News Analysis: Nvidia growth slows; Ellison, board apologise; Future Fund's new investment mandate
Ankita Rai
Thu 21 Nov 2024 4 minutesWelcome to the essential investor brief, featuring handpicked news for the week ending 22nd November 2024.
This week's highlights include:
-High expectations weigh on Nvidia: Nvidia's slowdown in revenue growth highlights the challenges of sustaining such rapid expansion. While its results remain strong, the company's struggle to meet high expectations and overcome supply chain hurdles underscores the difficulty of maintaining explosive growth in a competitive tech market.
-Ellison's mea culpa moment: Chris Ellison's admission of mistakes and his commitment to step down within 18 months is positive news for Mineral Resources. However, with shareholders divided—some supporting his continued presence—concerns remain about how the transition will affect the company’s direction and investor confidence. The company’s big test of governance and accountability is still to come.
-The fine line between policy and profit: The Future Fund's new investment mandate raises concerns about political interference. While Treasurer Jim Chalmers insists on maintaining financial returns, there’s a risk that future governments might steer the investments toward their political agendas, undermining the fund’s independence and long-term performance.
ECONOMY & FINANCE
With inflation lingering and the jobs market proving resilient, rate cuts will have to wait longer.
News highlights
The Reserve Bank of Australia has indicated that it is unlikely to cut the cash rate in February or April unless there is a sudden downturn in employment. Economists now predict the first post-pandemic rate cut could occur in May, depending on economic indicators.
- Takeaway: Investors may need to adjust their portfolios in anticipation of a longer period of higher rates.
Treasurer Jim Chalmers has directed the Future Fund to prioritise investments in housing and renewable energy. This marks the first change to the fund's investment mandate in 15 years, aimed at aligning with national priorities while maintaining return targets.
- Takeaway: The fund's shift toward national priorities such as infrastructure and housing may open opportunities in these sectors.
Goldman Sachs advises investing in copper and aluminium over iron ore in 2025. It expects iron ore prices to average $95 a tonne, while copper and aluminium prices are predicted to rise due to growing energy transition demand.
- Takeaway: The shift in commodity forecasts suggests adjusting portfolios to favour copper and aluminium over iron ore may be prudent. With weak demand from China and oversupply issues affecting iron ore, investors may be better positioned in base metals.
Cryptocurrency markets are preparing for Bitcoin to reach $100,000, driven by expectations of favourable regulation under President-elect Trump. Bitcoin has surged over 40% since Trump's election.
- Takeaway: Trump's vocal support for crypto has driven a surge in market activity, but the rally raises risks for leveraged investors. Increased volatility could trigger sharp price swings, leading to forced liquidations and significant losses for those who are overexposed.
CORPORATE NEWS
Nvidia's slowing earnings growth reflects growing investor scepticism around AI's real-world returns.
News highlights
Nvidia reported Q3 adjusted earnings of $US0.81 per share, beating estimates of $0.75. Revenue from the data centre segment grew 112% to $30.77 billion. The company forecasted Q4 revenue of $US37.5 billion, reflecting a slowdown in growth to 69.5%.
- Takeaway: Slowing revenue growth, supply chain issues with TSMC, and lower margins for new Blackwell chips signal increasing challenges for Nvidia in maintaining outsized performance.
US regulators have proposed breaking up Google over its search engine monopoly. The Department of Justice recommended selling Chrome, limiting Android's search engine preference, and restricting exclusive deals. Court hearings are set for April to determine the outcome.
- Takeaway: The US government's push to break up Google could disrupt its dominance in search. While the case is still unfolding, any penalties could impact Google's business model.
Indian billionaire Gautam Adani has been charged by the US Justice Department for bribing Indian officials to secure solar energy contracts and committing securities fraud. Adani and seven executives have been accused in a scheme tied to over $US2 billion in profits.
- Takeaway: The charges against Gautam Adani highlight significant legal, reputational, and financial risks. The Adani Group has been heavily involved in renewable energy projects and any disruption could have broader implications for India’s renewable energy sector and global investment in the space.
Shares in GQG Partners fell 19.3% after it announced it was reviewing its investments in Adani Group, following the US bribery charges.
- Takeaway: GQG’s portfolio includes significant investments in Adani companies, which could amplify the risk for Australian investors. The ongoing legal scrutiny could create volatility and impact fund performance, especially in resources.
Chris Ellison took full responsibility for mistakes related to his tax affairs and misuse of company resources while addressing shareholders at the AGM. The company confirmed he will step down within 12 to 18 months.
- Takeaway: The situation with Chris Ellison at Mineral Resources highlights ongoing instability due to governance issues. The uncertainty surrounding his transition, coupled with internal reviews, may further impact the company’s future performance and stock value.
Until next time...
Ankita Rai is a finance journalist at InvestmentMarkets with over 15 years' experience in business and finance writing. She excels at identifying investment themes and simplifying complex financial and tech topics to provide actionable insights for empowering investors.
