.

What to pay attention to: Analysts have forecast that Nvidia’s fourth-quarter sales tripled year over year, and net profit for the year increased roughly sevenfold, thanks to the strength of the company’s burgeoning data center business and solid demand. of their chips.

Investors will also pay attention to the outlook for next year, as Nvidia has been caught up in trade tensions between Washington and Beijing. China had been one of the company’s fastest-growing markets, but it is now prohibited from selling its highest-end chips there. Chinese rivals are seen as quickly closing the gap between their products and Nvidia’s; so are the internal AI chips built by Amazon, Google, Meta and Microsoft.

  • The market is also focused on the minutes of the Federal Reserve’s most recent meeting: traders have reduced their bets on rate cuts after last week’s hotter-than-expected inflation data, and Wednesday’s release could offer new information on when the central bank might start lowering rates. debt costs.

President Biden’s campaign surpasses that of Donald Trump. Biden’s re-election effort had $56 million in its coffers at the end of January, compared to about $30 million for the Trump campaign. That reflects both Democratic donors appearing to unite behind the president and Trump’s rising legal costs. Separately, Attorney General Letitia James of New York said she would consider seizing Trump’s assets if she cannot pay a $354 million judgment in the civil fraud case she brought against him.

The FTC and states reportedly plan to file suit to block Kroger’s acquisition of Albertsons. The agency and state attorneys general are preparing to challenge the $24.6 billion supermarket deal next week, according to Bloomberg. Their expected lawsuit is said to argue that a deal would reduce employee wages and increase costs for consumers.

HSBC profits plummet after $3 billion charge in China. Fourth-quarter profits at Europe’s biggest bank fell 80 percent after writing down its stake in Bank of Communications and a $2 billion hit from the sale of its French retail operations. HSBC shares fell on Wednesday on concerns that the slowdown in China, one of HSBC’s biggest markets, could hurt its business.

Harvard tries to contain another controversy over anti-Semitism. The university’s interim president, Alan Garber, condemned a social media post spread by two student organizations and a faculty organization that featured what he called “vile and hateful anti-Semitic tropes.” The groups later disavowed the cartoon, but the episode is the latest controversy at Harvard after the Hamas-led Oct. 7 attacks on Israel.

Capital One’s $35.3 billion deal to buy Discover Financial was always going to be difficult to get past financial regulators, as it would lead to the creation of a new credit card giant.

Public opposition to the transaction is already proving strong, as consumer advocates fear the possibility of combining two major lenders.

Company CEOs acknowledged that regulators might be skeptical. In a call with analysts on Tuesday, Richard Fairbank, head of Capital One, alluded to becoming a stronger competitor to both the largest banks and Visa and Mastercard, the country’s largest payments network operators:

  • “The enhanced scale and reach of our combined franchise will position us to compete more effectively against some of the largest banks and payments companies in the United States.”

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

Worth noting: A combination of Capital One and Discover would overtake JPMorgan Chase as the nation’s largest credit card issuer, according to one estimate, and the lender is expected to move some of those cards to Discover’s payments network.

Otherwise, Fairbank had little to say about potential downsides. He told analysts: “We believe we are well positioned for approval, but of course we cannot discuss our conversations with our regulators. Of course, we kept them informed throughout the process.”

Critics of the deal did not appear mollified by Capital One’s arguments.pointing to data such as a recent report from the Consumer Financial Protection Bureau that showed that larger issuers (like Capital One) charged borrowers more than their smaller rivals.

  • “This Wall Street deal is dangerous and will hurt workers” Senator Elizabeth WarrenDemocrat of Massachusetts, posted Tuesday on social media site X. “Regulators should block it immediately.”

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

The Justice Department has not said anything publicly and will not be the main regulator analyzing the Capital One deal (but it will have a say). Still, banking observers have pointed DealBook to a speech last year by Jonathan Kanter, the department’s antitrust chief, in which he called bank competition “essential” and argued that reviewing such deals requires recognizing the “realities of the modern market.” ”.

The fate of corporate diversity efforts already appeared cloudy after the Supreme Court last year rejected affirmative action as a factor in U.S. college admissions. Now, a rare move by an appeals court to rehear a challenge to Nasdaq’s decision to increase board diversity raises new questions about whether the exchange’s initiative can survive.

Nasdaq wants more data on board diversity than the law requires. In 2020, the exchange asked the SEC to approve a rule that would require thousands of companies listed on its exchange to disclose information about the composition of their boards of directors or face delisting. The SEC later approved it.

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

But the Fifth Circuit agreed Monday to reconsider the challenge en banc, and all of its judges are set to review the matter after a hearing scheduled for May. The court has a reputation for being more willing to consider and approve unusual legal theories.

Nasdaq declined to comment, while an SEC spokeswoman said the agency would continue to defend its actions. Blum did not respond to a request for comment.

It is increasingly difficult for companies to understand the changing landscape. Republican state attorneys general have threatened companies that adopt diversity initiatives, and companies have struggled to determine the legality of their programs.

That caution is reflected in sometimes unexpected ways: In a webinar Tuesday hosted by the Aspen Institute’s Business and Society Program on the future of such initiatives, speakers insisted on not being named or quoted.

The Labor Department on Wednesday will release its first measure of the “year of the strike” at corporate America, including disruptive work stoppages by major unions like SAG-AFTRA and the UAW.

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

Smaller strikes are also a big problem. The Labor Action Tracker from researchers at Cornell and the University of Illinois Urbana-Champaign shows that there were 470 stoppages and lockouts last year, equivalent to nearly 25 million strike days. The hospitality and food industry accounted for the largest share of walkouts the research tracks, but the smallest share of workers who left.

But Wednesday’s Labor Department data most likely underestimates that impact, because it will not include stoppages involving fewer than 1,000 workers. This disparity has already manifested itself before: the Department of Labor counted 23 strikes in 2022, while Labor Action counted 433.

Unions see the need to gain a foothold in smaller workplaces, even in units of larger companies like Starbucks. “Due to the growth in employment in smaller establishments, for unions to be able to represent workers, they must be able to organize these smaller workplaces,” Alex Colvin, dean of the Cornell School of Industrial and Labor Relations, told DealBook.

The change in tactics is another focus of labor observers’ attention. One-day strikes are increasing, Colvin said. And the UAW introduced a problem when it organized walkouts at select plants instead of a general walkout, a strategy that kept management guessing and helped the union focus on the Big Three automakers longer. That helped him win a lot in negotiations.