News & Insight • Weekly Newsletters

24 May 2024 | William Buckhurst | Charlie Todd

That Was The Week That Was

MACRO

• Inflation in the UK fell to 2.3% but not as much as experts were expecting (2.1%). It still means that prices are still rising and elements such as core and housing helped it beat the target for the Bank of England. These stats pushed back timing expectations of rate cuts
• With no sight of near time rate cuts Prime Minister Rishi Sunak calls for an election on the 4^th July
• US economic data – higher for longer, yields back close to 5%
• European auto stocks reacted to news of potential Chinese tariffs. Reports indicated that China was ready to implement tariffs as high as 25% on imported cars

COMPANY NEWS

• Nvidia exceeded lofty expectations as the company continues to outperform and out manoeuvre rivals. Although their next chip iteration, called Blackwell, is due out later this year CEO Jensen Huang also suggested a sequel is out the year after. He also said “the next industrial revolution has begun — companies and countries are partnering with NVIDIA to shift the trillion-dollar traditional data centres to accelerated computing and build a new type of data centre — AI factories — to produce a new commodity: artificial intelligence”
• JP Morgan, upgraded guidance but the shares still fell as CEO Jamie Dimon suggested the bank wasn’t going to be buying back shares at their current level
• Big news in the investment portal subsector as Hargreaves Lansdowne rejected a bid and AJ Bell had very good results and then the founder sold some stock
• National Grid (and Great Portland Estates) were on the front foot, raising cash from current shareholders through a rights issue (shareholders have the right to maintain their weighting in the larger company). It was rumoured that Grid had received an offer from a Sovereign Wealth Fund to cover the raise and then when putting it to the largest shareholders they did it
• UK water companies are having a tough time but are not helping themselves in the eyes of the regulator (OFWAT) with the number of leakages. Both Severn Trent and Pennon Group reported results that could have been better
• Dowlais, the automotive business that span out of Melrose, had slightly soggy results
• XP Power (a core holding of Odyssean Investment Trust) and Keywords Studios were on the receiving end of bids with large premiums to the prevailing price from Advanced Energy Industries and private equity company EQT It looks like EQT will be successful, but the XP Power bid looks opportune at best
• US Retailers, Target, Lowe’s and Macy’s all reported leaving guidance mostly unchanged but the most interesting quote came from Target executives stating “Currently one in three Americans has maxed out or is nearing the limit on at least one of their credit cards. For these reasons and more, we remain cautious in our near-term growth outlook”

SANDWICH CORNER

So, it turns out the train and plane traveller is popping into M&S and buying a sandwich rather than queuing up on the concourse for an Upper Crust alternative.  Greencore (the sandwich maker), who make the sandwiches for M&S – and other retailers – had excellent results. M&S surpassed expectations (pre-tax profit was £716.4million vs £685.6million expected) as the turnaround continues to gain traction but the print for SSP Group (owner of Upper Crust, Ritazza and other outlets at transport hubs) was underwhelming

TECH WEEK

Microsoft CEO Satay Nadella took the stage this week to give a keynote address at Microsoft Build, the company’s annual develop conference, where he unveiled several new AI initiatives. Interestingly, Nadella made the case that Moore’s Law is being replaced by Scaling laws for AI:

“If you think about it, even going all the way back to the beginning of modern computing, say 70 years ago, there have been two real dreams we’ve had: first, can computers understand us instead of us having to understand computers? And second, in a world where we have this ever-increasing information of people, places, and things, as you digitize more artifacts of people, places, and things, and you have more information, can computers help us reason, plan, and act more effectively on all of that information. Those are the two dreams we’ve had for the last 70+ years, and here we are: I think that we have real breakthroughs on both fronts.

The core underlying force, one of the questions I always ask myself is, ok, this is great, this is maybe the golden age of systems, what’s really driving it? I always come back to these scaling laws, just like Moore’s Law helped drive the information revolution, these scaling laws of DNN’s — along with the model infrastructure, interesting ways to use data, generate data — are really driving this intelligence revolution. You could say Moore’s Law was probably more stable in the sense that it was scaling at maybe 15 months, 18 months, we now have these things that are scaling every 6 months, or doubling every 6 months.”

THIS WEEK IN HISTORY

1849: Abraham Lincoln was granted a patent for a boat lifting device – the only president to have one

1927: American aviator Charles Lindbergh is the first person to complete the first nonstop solo flight across the “pond”

MARKET DATA

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