💻️ All hail Nvidia

PLUS: How will the market bounce back post-elections?

Author

Ruchirr Sharma
June 06, 2024

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Good morning. Dua Lipa is having a spectacular week. Yesterday, she became the first-ever artist to have five songs with two billion streams each and kicked off her world tour in Berlin.

Hope you are at least having a good week.

- Ruchrngd Sharma & Shatakshi Sharma  

🧵 In today’s issue:

  • 📊 Markets recap

  • 💻️ All hail Nvidia

  • 💰️ How will the market bounce back post-elections?

  • 🗞️ Bite-sized summaries

    • Byju’s in more trouble?

    • A new money exchange

    • A new kind of plane

  • 🧑‍🍳 What else is cookin’? (quick links)

  • 🍿 Entertainment, Entertainment, Entertainment

📊 Markets

🇮🇳 India

Data as of market close on 5/6/2024

  • Indian stock markets fluctuated following election results but closed over 3% higher with a new BJP-led government. Broad markets rallied, volatility dropped, and consumption stocks gained interest, while PSU banks, metals, and infrastructure stocks faced selling pressure.

🌍️ International

Data as of market close on 5/6/2024

  • Hints of a Fed rate cut and tech stocks drove the S&P 500 and Nasdaq to record highs. A cooling labour market sparked rumours of policy easing, with Nvidia surpassing Apple in market value. Indications of an economic slowdown boosted stocks but pressured Treasury yields.

It’s Nvidia’s world, and we are just investors in it.

In a major milestone, Nvidia surpassed Apple to become the second-most valuable public U.S. company by market capitalisation. On Wednesday, after its shares rose over 5%, Nvidia's market cap hit $3T, while Apple's stood at $2.99T at market close.

What’s happening? 

  • This remarkable rise has been fueled by investors' bullish bets on Nvidia's dominance in the AI chip market. 

  • The company commands an estimated 80% market share in AI chips for data centers, which are attracting billions in spending from major cloud providers.

  • Nvidia's data center business, including its GPU sales, saw a staggering 427% year-over-year revenue growth in the latest quarter, contributing 86% of the company's overall sales. 

  • Investors are increasingly confident in the sustainability of this growth, which was driven by a handful of cloud giants.

In contrast, Apple's sales growth has stagnated recently: 

  • Its overall sales dropped 4% in the last quarter, with iPhone sales declining 10% year-over-year. 

  • The iPhone maker faces strategic challenges, demand issues in China, manufacturing concerns, and mixed reactions to its new virtual reality headset, Vision Pro.

Overall: While Apple was the first to reach $1T and $2T market caps, Microsoft currently holds the top spot as the most valuable U.S. company. It also benefits from the demand for AI infrastructure.

Nvidia's meteoric rise, with its shares surging over 3,290% in five years, highlights the market's optimism about its AI business, a stark contrast to its early days targeting the gaming industry.

Read more: CNBC

Narendra Modi's Bharatiya Janata Party (BJP) lost its outright majority in India's general election, suffering a significant political setback after a decade in power. 

TL;DR: The BJP secured 240 seats in the 543-seat Lok Sabha, falling short of the 272 seats needed for a majority. 

This outcome led to wild swings in stock prices of major new-age tech companies:

  • On Tuesday, as the broader markets plunged over 8% in their biggest one-day fall in two years, shares of firms like Zomato, Paytm, Delhivery, Nykaa, and PB Fintech also took a beating.

  • This came after massive gains on Monday when exit polls had suggested a clear mandate for the ruling BJP. 

  • Senior startup executives had hoped the new government would continue supporting the ecosystem.

On Wednesday, however, as the overall markets recovered some losses, stocks of most new-age companies also rebounded:

  • Logistics firm Delhivery ended 7.7% lower on Tuesday but rose nearly 5% on Wednesday. 

  • Beauty retailer Nykaa fell 4% on Tuesday but gained 4.5% the next day. 

  • Paytm continued declining, ending 4.9% down on Wednesday after a 5% fall previously, impacted by RBI's recent crackdown on its payments bank.

  • Debutant Go Digit General Insurance saw a relatively mild 1.3% dip on Tuesday and gained 1.9% on Wednesday. 

  • Zomato recovered fully with a 6.8% jump after losing 2% earlier. 

  • Honasa Consumer (Mamaearth) plunged 9% but bounced back 10.65%. 

  • PB Fintech fell 3.4% but rose over 4% the next session.

Overall: The wild stock market swings of new-age tech companies highlight investor concerns around policy uncertainties and a potentially less stable government after India's fractured election verdict. 

With no single party securing a clear majority, the new administration will likely face increased scrutiny and opposition in pursuing its economic agenda and supporting the startup ecosystem going forward. 

How the incoming coalition navigates this challenging landscape will be closely watched by markets and businesses alike.

Read more: Economic Times

🗞️ Bite-sized summaries

Source: CNBC

🤔 Byju’s in more trouble? - A group of creditors led by HPS Investment Partners has petitioned a US court to initiate bankruptcy proceedings under Chapter 11 against three subsidiaries of Byju's - Neuron Fuel Inc. (Tynker), Epic! Creations Inc., and Tangible Play Inc. (Osmo) - which were guarantors for a $1.2 billion syndicated term loan taken by Byju's Alpha in 2021. The lenders claim this move aims to protect and maximize the value of these US-based operating entities amid Byju's financial troubles, prevent further asset diversion, and reorganize the businesses, as they remain committed to the subsidiaries' success. This comes after Byju's defaulted on the loan, leading to Byju's Alpha being put into bankruptcy earlier this year, and amidst ongoing legal battles between Byju's and the lenders over the loan proceeds.

💰️ A new money exchange - A group of over two dozen investors, including major firms like Citadel Securities and BlackRock, announced plans to launch a new stock exchange called the Texas Stock Exchange (TXSE) based in Dallas. The TXSE aims to compete with the New York Stock Exchange and Nasdaq by providing an electronic trading platform for primary listings, dual listings, and exchange-traded products when it begins facilitating trades in 2025 after registering with the SEC later this year. The exchange has raised $120 million and will employ around 100 people. Its founder cited Texas' booming economy as a major opportunity, though past attempts at regional stock exchanges have often failed or been acquired by larger incumbents.

✈️ A new kind of plane (see image above) - Archer Aviation received a key Part 135 certification from the U.S. Federal Aviation Administration, allowing the electric air taxi maker to become an airline and carry passengers effectively. This milestone brings Archer closer to launching commercial operations with its four-passenger eVTOL (electric vertical takeoff and landing) aircraft called "Midnight." This advancement comes after United Airlines agreed to purchase dozens of Archer's eVTOL aircraft in 2021, as airlines explore using this new technology to reduce emissions and transport passengers to and from airports in congested areas.

🧑‍🍳 What else is cookin’?

What’s happening in India (and around the world 🌍️)

🍿 Entertainment, Entertainment, Entertainment

And that’s all for today folks - have a lovely day and we’ll see you tomorrow.