Investing -- May 29, 2023

NOT YET PROOFREAD. There will be typographical and content errors.

Locator:10005INV. 

WTI: continues to melt up. US holiday. WTI up 1%; up 73 cents; trading at $73.40.

Investing. Spend some time "digesting" this graphic. Link here.

From the linked article:

The U.S. stock market is surprisingly calm right now, especially in the face of the debt-ceiling fight. A key reason: a growing divide between mainstream investors, who have largely been sitting out the 2023 stock rally, and the machines whose buying has been driving it.

Only days remain until the U.S. blows past its debt-ceiling deadline. On Saturday, President Biden and Republican House Speaker Kevin McCarthy reached a tentative agreement to prevent a destabilizing default. But passage of the plan, which is expected to face opposition from some House conservatives this week, isn’t yet assured. [If all Democrats support the deal, as is expected, only five Republicans need to support the deal. The WSJ suggests McCarthy got the better deal; "everyone" else says otherwise. -- That's my take. ]

Despite the political uncertainty, the rebounding stock market has barely gotten nicked, with the S&P 500 finishing 0.3% higher last week. Over recent months, stocks have handily overcome stress in the banking system, stubborn inflation and interest-rate hikes. Last year, those kinds of issues repeatedly torpedoed stocks. This year, markets have met such events with a shrug.

The market’s steady rise has puzzled analysts and portfolio managers as the S&P 500 has churned more than 9% higher this year (and the technology-focused Nasdaq Composite has risen 24%). One explanation: Quant funds, or those relying on computer models and automated trading, have been doubling down on equity markets as other investors have stepped back, citing high valuations and concerns about the likely course of the U.S. economy.

Quant-fund buying has pushed these funds’ net exposure to U.S. stocks to the highest level since December 2021, according to data from Deutsche Bank. Mainstream investors, in contrast, have been pulling cash from stock funds and pouring it into money markets.

The continuing demand from quants has provided a lifeline for the stock market. Combined with robust corporate buybacks, their buying has helped counteract selling pressure and led to placid moves. The S&P 500, for example, has moved less than 1% in either direction for 36 of the last 46 sessions, according to Dow Jones Market Data, the quietest 46-day stretch since December 2021.

Much more at the link, of course.

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Chips

Link here. 

A reminder, before we get started. The Nvidia story was a ten-year story in the making; it was not an overnight investing opportunity.

From he linked article:

The artificial-intelligence revolution is being likened by Google’s chief executive to humanity’s harnessing of fire. Now if only the industry could secure the digital kindling to fuel it.

A shortage of the kind of advanced chips that are the lifeblood of new generative AI systems has set off a race to lock down computing power and find workarounds. The graphics chips, or GPUs, used for AI are almost all made by Nvidia. But the boom in demand for them has far outpaced supply with the viral success of ChatGPT, a chatbot that is able to respond to questions in humanlike ways.

“Because there is a shortage, it’s about who you know,” said Sharon Zhou, co-founder and CEO of Lamini, a startup that helps companies build AI models like chatbots. “It’s like toilet paper during the pandemic.”

That situation has restricted the processing power that cloud-service providers like Amazon.com and Microsoft can offer to clients such as OpenAI, the company behind ChatGPT. AI developers need the server capacity to develop and operate their increasingly complex models and help other companies build AI services.

Even the most connected tech entrepreneurs in the world are struggling to secure capacity. During a May 16 congressional hearing on AI, OpenAI CEO Sam Altman said it would be better if fewer people used ChatGPT because of the processor bottleneck.

“GPUs at this point are considerably harder to get than drugs,” Elon Musk told The Wall Street Journal CEO Council Summit on May 23.

Being Musk has its perks, though. Earlier this year, startups clamoring for Oracle computing capacity were abruptly told that a buyer had snapped up much of Oracle’s spare server space, people familiar with the matter said. The buyer, the startups were told, was Musk, who is building his own OpenAI rival called X.AI.

Access to tens of thousands of advanced graphics chips is crucial for companies training large AI models that can generate original text and analysis. Without them, work on the large language models that are behind the AI runs much slower, founders say. Nvidia’s advanced graphic chips excel at doing lots of computations simultaneously, which is crucial for AI work.

Much more at the link, of course. 

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Previously Posted

Locator: 44766INV.  
Locator: 44766AAPL.  

Emperor with no clothes. Link here.

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Ouch: Nvidia short sellers lose $2.3 billion in one day. Link here.

“Our expectations for NVDA’s future revenues are lifting substantially,” Wedbush analyst Matt Bryson wrote in a note upgrading Nvidia to outperform from neutral. He pushed his price target to $490, implying an additional roughly 29% in upside for shares from Wednesday’s close.

Someone else noticed the same thing, link here.

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them. 

Again, all my posts are done quickly. There will be typographical and content errors in all my posts. If any of my posts are important to you, go to the source.