Nvidia profits fail to spark share price rally; UK to join Pacific trade bloc in December – business live
Nvidia Shares Drop 7%; UK Car Production Falls 14%
Hello and welcome to our live updates on business, economics, and financial markets.
Nvidia's stock has dropped 7% after the market closed, even though they surpassed what analysts were predicting for both sales and profits.
The company that designs microchips in Silicon Valley announced a significant increase in sales, reaching $30 billion in the second quarter. This was a 122% increase compared to the same period last year, surpassing analysts' expectations of $28.7 billion.
Jensen Huang, the person who started Nvidia and runs the company as its top leader, mentioned that people are really excited for the new Blackwell chips. These chips are able to fit 208 billion transistors and are used to run the complex calculations needed for training big language models. He also talked about how the current line of products from Nvidia is still in high demand.
Nvidia made a lot of money because data centers around the world are working hard to update their computer systems with faster computing and AI technology.
Why did stocks drop after the US market closed even though the company indicated that it is still leading in the artificial intelligence (AI) industry?
One possible concern could be the limited information provided about the delays affecting Blackwell chip production. Even though the company implied that the manufacturing issues had been resolved by TSMC, the Taiwanese semiconductor manufacturer responsible for producing Nvidia's cutting-edge chips.
However, another reason could be that the company has experienced such significant growth that it must exceed expectations by a large margin in order to continue growing.
Henry Allen, a planner at Deutsche Bank, stated:
Even though the results were slightly better than expected, the company's stock price dropped by approximately 7% in after-hours trading. This was partly due to not meeting some estimates that were anticipating a stronger performance. The revenue exceeded expectations, but it was the smallest outperformance in six quarters. This was not as big a victory as Nvidia has frequently experienced in the past year and a half.
Simultaneously, the Q3 revenue forecast slightly surpassed the average prediction ($32.5bn compared to an estimated $31.9bn) but remained in line with analysts' expectations.
UK Car Production Declines As Manufacturers Gear Up For New Models
In the UK, there has been a decrease in car production numbers recently. However, this is mainly due to companies shifting their focus towards manufacturing new models, as reported by the Society of Motor Manufacturers and Traders (SMMT).
The advocacy group reported that there was a 14.4% decrease in production during the month of July due to model changes and limited supplies in the supply chain.
A new car model that may be coming soon is the Range Rover electric vehicle, which will be the first electric car to be produced in the UK by Jaguar Land Rover. The biggest car manufacturer in the UK currently only has one other electric model, the Jaguar I-Pace, which is made by a manufacturer in Austria.
The car manufacturing sector made 482,000 vehicles in the initial seven months of this year, showing a decrease of 9% compared to 2023. The SMMT is optimistic that yearly production will surpass 1 million cars in the upcoming year as they begin producing new models.
Mike Hawes, the head of the SMMT, stated
After experiencing a notable increase in business last year, it was anticipated that there would be some changes in production. It is clear that there will continue to be fluctuations as the industry works to shift towards producing vehicles with zero emissions.
Once the extensive investments in new models begin to show results, we can expect to see an increase in sales. To achieve this, we need to take advantage of all opportunities to improve our competitiveness on a global scale.
Blog Update: Eurozone consumer sentiment at 10am British Summer Time. The August data shows a decrease of 13 points, slightly lower than the expected consensus of -13.4.
10:15am British Summer Time: The chief economist of the European Central Bank, Philip Lane, will be giving a speech in Frankfurt.
1pm UK time: Upcoming news about the inflation rate in Germany for August. Previous rate was 2.3% annually, while the consensus is expecting a rate of 2.1%.
At 1:30pm BST, the United States will release the second estimate of its GDP for the second quarter. The previous estimate was a 1.4% annual growth rate, while the consensus among analysts is for a 2.8% growth rate.
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Nvidia Stock Price Rebounds 1.9% Before Market
Nvidia's stock took a 7% dive this morning before the opening of Wall Street, but has since rebounded, currently down by just 1.9%.
Experts have had a chance to think about the results, and some are highlighting the point that the company's performance was still extremely impressive, even though it didn't exceed the most optimistic predictions like it has in previous years.
Blayne Curtis and Ezra Weener, who work as analysts for Jefferies, a financial institution based in the United States, have raised their price target following the recent results. They expressed satisfaction with the news that issues causing delays for the upcoming Blackwell chip have been resolved, and that sales of the current Hopper model continue to perform strongly.
The company is seeing high demand for its Hopper product, and they highlighted that the Blackwell ramp was a major focus of their recent discussions. They anticipate generating several billion in revenue starting in the fourth quarter, which is on track despite concerns about delays. The delay was already widely understood, but the company mentioned making a change to the Blackwell GPU mask to enhance production efficiency.
In general, there may be some discussions about the amount of money being spent on AI, but things are looking good with the worries about Blackwell delays behind us. There are also billions of dollars being invested in Blackwell, which will contribute to the ongoing growth of Hopper in the second half of the year.
Lindsay James, a specialist in investing at Quilter Investors, a company that manages funds, explained:
Although the demand for the company's products is high, there might be some disappointment after the delayed shipments of the latest chip design in Q4. This could cause a slight decrease in stock value. However, with earnings expected to more than double this year and the valuation not too high considering this growth, both optimistic and pessimistic investors have reasons to be interested.
UK Joining Trans-pacific Trade Bloc On 15 Dec
The UK will officially join a new trading group on 15 December, once Peru has met all the necessary requirements to become a member.
The CPTPP will provide British exporters with access to 11 countries without having to pay tariffs. However, this will initially only be applicable to the six countries that have officially approved the agreement: Japan, Singapore, Chile, New Zealand, Vietnam, and Peru.
The business department in the UK announced on Thursday that “the deal could increase the UK economy by approximately £2 billion per year” – although not until 2040. This was considered a significant accomplishment in trade by the former Conservative government.
But don't see it as a big opportunity to fix the loss of trade with the EU post-Brexit. The Observer's political editor, Toby Helm, shared this news on Sunday.
The previous year, the Conservatives promoted joining the Trans-Pacific Partnership as a crucial aspect of the future of Britain after Brexit. However, the Office for Budget Responsibility estimated that it would only contribute 0.04% to the country's GDP over a period of 15 years.
The government oversight agency also mentioned that two different trade agreements between Britain and Australia and New Zealand, which were seen as important deals after Brexit, "could potentially boost the overall economy by a total of 0.1% by the year 2035".
Douglas Alexander, the trade policy minister, advised businesses to reach out to the government to inquire about potential advantages. He mentioned:
This is a positive development for businesses in the UK, as they are now closer to being able to benefit from the opportunities that our participation in CPTPP will provide.
We are very thankful to all the countries in the CPTPP that have approved our membership so far - Japan, Singapore, Chile, New Zealand, Vietnam, and now Peru. We are excited for more countries to do the same in the months ahead.
The European Commission's economic sentiment indicator suggests that the eurozone economy is set to get better.
The economic confidence gauge, which is determined by surveys of businesses and households, increased from 95.8 points in July to 96.9 in August. This surpassed the predicted steady reading by economists.
Still, the signal is lower than usual – which is no shock since Germany, the biggest economy, is still facing significant challenges.
The Commission's assessment of how confident consumers are dropped a bit, to -13.5 points. This was a slight decrease from the previous month's score of -13.4 points.
Nvidia has capitalized the most on the excitement surrounding artificial intelligence, positioning itself as the primary provider of essential tools and equipment. Instead of directly joining the gold rush, Nvidia is the one selling the shovels and picks to those searching for the treasure.
However, another way to determine if the excitement can continue will be the most recent funding round for OpenAI. The company sparked a surge in investments when they introduced ChatGPT at the end of 2022, a chatbot capable of conversing and answering questions in a manner that appears to be on par with humans (though with the same human tendencies and imperfections).
The business, led by Sam Altman, has reached a value of $86 billion, but is now looking for more funding to push it over the $100 billion mark. Reports from Bloomberg News and the Financial Times suggest that the company is actively seeking additional investment. The FT stated:
The company from San Francisco is in discussions with venture capital firms like Thrive Capital, who are planning to invest $1 billion and take the lead in the funding round. Other investors are also involved, as reported by two sources familiar with the matter.
A person who invests in the company said that OpenAI's stock has been bought and sold on another market at a price that suggests the company is worth over $110 billion.
The investment is great for Nvidia because a lot of the money will likely be used to purchase GPUs, which are specialized chips used for gaming and are also perfect for training AI systems.
Altman's latest blog post about X, which was published three weeks ago, was filled with praise for Josh Kushner, the CEO of Thrive. It's not surprising, though, considering that there are rumors of a billion-dollar deal in the works.
Large corporate stock prices in Europe have reached their peak in the past six weeks, although they have not seen a significant surge.
The Euro Stoxx 600 index increased by 0.4% to reach its highest level since July 15th. After experiencing a sharp decline in early August, the shares have since rebounded and exceeded their previous levels.
Tech stocks in Europe increased by 0.8% on Thursday morning, as stated by Reuters.
European technology companies like STMicro, ASML, and ASM International are reacting positively to Nvidia's recent results, with their stocks increasing by 0.7%-1.3%.
Drax Fined £25m For Inaccurate Wood Sourcing Data
The generator company Drax has accepted to pay a sum of £25m as a penalty following the discovery by the energy regulatory authority that they had provided incorrect information regarding the sustainability of the wood pellets used at their large facility in North Yorkshire.
Ofgem's inquiry, started in the previous year, found that there were not enough rules and safeguards in place for gathering information on the procurement of wood from Canada from April 2021 to March 2022.
Drax, which receives a lot of financial support from the UK government, has been consistently questioned about the long-term viability of its wood-burning power generation operations.
Approximately 80% of the wood pellets used in Drax's biomass facilities come from forests located in the United States and Canada.
Ofgem stated that they did not find any proof to indicate that the breach was intentional, and described it as being "technical in origin."
The government overseer explained that the information did not meet the requirements to determine the level of financial support Drax receives from the public, and it would not affect the subsidies it currently receives. In order for companies to qualify for government funding, a minimum of 70% of the biomass used must come from sustainable sources.
Drax has decided to contribute £25m to a voluntary compensation plan to resolve the issue and will provide new profiling information for wood pellets sourced from Canada. Additionally, they will enlist an impartial auditor to generate data for their yearly biomass report up to March.
Nevertheless, Ofgem's discoveries are expected to provoke additional censure regarding the government's backing of Drax and its biomass activities, which have been subject to growing examination by lawmakers and environmental advocates.
HSBC Reorganizes Leadership Before New CEO Arrives
The new leader of HSBC, Georges Elhedery, won't begin his official duties until Monday, but it seems that the usual changes in leadership at the top are already happening under the new CEO.
Elhedery, who is currently the chief financial officer of the UK-listed bank, will be taking over from Noel Quinn. Noel Quinn announced in April that he would be stepping down after leading the bank for five years.
Today we discovered some interesting developments happening behind the scenes, according to a statement from the bank reported by Reuters. The resignation of Nuno Matos is especially noteworthy, as he was considered a possible contender for the top CEO position.
HSBC's top executive in charge of wealth and personal banking, Nuno Matos, is stepping down from his role.
John Hinshaw, the chief operating officer of the HSBC group, has chosen to depart from the group in order to explore new opportunities.
Stuart Riley has been chosen to take on the new role of global chief information officer at HSBC, where he will now oversee data and innovation.
Suzy White, who currently holds the position of chief operating officer at HSBC global banking and markets, has been chosen to serve as the global chief operating officer on a temporary basis.
European stock markets are relatively stable today, even though there is movement in the US market following Nvidia's earnings report.
Just a friendly reminder that we are still in the month of August, which is typically a time when many investors take a break. However, this can sometimes result in unexpected and significant changes in the market, as we have witnessed recently.
Today is different. For a rare moment, none of the main stock market indicators have moved. Here are the initial reports from Reuters:
European stocks were stable on Tuesday, with the Stoxx 600 index showing little change.
The UK's FTSE 100 remains unchanged, while Germany's DAX also stays steady.
France's CAC 40 is steady, while Spain's IBEX is also holding steady.
EURO STOXX Index remains unchanged, while Euro Zone's top-performing companies show no movement.
Nvidia Stock Drops 7% Pre-market; UK Car Output Sinks 14%
Hello and welcome to our live updates on everything related to business, economics, and financial markets.
Nvidia's stock has dropped by 7% in after-hours trading, even though they actually exceeded analyst predictions for both sales and profits.
The company in Silicon Valley that designs computer chips announced that its sales had more than doubled to $30 billion in the second quarter, which was a 122% increase compared to last year. Analysts had predicted sales to be around $28.7 billion on average.
Jensen Huang, the person who started and is currently the leader of Nvidia, mentioned that people are very excited for the upcoming Blackwell chips with 208 billion transistors. These chips are necessary for complex tasks like training large language models. He also mentioned that there is a lot of interest in their current range of products.
Nvidia hit an all-time high in revenue thanks to data centers around the world working at full capacity to update their computing systems with faster technology and innovative AI.
Why did the stock prices drop after US trading closed even though the company indicated they are at the forefront of the artificial intelligence (AI) movement?
A possible factor could have been the limited information provided about the delays impacting Blackwell chip production. Even though the company claimed that TSMC, the Taiwanese semiconductor manufacturer responsible for producing Nvidia's most advanced chips, had resolved the manufacturing issues.
However, it could also be that the company has experienced such a significant expansion that in order to continue growing, it must not just meet expectations, but exceed them significantly.
Henry Allen, a planner at Deutsche Bank, expressed.
Even though they did better than predicted, their stock price dropped about 7% after the market closed. Some analysts were disappointed because the results didn't exceed their high expectations. In comparison to previous quarters, the revenue increase was not as large as expected, leading to a smaller beat than what Nvidia has seen in the last year and a half.
Additionally, the Q3 revenue forecast slightly surpassed the average estimate by reaching $32.5bn, compared to the estimated $31.9bn. However, it still falls comfortably within the range of analysts' expectations.
Car Production In UK Drops Ahead Of New Models
In the UK, car production data has decreased, but only because companies are shifting their focus towards producing new models, as reported by the Society of Motor Manufacturers and Traders (SMMT).
The advocacy group reported that there was a 14.4% decrease in production in July due to changes in models and temporary limitations in the supply chain which were hindering output.
One new model that is expected to be released is the electric Range Rover, which will be the first electric vehicle produced in the UK by Jaguar Land Rover, the largest manufacturer in the country. The company's only other electric vehicle, the Jaguar I-Pace, is currently being produced by a third-party manufacturer in Austria.
The car manufacturing sector made 482,000 vehicles in the initial seven months of the year, marking a 9% decrease from last year. The SMMT is anticipating a boost in annual production to exceed 1 million cars in the upcoming year with the commencement of production of new models.
Chief executive Mike Hawes of the SMMT commented
After a big increase last year, it was expected that there would be some changes in the amount of goods produced. It is possible that there will continue to be some ups and downs as the industry shifts towards making vehicles that have zero emissions.
As the significant investments made in new models begin to show results, we can expect an increase in sales volume, as long as we take advantage of every opportunity to improve our international competitiveness.
Blog Update: At 10am BST, the Eurozone consumer confidence report for August will be released, showing a decrease of 13 points with a consensus expectation of -13.4.
European Central Bank will have a speech by the main economist Philip Lane in Frankfurt at 10:15am BST.
1pm BST: Germany's inflation rate for the month of August is expected to be 2.1%, slightly lower than the previous rate of 2.3% on an annual basis.
1:30pm BST: The second estimate of the US GDP for the second quarter will be released. The previous estimate was 1.4% annualised, while the consensus is expecting 2.8%.
