This was another week of summer trading, but we did get an earnings report from semiconductor behemoth Nvidia and a speech on Friday from Fed Chair Kevin Warsh. Also, the Fed’s preferred gauge of inflation, Personal Consumption Expenditures (PCE) was reported on Wednesday at 3.7% (YoY) which is higher than we all wanted.
Chairman Warsh’s Jackson Hole Debut
- No preview of the next move. “I stand here today committed to a discipline, not a decision,” he said — deliberately declining to signal a September rate call.
- On Forward Guidance (market manipulation): he’s moving to scale back forward guidance itself, calling the practice a Global Financial Crisis-era relic that has “overstayed its welcome.”
- Inflation Is Made in Washington DC: “The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank.” An unusually direct admission from a sitting Chairman.
- Bond vigilantes took notice: The 2-year Treasury yield — the part of the curve most sensitive to Fed expectations — jumped on his remarks by 10bps to 4.3%.
- My take: growth sounds fine to him; inflation is clearly where his focus sits.
NVIDIA’s Report Card
- The headline: revenue of $96.2 billion, up 106% year-over-year — beating NVIDIA’s own guidance and Street estimates by $4–$5 billion.
- Underneath it: Data Center revenue of $89.0 billion (+117%) and Non-GAAP EPS of $2.22 (+120%), also ahead of estimates.
- The stock’s reaction: up nearly 9% the next session.
- One thing I’m watching: margin guidance steps down to 74% for Q3 from 75% this quarter, tied to ramp costs on the new Vera Rubin platform. Is this peak margin?
- Supply commitments more than doubled to $279 billion. These are orders the company places with its manufacturer so they can satisfy customer order demand. If they are wrong and demand falters in the coming year, they will be left holding a very big bag of chips. However, their customers can’t get enough of their product so I think it signals there will be a significant amount of compute demand in the next 1-2 years.
- Chips Retain Value Now: On their conference call, the company mentioned that their 2023 vintage chips are now higher in value today than when they were first issued. Artificial intelligence is changing the cyclical nature of the semiconductor business which is a first for this mature industry.
The S&P 500
The S&P 500 index was up slightly this week, but I expect more consolidation (sideways trading) next week before the Labor Day Holiday. Earnings are good but rising yields could be a headwind for the month of September.
Putting It Together
We have one more week before Labor Day, but trading volumes should begin to pick up and normalize as many families send their kids back to school and summer travel ends. It should be an interesting September as the markets wrestle with oil prices, inflation, rising yields while hyper growth in the technology sector anchors markets.
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President, Kisco Capital
This commentary is provided by Kisco Capital LLC for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Opinions are subject to change without notice. Past performance is not indicative of future results. All investments involve risk, including possible loss of principal. Kisco Capital and its clients may hold positions in securities discussed herein.
