The Housing Market And Interest Rates: 3.4% Is The Magic Number

We are going to have a few posts on housing over the next couple days and will kick it off with this post from M&G's Bond Vigilantes, August 28:

Housing and the Fed – how low will rates need to go?

Central banks have traditionally relied on interest rates as a primary tool to influence economic activity, raising rates to cool down an overheating economy, and cutting rates to stimulate growth. Historically, these mechanisms have worked fairly well; however, the recent cycle has proven to be different. Despite a series of aggressive rate hikes, the expected economic slowdown has been surprisingly muted, suggesting that economies are now less sensitive to interest rates. This raises a crucial question: if recent rate hikes haven’t significantly slowed the economy, how can we assume that traditional rate cuts will effectively stimulate it? And just how low must rates go to have an impact?

The housing market serves as a key channel for monetary policy transmission, making it essential to examine how it has responded to recent rate changes. Historically, the transmission mechanism from monetary policy to the housing market, and subsequently to the broader economy, was straightforward (as discussed here). However, this mechanism has become less predictable, especially post-financial crisis (discussed here). This monetary mechanism is not working as normal due to the unique nature of the current housing market.

The strength of the housing market depends on the balance between supply and demand. The housing inventory chart below illustrates the current bifurcation in this market, showing a sharp divergence between the average time new and existing homes stay on the market, with the availability of existing home inventories remaining low due to homeowners’ reluctance to sell, while new home inventories have risen as affordability challenges deter potential buyers:

Source: M&G, Bloomberg, 30 June 2024

On one side, existing homeowners, who have locked in historically low mortgage rates, have little incentive to move, since doing so would mean giving up those competitive rates. On the other side, new homebuyers are willing to buy but cannot afford to, as elevated mortgage rates have made housing largely unaffordable for them.

We therefore need to understand what level of rates is required to restore balance in the housing market and stimulate activity again....

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There is a lot going on in this presentation with much of it being self-contradictory. Such is the state of a "market" untethered from market forces. It's all in the financing, and has been since 2009.

Nvidia Q2 2025 Earnings Call Transcript, August 28, 2024 (NVDA)

From Motley Fool Transcribing, August 28:

NVDA earnings call for the period ending June 30, 2024.

Contents:

    Prepared Remarks
    Questions and Answers
    Call Participants

Prepared Remarks:....

*****

....During this call, we will discuss non-GAAP financial measures. You can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in our CFO commentary, which is posted on our website. Let me highlight an upcoming event for the financial community. We will be attending the Goldman Sachs Communacopia and Technology Conference on September 11 in San Francisco, where Jensen will participate in a keynote fireside chat.

Our earnings call to discuss the results of our third quarter of fiscal 2025 is scheduled for Wednesday, November 20, 2024. With that, let me turn the call over to Colette.

Colette M. Kress -- Chief Financial Officer, Executive Vice President

Thanks, Stewart. Q2 was another record quarter. Revenue of $30 billion was up 15% sequentially and up 122% year on year and well above our outlook of $28 billion. Starting with Data Center.

Data Center revenue of $26.3 billion was a record, up 16% sequentially and up 154% year on year, driven by strong demand for NVIDIA Hopper, GPU computing, and our networking platforms. Compute revenue grew more than 2.5x. Networking revenue grew more than 2x from the last year. Cloud service providers represented roughly 45% of our Data Center revenue, and more than 50% stemmed from the consumer Internet and enterprise companies.

Customers continue to accelerate their Hopper architecture purchases while gearing up to adopt Blackwell. Key workloads driving our Data Center growth include generative AI model training and inferencing; video, image, and text data pre and post processing with CUDA and AI workloads; synthetic data generation; AI-powered recommender systems; SQL and Vector database processing as well. Next-generation models will require 10 to 20 times more compute to train with significantly more data. The trend is expected to continue.

Over the trailing four quarters, we estimate that inference drove more than 40% of our Data Center revenue. CSPs, consumer Internet companies, and enterprises benefit from the incredible throughput and efficiency of NVIDIA's inference platform. Demand for NVIDIA is coming from frontier model makers, consumer Internet services, and tens of thousands of companies and start-ups building generative AI applications for consumers, advertising, education, enterprise and healthcare, and robotics. Developers desire NVIDIA's rich ecosystem and availability in every cloud.

CSPs appreciate the broad adoption of NVIDIA and are growing their NVIDIA capacity given the high demand. NVIDIA H200 platform began ramping in Q2, shipping to large CSPs, consumer Internet, and enterprise company. The NVIDIA H200 builds upon the strength of our Hopper architecture and offering over 40% more memory bandwidth compared to the H100. Our Data Center revenue in China grew sequentially in Q2 and a significant contributor to our Data Center revenue.

As a percentage of total Data Center revenue, it remains below levels seen prior to the imposition of export controls. We continue to expect the China market to be very competitive going forward. The latest round of MLPerf inference benchmarks highlighted NVIDIA's inference leadership with both NVIDIA Hopper and Blackwell platform combining to win gold medals on all tasks. At Computex, NVIDIA, with the top computer manufacturers, unveiled an array of Blackwell architecture-powered systems and NVIDIA networking for building AI factories and data centers.

With the NVIDIA MGX modular reference architecture, our OEMs and ODM partners are building more than 100 Blackwell-based systems designed quickly and cost-effectively. The NVIDIA Blackwell platform brings together multiple GPU, CPU, DPU, NVLink, and Link Switch and the networking chips, systems, and NVIDIA CUDA software to power the next generation of AI across the cases, industries, and countries. The NVIDIA GB200 NVL72 system with the fifth-generation NVLink enables all 72 GPUs to act as a single GPU and deliver up to 30x faster inference for LLM's workloads and unlocking the ability to run trillion-parameter models in real time. Hopper demand is strong, and Blackwell is widely sampling.

We executed a change to the Blackwell GPU mass to improve production yields. Blackwell production ramp is scheduled to begin in the fourth quarter and continue into fiscal year '26. In Q4, we expect to get several billion dollars in Blackwell revenue. Hopper shipments are expected to increase in the second half of fiscal 2025.

Hopper supply and availability have improved. Demand for Blackwell platforms is well above supply, and we expect this to continue into next year. Networking revenue increased 16% sequentially. Our Ethernet for AI revenue, which includes our Spectrum-X end-to-end Ethernet platform, doubled sequentially with hundreds of customers adopting our Ethernet offerings.

Spectrum-X has broad market support from OEM and ODM partners and is being adopted by CSPs, GPU cloud providers, and enterprises, including xAI to connect the largest GPU compute cluster in the world. Spectrum-X supercharges Ethernet for AI processing and delivers 1.6x the performance of traditional Ethernet. We plan to launch new Spectrum-X products every year to support demand for scaling compute clusters from tens of thousands of GPUs today to millions of DPUs in the near future. Spectrum-X is well on track to begin a multibillion-dollar product line within a year.

Our sovereign AI opportunities continue to expand as countries recognize AI expertise and infrastructure at national imperatives for their society and industries. Japan's National Institute of Advanced Industrial Science and Technology is building its AI Bridging Cloud Infrastructure 3.0 supercomputer with NVIDIA. We believe sovereign AI revenue will reach low double-digit billions this year. The enterprise AI wave has started.

Enterprises also drove sequential revenue growth in the quarter. We are working with most of the Fortune 100 companies on AI initiatives across industries and geographies. A range of applications are fueling our growth, including AI-powered chatbots, generative AI copilots, and agents to build new monetizable business applications and enhance employee productivity. Amdocs is using NVIDIA generative AI for their smart agent, transforming the customer experience and reducing customer service costs by 30%.

ServiceNow is using NVIDIA for its Now Assist offering, the fastest-growing new product in the company's history. SAP is using NVIDIA to build dual copilots. Cohesity is using NVIDIA to build their generative AI agent and lower generative AI development costs. Snowflake, serves over 3 billion queries a day for over 10,000 enterprise customers, is working with NVIDIA to build copilots.

And lastly, is using NVIDIA AI Omniverse to reduce end-to-end cycle times for their factories by 50%. Automotive was a key growth driver for the quarter as every automaker developing autonomous vehicle technology is using NVIDIA in their data centers. Automotive will drive multibillion dollars in revenue across on-prem and cloud consumption and will grow as next-generation AV models require significantly more compute. Health care is also on its way to being a multibillion-dollar business as AI revolutionizes medical imaging, surgical robots, patient care, electronic health record processing, and drug discovery.

During the quarter, we announced a new NVIDIA AI foundry service to supercharge generative AI for the world's enterprises with Meta's Llama 3.1 collection of models. This marks a watershed moment for enterprise AI. Companies for the first time can leverage the capabilities of an open-source frontier-level model to develop customized AI applications to encode their institutional knowledge into an AI flywheel to automate and accelerate their business. Accenture is the first to adopt the new service to build custom Llama 3.1 models for both its own use and to assist clients seeking to deploy generative AI applications.

NVIDIA NIMs accelerate and simplify model deployment. Companies across healthcare, energy, financial services, retail, transportation, and telecommunications are adopting NIMs, including Aramco, Lowes, and Uber. AT&T realized 70% cost savings and eight times latency reduction after moving into NIMs for generative AI, call transcription, and classification. Over 150 partners are embedding NIMs across every layer of the AI ecosystem.

We announced NIM Agent Blueprint, a catalog of customizable reference applications that include a full suite of software for building and deploying enterprise generative AI applications. With NIM Agent Blueprint, enterprises can refine their AI applications over time, creating a data-driven AI flywheel. The first NIM Agent Blueprints include workloads for customer service, computer-aided drug discovery, and enterprise retrieval augmented generation. Our system integrators, technology solution providers, and system builders are bringing NVIDIA NIM Agent Blueprints to enterprises.

NVIDIA NIM and NIM Agent Blueprints are available through the NVIDIA AI Enterprise software platform, which has great momentum. We expect our software, SaaS, and support revenue to approach a $2 billion annual run rate exiting this year, with NVIDIA AI Enterprise notably contributing to growth. Moving to gaming and AI PC. Gaming revenue of $2.88 billion increased 9% sequentially and 16% year on year.

We saw sequential growth in console, notebook, and desktop revenue, and demand is strong and growing and channel inventory remains healthy. Every PC with RTX is an AI PC. RTX PCs can deliver up to 1,300 AI tops and are now over 200 RTX AI laptops designed from leading PC manufacturers. With 600 AI-powered applications and games and an installed base of 100 million devices, RTX is set to revolutionize consumer experiences with generative AI.

NVIDIA ACE, a suite of generative AI technologies is available for RTX AI PCs. Megabreak is the first game to use NVIDIA ACE, including our small language model, Nemotron 4B optimized on device inference. The NVIDIA gaming ecosystem continues to grow. Recently added RTX and DLSS titles include Indiana Jones and The Great Circle, Awakening, and Dragon Age: The Vanguard.

The GeForce NOW library continues to expand with total catalog size of over 2,000 titles, the most content of any cloud gaming service. Moving to pro visualization. Revenue of $454 million was up 6% sequentially and 20% year on year. Demand is being driven by AI and graphic use cases, including model fine-tuning and Omniverse-related workloads.

Automotive and manufacturing were among the key industry verticals driving growth this quarter. Companies are racing to digitalize workflows to drive efficiency across their operations. The world's largest electronics manufacturer, Foxconn, is using NVIDIA Omniverse to power digital twins of the physical plants that produce NVIDIA Blackwell systems. And several large global enterprises, including Mercedes-Benz, signed multiyear contracts for NVIDIA Omniverse Cloud to build industrial digital twins of factories.

We announced new NVIDIA USD NIMs and connectors to open Omniverse to new industries and enable developers to incorporate generative AI copilots and agents into USD workloads, accelerating our ability to build highly accurate virtual worlds. WPP is implementing the USD NIM microservices in its generative AI-enabled content creation pipeline for customers such as The Coca-Cola Company. Moving to automotive and robotics. Revenue was $346 million, up 5% sequentially and up 37% year on year.

Year-on-year growth was driven by the new customer ramp in self-driving platforms and increased demand for AI cockpit solutions. At the consumer -- at the Computer Vision and Pattern Recognition Conference, NVIDIA won the Autonomous Brand Challenge in the end-to-end driving upscale category, outperforming more than 400 entries worldwide. Boston Dynamics, BYD Electronics, Figure, Intrinsyc, Siemens, and Teradyne Robotics are using the NVIDIA Isaac robotics platform for autonomous robot arms, humanoids, and mobile robots. Now, moving to the rest of the P&L.

GAAP gross margins were 75.1% and non-GAAP gross margins were 75.7%, down sequentially due to a higher mix of new products within Data Center and inventory provisions for low-yielding Blackwell material. Sequentially, GAAP and non-GAAP operating expenses were up 12%, primarily reflecting higher compensation-related costs. Cash flow from operations was $14.5 billion. In Q2, we utilized cash of $7.4 billion toward shareholder returns in the form of share repurchases and cash dividends, reflecting the increase in dividend per shareholder.

Our board of directors recently approved a $50 billion share repurchase authorization to add to our remaining $7.5 billion of authorization at the end of Q2. Let me turn the outlook for the third quarter. Total revenue is expected to be $32.5 billion, plus or minus 2%. Our third-quarter revenue outlook incorporates continued growth of our Hopper architecture and sampling of our Blackwell products.

We expect Blackwell production ramp in Q4. GAAP and non-GAAP gross margins are expected to be 74.4% and 75%, respectively, plus or minus 50 basis points. As our Data Center mix continues to shift to new products, we expect this trend to continue into the fourth quarter of fiscal 2025. For the full year, we expect gross margins to be in the mid-70% range.

GAAP and non-GAAP operating expenses are expected to be approximately $4.3 billion and $3.0 billion, respectively. Full-year operating expenses are expected to grow in the mid- to upper 40% range as we work on developing our next generation of products. GAAP and non-GAAP other income and expenses are expected to be about $350 million, including gains and losses from nonaffiliated investments and publicly held equity securities. GAAP and non-GAAP tax rates are expected to be 17%, plus or minus 1%, excluding any discrete items.

Further financial details are included in the CFO commentary and other information available on our IR website. We are now going to open the call for questions. Operator, would you please help us poll for questions?

Questions & Answers:....

....MUCH MORE

The stock ended the after-hours session down another $8.66 (-6.89%) at $116.95, bringing the day's cumulative loss to $11.35 (-8.85%).

More to come tomorrow.
Earlier:
Nvidia Beats On Top And Bottom Lines, Shares Drop (NVDA)

Nvidia Beats On Top And Bottom Lines, Shares Drop (NVDA)

After falling  $2.69 (-2.10%) during the regular session the stock is down $4.41 (-3.51%) in very early after-hours trading.

From the company, August 28:

NVIDIA Announces Financial Results for Second Quarter Fiscal 2025

• Record quarterly revenue of $30.0 billion, up 15% from Q1 and up 122% from a year ago
• Record quarterly Data Center revenue of $26.3 billion, up 16% from Q1 and up 154% from a year ago

NVIDIA (NASDAQ: NVDA) today reported revenue for the second quarter ended July 28, 2024, of $30.0 billion, up 15% from the previous quarter and up 122% from a year ago.

For the quarter, GAAP earnings per diluted share was $0.67, up 12% from the previous quarter and up 168% from a year ago. Non-GAAP earnings per diluted share was $0.68, up 11% from the previous quarter and up 152% from a year ago.

“Hopper demand remains strong, and the anticipation for Blackwell is incredible,” said Jensen Huang, founder and CEO of NVIDIA. “NVIDIA achieved record revenues as global data centers are in full throttle to modernize the entire computing stack with accelerated computing and generative AI.”

“Blackwell samples are shipping to our partners and customers. Spectrum-X Ethernet for AI and NVIDIA AI Enterprise software are two new product categories achieving significant scale, demonstrating that NVIDIA is a full-stack and data center-scale platform. Across the entire stack and ecosystem, we are helping frontier model makers to consumer internet services, and now enterprises. Generative AI will revolutionize every industry.”

During the first half of fiscal 2025, NVIDIA returned $15.4 billion to shareholders in the form of shares repurchased and cash dividends. As of the end of the second quarter, the company had $7.5 billion remaining under its share repurchase authorization. On August 26, 2024, the Board of Directors approved an additional $50.0 billion in share repurchase authorization, without expiration.....

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And much more to come. 

Via Motley Fool:

Nvidia's Q2 guidance and Wall Street's estimates

Metric	Q2 Fiscal 2024 Result	Nvidia's Q2 Fiscal 2025 Guidance	Nvidia's Projected Growth	Wall Street's Q2 Fiscal 2025 Consensus Estimate	Wall Street's Projected Growth
Revenue	$13.51 billion	$28 billion	107%	$28.68 billion	112%
Adjusted earnings per share (EPS)	$0.27*	$0.622**	130%	$0.64	137%

Watch The News On September 6th: "Why Wells Fargo sees Fed cutting rates 'aggressively'"

From the San Francisco Business Times, August 27:

Wells Fargo’s economics team expects the Federal Reserve to cut rates aggressively due to job market weakness, ultimately seeing the central bank cutting rates a total of two percentage points.

Wells sees the Fed cutting rates a half percentage point when the Federal Open Market Committee meets Sept. 18, adding that the August unemployment report, to be issued Sept. 6, will be pivotal in whether the Fed cuts rates a quarter or half percentage point in September....

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San Francisco being Wells Fargo's hometown the Business Times tends to watch them closer than most media do.  

"Why AI can’t spell ‘strawberry’"

If I only had a brain...

From TechCrunch, August 27:

How many times does the letter “r” appear in the word “strawberry”? According to formidable AI products like GPT-4o and Claude, the answer is twice.

Large language models (LLMs) can write essays and solve equations in seconds. They can synthesize terabytes of data faster than humans can open up a book. Yet, these seemingly omniscient AIs sometimes fail so spectacularly that the mishap turns into a viral meme, and we all rejoice in relief that maybe there’s still time before we must bow down to our new AI overlords.

oh pic.twitter.com/K2Lr9iVkjQ

— Rob DenBleyker (@RobDenBleyker) August 26, 2024

The failure of large language models to understand the concepts of letters and syllables is indicative of a larger truth that we often forget: These things don’t have brains....

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Which brings to mind the question all America is asking: What was the deal between Dorothy and the Scarecrow?

"Construction’s manufacturing boom: Mapping the biggest facilities underway in the US"

From ConstructionDive, August 7/22:

New projects added to the tracker this month include a $1.4 billion sodium-ion battery factory in Rocky Mount, North Carolina, and a $575 million semiconductor project in Taylor, Texas.

Spending in the manufacturing sector has ballooned since the CHIPS Act was signed into law in August 2022. Projects underway include everything from plants focused on chip fabrication and electric vehicle batteries to consumer goods and cars.

Here, Construction Dive rounds up the biggest of these projects announced since August 2022, sorted by value and location, along with their contractors when available. Please check this page for regular updates.

The U.S. continues to gain ground on other countries’ manufacturing dominance a year after President Joe Biden signed the $52 billion CHIPS and Science Act in August 2022.

The renewed push to revive American manufacturing after decades of offshoring has led to over $898 billion in private company investment, according to the White House. The multibillion-dollar investments scattered across the country range from biotechnology facilities and chip fabrication plants to electric vehicle battery factories and clean energy projects.

Some major manufacturing projects added to this page over the past four weeks include a $1.4 billion Natron Energy manufacturing facility in Rocky Mount, North Carolina, a $680 million LS GreenLink project in Chesapeake, Virginia, and a $575 million Soulbrain TX semiconductor plant in Taylor, Texas.

The map also lists the contractors working on these projects when they are available. Some of the notable wins since the last update include:...

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Related at ConstructionDive, August 26:
The 9 largest commercial construction starts of July 2024

Capital Markets: "Corrective Forces Weigh on G10 Currencies, with the Euro Threatening its Largest Loss in Two Months"

From Marc Chandler at Bannockburn Global Forex:

Overview: Corrective forces are helping lift the dollar against all the G10 currencies. The euro's 0.5% pullback is the largest in nearly two months. Sterling's 0.3% loss is the most in nearly three weeks. The dollar-bloc currencies are the most resilient and are off less than 0.2% today. Emerging market currencies are more mixed. Central European currencies have been dragged lower by the euro. The Chinese yuan is a little softer, consistent with the yen's pullback. The Mexican peso, which lead the way lower yesterday is on the top of the EM leader board today.

Equities are mostly firmer today. China and Hong Kong were exceptions among the large bourses in Asia Pacific. Europe's Stoxx 600 is up nearly 0.5% and US index futures are slightly higher. European 10-year yields are 2-4 bp lower today, unwinding some of yesterday's rise. The 10-year US Treasury yield is off almost a basis point slightly below 3.82%. Gold approached the record high set last week ($2532) but perhaps encouraged by a stronger dollar, profit-taking pushed the yellow metal back to almost $2500. Geopolitics and the disruption Libyan and Colombian supply helped lift October WTI to about $77.60 on Monday. It consolidated yesterday, falling to about $75.40 and is now near $74.30. A break of the $73.80 area could target the recent low (~$71.50)....

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"Ikea aims to compete with eBay with launch of secondhand online marketplace"

And the jokes just assemble themselves.

From Business Insider, August 27:

• Ikea has launched a marketplace for customers to buy pre-owned items, Financial Times reported.
• The pilot program will be tested in Madrid and Oslo through the end of the year.
• The launch aims to help Ikea compete with resale sites like eBay, Gumtree, and Finn.

Now, you can pay to reassemble someone's pre-owned Ikea furniture thanks to a new secondhand marketplace launched by the home furnishings giant.

The Financial Times reported that Ikea is launching its pilot marketplace, Ikea Preowned, to compete with resale sites like eBay in the United States and Gumtree and Finn internationally.

So far, only customers in Madrid and Oslo can access the pre-owned offerings, but the company could expand beyond its test markets in the new year, per FT.

"This has been a dream in the making for a while," Jesper Brodin, chief executive of Ingka, the main operator of Ikea stores, told FT. "We are in a place in Ikea where we can do more advanced and cool stuff. There is an incredible confidence in the company evolving on digital."

Sellers list their pre-owned Ikea products on the marketplace with their own photos and listing price, and the site's AI-enabled database automatically populates details like dimensions and promotional images into the listing, FT reported....

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Second thoughts on the jokes. The setups seem to last forever and the final result may still be a bit wobbly.

Maybe Singapore Won't Be Bypassed: "Thailand's 'land bridge' ambitions face fresh roadblocks"

Following on August 14's Will Singapore Be Bypassed? "Blocking Thailand’s solution to China’s ‘Malacca Dilemma’": 

*****

From Nikkei Asia, August 28:

Environmental and political concerns cloud plan to build new trade artery

BANGKOK -- As Thailand inches forward on its decades-old vision for a logistics corridor connecting the Pacific and Indian oceans, local opposition and political instability threaten the plans.

The proposed 90-kilometer highway-and-rail link would cut across the Malay Peninsula, connecting a planned port facing the Indian Ocean in Ranong province with another planned port, in Chumphon province, along the Gulf of Thailand and with a lane to the Pacific Ocean. A special economic zone will be established nearby.

The megaproject would allow cargo to bypass the congested Strait of Malacca -- a choke point that is sandwiched by Malaysia, Singapore and Indonesia and is only expected to grow busier as Asia's economy expands.

But the plan threatens environmental devastation for Koh Phayam, a resort island famous for sparkling blue waters and coral reefs near the planned port in Ranong.

The government has told residents of Koh Phayam that the port will cover roughly 1,000 hectares. Shipping lanes for giant bulk carriers would be established near the island, which involves digging into roughly 6,400 hectares of seabed -- about twice the area of the island itself....

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"Japan’s Mitsubishi Electric Sees Surging Demand for a Special Type of A.I. Hardware"

Not quite a "single point of failure" but still the kind of concentration that keeps the supply-chain wizards up at night.

From Observer, August 23:

A.I. data centers are hungry for a special type of hardware for which Mitsubishi Electric makes half the world's supply.

As Big Tech companies race to dominate the A.I. arms race, a surge in demand for hardware powering A.I. has resulted in massive paydays for companies that make it. Mitsubishi Electric, a Tokyo-based company that manufactures electronics and electrical equipment, has recently seen a surge in sales for its optic transceivers, which are key to enabling high-speed transmission in data centers. (Mitsubishi Electric and Mitsubishi Motors are both connected to Mitsubishi Heavy Industries.)

Demand for the devices is so high that Mitsubishi Electric is planning on increasing its production capacity by 50 percent next month, said Masayoshi Takemi, executive officer and group president of the company’s semiconductor and devices business, in an interview with Bloomberg. “But that won’t be enough to meet the strong level of inquiries we’re getting,” he said. “We may need to double what we’ll have in September.”

A desire for bolstered data center capacity is largely driven by the mass energy use required for A.I. A ChatGPT query, for example, takes up nearly ten times as much electricity as a Google search, according to a recent Goldman Sachs report. The report estimated data center energy demands will grow by 130 percent by the end of the decade. Data centers operated by hyperscalers—cloud service providers offering mass amounts of computing and storage—have proliferated in recent years, with 1,000 established globally as of early 2024, according to data from the Synergy Research Group. In the coming years, 120 to 130 data centers are expected to come online, said the research firm.

What are optical transceivers?....

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This, on the other hand: "The global semiconductor industry relies on a single NC mountain town".

"Solar Stocks Continue to Struggle. This One Is the Only Winner"

Life is easier if you can figure out the class of the field.

And if your mandate says you have to have solar exposure - so to speak - this is the name, at least among the North American companies.

From Barron's, August 26:

First Solar stock bucks the trend of the solar industry. 

First Solar stock is outshining the solar energy sector this year while the rest of the stocks have dimmed.

It hasn’t been a good year for solar stocks. The Invesco Solar ETF has dropped 20% in 2024, putting it on pace to have its worst year since 2023 when it fell 27%.

But while almost all other solar stocks take a hit, FirstSolar shines.

There’s a handful of reasons why solar companies are struggling. For one, the rise in interest rates has hit demand. Higher rates increase the financing costs to put solar panels on customers’ homes, and at a time when inflation continues to hit people’s wallets, that has negatively affected the industry.

Investors are also mindful that former President Donald Trump could win the 2024 presidential election. Trump has been critical of clean energy and President Joe Biden’s Inflation Reduction Act, or IRA, which gives tax credits to those who install solar panels and is supposed to help boost demand....

.... “We argue that First Solar’s differentiated thin-film technology, combined with solid growth prospects and strong visibility backed by a backlog with orders extending through 2030E, make it a compelling investment opportunity,” Clarksons Securities analyst Roald Hartvigsen wrote in a note on Aug. 14. He initiated coverage of the stock with a Buy rating and $270 price target....

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As noted a couple years ago, we have quite a bit of history with this one.

January 2022
Chartology: First Solar (FSLR)

The stock is currently changing hands at $86.36 down $0.92 (-1.06%).

We haven't posted much on the solar stocks over the last few years, primarily because their fortunes are so dependent on policy moves (and tsunamis of cash) from Washington.

Additionally the truth of the matter is that the biggest beneficiary of the solar component of the "Build Back Better" bill, if it had passed in 2021 was going to be the Chinese because of their dominance in silicon-based solar, from the silicon ingots to the cells to the panels.

First Solar is different in that their main technology is not silicon based.

We covered the rather remarkable history of the stock from the $20 IPO to the $317 top tick to the subsequent closing low $11.77. Use the 'search blog' box if interested, keyword: FSLR.

The point of all this is to be prepared should the BBB be revived in 2022....

It was, as the Inflation Reduction Act, First Solar is the biggest beneficiary, $10 billion or so.

Unfortunately for the "Chartology" post I used a dynamic one-year chart meaning we now get only the last twelve months rather than the 12 months to Jan. 2022.

In late pre-market action the stock is changing hands at $232.49 down $0.70 (-0.30%) on a generally down day.

Capital Markets: "Sterling Shines" Plus: That Time Izabella Kaminska Made One Of The Greatest Currency Calls In History

I wonder what she's doing now? Probably living a life of leisure off the Soros-like proceeds of that amazing call.

From Marc to Market (definitely not to be confused with our earlier Marx-to-market): 

Overview: The US dollar is softer against all the G10 currencies but the Japanese yen. Sterling is leading the advance and is at new two-year highs, knocking on $1.3250. More generally, the dollar's consolidative tone remains intact, but it looks like a pause rather than a reversal, especially against the dollar-bloc currencies. The weaker yen is a headwind for most of the regional currencies, including the yuan. Most central European currencies are firmer, helped by the euro.

Equities were mixed in the Asia Pacific region, but Europe's Stoxx 600 is firmer near its best level for a month and US index futures are slightly higher. Benchmark 10-year yields are rising. Even China's 10-year bond yield is up a couple of basis points (to 2.17%). European 10-year yield 3-5 bp higher, with Italian BTPs and UK Gilts leading the way. The 10-year US Treasury yield is up a couple of basis points to 3.84%. Gold is a little heavier but holding above $2500 so far today. The record high was set a week ago slightly below $2532. September WTI is paring yesterday's nearly 3.5% rally, scored on the back of rising Middle East tensions, Libya's internal dispute leading to an announcement of a stoppage in production and exports and new of repeated attacks on Colombian pipelines. September WTI reached $77.60 and is now around a dollar lower. It had rallied a little more than 7.5% over the past three sessions after losing around 6.5% in the previous four sessions. ...

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And Ms Iz? We're coming up on the second anniversary of the events retold in April 2023's "Capital Markets: I Hate Izabella Kaminska Edition":

Yes she called the turn in the British pound.
And yes, she did it the month the pound bottomed.*

And yes, the pound is the best performing G10 currency this year.

Insufferable woman....

*****

*That wasn't just any old bottom. That month, September 2022 the British pound touched the lowest level in its history, 1.0384 dollars to buy a pound.

As noted in this September 26, 2022 post: "What The Hell Is Going On In Britain? Izabella Kaminska Has Some Thoughts": 

 From The Blind Spot, September 26:

Spot Markets Live Transcript: 26/09/22

*****
"I don’t know about you but it feels like there’s something very paradigm-shifting going on."
*****

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Remember: a paradigm is 20 cents.

Also remember: a pair of dimes used to be worth a lot less vs the pound:

**928: Athelstan, the first King of England adopted sterling as the first national currency. He set up mints around the country to supply the growing nation.

One pound could buy you 15 cows.

1717: The United Kingdom defined sterling's value in terms of gold rather than silver for the first time.

Sir Isaac Newton, as Master of the Mint, set the gold price of £4.25 per fine ounce that lasted two hundred years, except during the Napoleonic wars when gold cash payments were suspended.

1925: £1 equivalent to $4.86. 

1949: Exchequer announces formal 30% devaluation, $4.03 to $2.80.

1964/65: [sterling crisis, cap in hand to the BIS and IMF]

1967: Formal devaluation, $2.80 to $2.40

“It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued."

— Prime Minister Harold Wilson, 1967

Sources:

https://www.weforum.org/agenda/2016/06/a-short-history-of-the-british-pound/

https://www.exchangerates.org.uk/articles/1325/the-200-year-pound-to-dollar-exchange-rate-history-from-5-in-1800s-to-todays.html

1.06583 last. 

On the bovine standard 1 GBP = 1 MCD regular hamburger.

Down from 15 cows  

Which, on October 2nd, was followed by "Does King Henry I's Order of 1125 Apply To The BoE and Treasury As Well As To The Royal Mint?":

"All the moneyers who were in England should be mutilated"
This was the order given by King Henry I in 1125. Specifically, they should each "lose their right hand and be castrated....

I don't think Ms Kaminska was that angry.

1.2476, last. It was the reversal of an almost 1100 year downtrend. (928 AD - 2022 AD)

So a good call. But where was she when we got crosswise to the the Denarius/Shekel pair in A.D. 70?
As we were running those damn "Here at Masada Securities we consider ourselves a fortress of strength in these uncertain times...." adverts.

GBP/USD 1.32185. From TradingView, five years of the pound vs the dollar, the weekly prints only show 1.08504 for the bottom Sept. 18, 2022, followed by 1.11556 on the 25th.

I should dig up the daily chart for that month, it's even more amazing how weak the￡was, 1.0384.

"PDD’s $55 Billion Stock Crash Sends Warning on Chinese Economy"

Yes, yes it does.

The people have money, but as we've posited* they are saving it for future expenditures rather than current spending. This is partly because you have a couple generations of Chinese people who flat-out don't trust the party/government to care for them in their golden years.

Additionally a huge amount of those retirement savings are tied-up in real estate** whose carrying value is high but whose Marx-to-market price may be less than zero. 

The central bank may try to introduce a renminbi with an expiration date, sooner than expected, for the purported greater good of busting loose some of the accumulated savings

From Bloomberg, August 26/27:

• PDD’s stock plunges 29% after a disappointing sales outlook
• Beijing has been struggling with slowing economic growth

One of the last remaining bright spots for Chinese consumption is rapidly fading, as the nation’s economic malaise takes a toll on demand for even the most accessible of goods.

In the latest warning to global markets on the health of the Chinese economy, Temu-owner PDD Holdings Inc. on Monday surprised investors with an unusually gloomy outlook. The e-commerce firm, which became a market darling with low-priced goods that helped propel sales and profits during China’s economic downturn, also reported revenue that missed estimates. During a post-earnings briefing, CEO Chen Lei mentioned at least eight times that revenue and profits must “inevitably” decline as economic growth slows.

“We are seeing many new challenges ahead, from changing consumer demand, intensifying competition, and uncertainties in global environment,” Chen, also one of PDD’s earliest employees, told analysts. 

The CEO and his lieutenants were careful to stress they remained confident in Chinese consumption over the longer term — a big priority for Beijing in rebalancing the world’s No. 2 economy. But the damage was done. PDD’s shares plunged 29% in their biggest fall on record, wiping out $55 billion of market value. Its closest rivals Alibaba Group Holding Ltd. and JD.com Inc. followed suit, sliding about 5% in Hong Kong.

PDD’s warning stunned investors because the company was long viewed as the main beneficiary of a Chinese “consumer downgrade” — its low-pricing strategy on Pinduoduo domestically and Temu abroad was intended to appeal to cost-conscious shoppers at a time of unprecedented economic volatility.

The disappointing results were the latest in a series of red flags about the Chinese economy. This week, popular fast food chain Din Tai Fung — long one of the most popular restaurant brands across the country — revealed it was shutting more than a dozen outlets. Last month, Starbucks Corp. disclosed a 14% plummet in Chinese revenue in the June quarter.

“The big issue is weakness in China consumer,” said Joshua Crabb, head of Asia Pacific equities at Robeco Hong Kong Ltd. “The read-across for competition and a weak consumer will be negative for sure.”

While Starbucks and Din Tai Fung have long wrestled with volatile sentiment, PDD’s warnings were especially surprising given it encapsulated for years how cash-strapped Chinese consumers spurned luxury brands for lower-end alternatives.

Founded by ex-Google engineer Colin Huang in 2014, the company in past years has combined low prices with aggressive rural expansion and game-like elements on its platform to grab market share from Alibaba and JD. It parlayed that formula into the global e-commerce bargains app Temu, which it launched during the Super Bowl in 2023. That app has become a shopping phenom akin to Shein, becoming for a time one of the most downloaded US apps....

....MUCH MORE

*Readers who have been with us for a while may remember the intro to and outro from January 31, 2023's "What If China Had A Reopening And Nobody Cared?":

China isn't reopening, it has reopened. This is it. And despite the record savings the population has accumulated over the last three years we are not seeing a wave of demand in the domestic economy. Using one of the most basic proxies for what is actually going on, the price of pork, the grand reopening, is, to say the least, muted. This is especially true considering the country just celebrated the largest, most festive holiday on the calendar.....

*****

....One data point does not make a trend but it does raise the possibility that the facile expectation of a boom in Chinese consumption is wrong.

What if, and I'm just spitballing here, what if the giant ball of savings is being targeted by the rapidly aging population as a retirement cushion, i.e. future consumption, not current?

That would leave China's export economy to carry the weight.

And that is not looking very promising at the moment:...

**Also:

.... Unsold housing inventory climbed to 3.6 billion square feet last year, the highest since 2016, official data showed. It will cost at least 7 trillion yuan ($967 billion), or 78% of China’s budget deficit this year, for the government to absorb the inventory in 18 months, Tianfeng Securities estimated....

*****

....That's the unsold stuff. There are another 30 million apartments that were purchased as retirement assets and never lived in because it was assumed future buyers would want that "new apartment smell." If interested see December 2021's "CORRECTION—China Does NOT Have 90 Million Empty Apartments". 

—"China Mulls Government Purchases of Unsold Homes to Ease Glut", May 14, 2024

Speaking of Houthis: Trafigura Expects 4.5% Rise in Industry-Wide Annual Emissions Due to Red Sea Tanker Diversions

Combined with the world's largest single-event greenhouse gas release (deliberate no less) when the  Nord Stream pipeline was blown up, if Greta hears about this, there's gonna be consequences and repercussions.

From Shipping Telegraph, August 15:

Singapore-based commodity trading company Trafigura Group Pte Ltd (Trafigura) expects 4.5% increase in annual emissions from oil tankers alone due to diversions around the Cape of Good Hope.

Research by the giant commodities group estimated that an extra 200,000 barrels of fuel oil will be consumed by oil tankers alone this year as they are diverted around the Cape of Good Hope.

The current disruption to global trade from ships not being able to use the Red Sea is leading to much longer voyages and a dramatic increase in emissions.

“When container ships and other vessels are considered, we think an additional 500,000 barrels of fuel will be consumed by the shipping industry this year because of the disruptions.”....

....MUCH MORE

Earlier: smaller, cheaper anti-ship weapons:

Watch Out Shipping, Silicon Valley Is Gunning For You

Watch Out Shipping, Silicon Valley Is Gunning For You

This may not be the best idea ever to come out of the Valley.

From gCaptain, august 26:

US Tech Titan Targets Ships: Y Combinator Backs Anti-Ship Missile Startup

In a move that could ripple through global naval strategies, Y Combinator—the California-based tech incubator behind Airbnb, Dropbox and Flexport—is now backing Ares Industries, a startup aiming to revolutionize maritime warfare with a new line of anti-ship missiles.

This development marks a significant shift for Silicon Valley, traditionally known for software and tech innovations rather than weaponry. However, the industry has been pivoting rapidly with the success of other defense startups like Palantir and Anduril Industries. Ares Industries is bringing the disruptive spirit of the tech world into the defense sector, focusing on compact, cost-effective weaponry designed to challenge naval warfare conventions.

The centerpiece of Ares’ arsenal is a next-generation anti-ship missile, priced at a mere $50,000. This lightweight, backpack-sized missile can be deployed from small vessels or merchant ships, making it a versatile tool for both conventional navies and irregular maritime forces. A defense expert tells gCaptain this level of affordability and portability could be a game-changer in and around choke points, where smaller, agile forces might neutralize much larger naval assets.

“Ares is building a new class of anti-ship cruise missiles,” said cofounders Alex Tseng and
Devan Plantamura in a recent statement. “We are going to deliver the capabilities that the US Department of Defense wants in a form factor that’s 10x smaller and 10x cheaper.”....

....MUCH MORE

Couldn't they have worked on an anti-missile missile first? What with the Houthis and all. 

"Vietnam becoming a chip-making powerhouse"

From Asia Times, August 26:

Global semiconductor makers piling into Vietnam to decouple from China and eschew much higher Western wages 

Vietnam is becoming an important new player in the global semiconductor industry, a decoupling beneficiary of the US-led chip wars against China.

Vietnam’s well-educated and highly motivated engineers work for comparatively low wages, attracting various semiconductor packaging and design companies from the US, Germany, Japan, South Korea and Taiwan.

With a technology-oriented industrial development policy, Vietnam is following in the footsteps of Malaysia, currently the world’s sixth-largest semiconductor exporter and with 13% of the global assembly, testing and packaging industry, according to ISIS Malaysia, a think tank....

....MUCH MORE

Not meaning to be rude but the think tank may want to change its name.

These folks too:

Rest is fine.

Losses continue for quantum computer companies, trending slowly in the right direction

 From DatacenterDynamics, August 23:

Quantum computing earnings Q2 2024: IonQ, Rigetti, D-Wave results

Quantum computing firms IonQ, Rigetti, and D-Wave have announced their Q2 2024 earnings results.

All three companies continued to post losses as they seek to build systems capable of surpassing classical supercomputers, though some saw those losses narrow slightly.

IonQ: Revenue up, net losses down, another govt contract win
For Q2 2024, IonQ reported $11.4 million in revenue; up 106 percent on Q2 2023’s $5.5 million.

Net loss for the quarter was $37.6 million and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss was $23.7m; Q2 2023 saw a net loss of $43.7m and adjusted EBITDA loss of $19.4m.

During Q1 2024, IonQ recognized revenue of $7.6 million for the first quarter, compared to $4.3 million in the prior year. Net loss was $39.6 million and adjusted EBITDA loss was $27 million.

“This was a tremendous quarter for IonQ, with the company posting revenue well above the high-end of our guidance range and leading the industry in technical innovations that have brought the quantum era within reach,” said Peter Chapman, president and CEO of IonQ.

“Specifically, the second quarter saw the launch of our accelerated technical roadmap, our demonstration of 99.9 percent fidelity using our next-generation barium qubits, and our invention of an industry-first partial error correction scheme, a new technique that could allow much larger applications to run on near-term quantum systems.”

The company secured $9 million in new bookings for the second quarter. The company announced it was to supply the Applied Research Laboratory for Intelligence and Security (ARLIS) with a networked system for ‘blind’ quantum computing, where the system remains ‘blind’ to what information is being processed through them.

The initial phase of the $40m contract is a $5.7 million award for the design of the quantum computers based on IonQ trapped ion processors, due for completion by the end of the year. ARLIS plans to have two systems built based on the initial IonQ design.

IonQ said it also extended its contract with Amazon Web Services (AWS) to continue to offer its quantum computers via Amazon’s quantum service, Braket.

For Q2 2024, total operating costs and expenses for the second quarter were $60.3 million, up 56 percent from $38.6 million in the prior year period, but within the company's plan.

Rigetti: Revenue flat, losses drop slightly
Rigetti posted Q2 revenue of $3.1 million. Operating loss for the quarter was $16.1 million, while the net loss was $12.4 million. This compaed to revenue of $3.3 million and a net loss of $17m in the same period 12 months ago....

....MUCH MORE

"Kazatomprom’s Uranium Shortfall Sparks Speculation of Russian Takeover on Supply"

From Canada's The Deep Dive, August 25:

Kazatomprom, Kazakhstan’s national atomic company and the world’s largest producer of uranium, is facing significant challenges as it revises down its production targets. Amid these shortfalls, there is growing speculation that a substantial portion of Kazakhstan’s uranium output is being funneled directly to Russia, further intensifying the geopolitical implications of the company’s struggles.

The most glaring example of Kazatomprom’s difficulties lies within the Budenovskoye joint venture, a partnership between Kazatomprom and the Stepnogorsk Mining and Chemical Combine (SGCC), with Russia’s Rosatom holding a substantial stake through SGCC. Budenovskoye is a critical component of Kazakhstan’s uranium production strategy, particularly sections 6 and 7, which were expected to drive significant increases in output over the coming years.

However, recent reports reveal that production forecasts for these sections have been drastically revised.

Initially, Kazatomprom had planned to produce 2,500 tons of uranium from Budenovskoye’s sections 6 and 7 in 2024, with a sharp increase to 4,500 tons in 2025 and full capacity of 6,000 tons by 2026. These figures have now been slashed. Production in 2024 is now guided to just 500 tonnes, and in 2025 is expected to reach only 1,300 tons, a steep decline from earlier estimates. The target for 2026 has also been reduced to 3,750 tons, with the full 6,000-ton nameplate capacity now pushed back to 2027.

This significant reduction, amounting to a shortfall of 3,200 tons (8.32 million pounds) in 2025 and 2,250 tons (5.85 million pounds) in 2026, is particularly concerning because all production from these sections is contracted to Rosatom under a three-year deal stretching from 2024 to 2026....

....MUCH MORE

We didn't post on this latest warning, which sparked a 5.5% Friday pop in the pros favorite Western name, Cameco, thinking that CCJ would pull back after the excitement died down but so far, no. 

Because of that our most recent post on the producers is June 16's "Deadly and Wildly Profitable, Uranium Fever Breaks Out" which had these links as an outro:

Uranium Miner Cameco and Brookfield Renewable Partners To Buy Nuke Maker Westinghouse (CCJ; BEP)

April 8: Australia: "Uranium price creates new ASX boom"

April 3: Uranium—"Epic Fail The New Junta in Niger Tells the United States to Pack Up Its War and Go Home"

 Related March 5: "Uranium Firms Revive Forgotten Mines as Price of Nuclear Fuel Soars"

 Related, January 14: "World’s Biggest Uranium Miner Warns of Production Shortfall"

And if interested, see also "Trans-Uranic Express: The First Uranium Boom and Lessons For Today's Investor".

And something to tuck in the back of the reptile brain, part of the matrix for fashioning your plan for world domination:

European Bank For Reconstruction and Development Says Central Asia Is Where The Action Is

Say Hi to Mackinder for me should you see him on the Silk Road.

January 14: "World’s Biggest Uranium Miner Warns of Production Shortfall"

November 2023: Uranium's Epic Rally Says Lots About the World Right Now

November 2023: "U.S. Re-enters the Nuclear Fuel Game"

Finally, as noted in an earlier post, a couple names:

...Which brings us right back around to green power. CCJ for the timid and "NAC Kazatomprom" for the adventurous. Dually listed LSE (KAP) and Kazakhstan Stock Exchange, Astana (KAZP)

"India's gold duty cut likely to spark buying spree during festivals"

From Reuters via ZAWYA, Dubai HQ (owned by LSEG), August 26:

India slashed import duties on gold in July to 6% from 15%, a step aimed at tackling smuggling

BENGALURU: Gold demand in India during the upcoming festive season is likely to remain robust, as the substantial reduction in import duty has made prices appealing, providing comfort to retail consumers and encouraging purchases, industry officials said.

Higher demand in the world's second-largest gold consumer could support a rally in global prices, which hit a record high last week. But higher demand for gold imports could increase India's trade deficit and weigh on the rupee.

"The primary beneficiaries of the reduced duty cut will be retail consumers," said Sachin Jain, CEO of the World Gold Council's Indian operations.

India slashed import duties on gold in July to 6% from 15%, a step aimed at tackling smuggling.

Demand during the upcoming festival season will be very strong, Jain told Reuters on the sidelines of the India Gold Conference.

Gold demand in India usually strengthens towards the end of the year, which coincides with the traditional wedding season and major festivals including Diwali and Dusherra, when bullion buying is considered auspicious....

....MORE

Yikes! Swiss company, Meyer Burger says it’s no longer viable to build Colorado solar cell production site

From MarketWatch, August 26: 

Meyer Burger Technology stock skids as its profit target to be lowered

A Swiss company intending to build a solar cell manufacturing facility in Colorado Springs, Colo., said on Monday the project is not financially viable and has been put on hold.

Meyer Burger Technology said it is now going to focus on the module production plant in Goodyear, Ariz., which is mostly installed and in the ramp-up phase, and its existing cell production site in Thalheim, Germany will now form the backbone of its solar-cell supply.

It said its medium term earnings before interest, tax, depreciation and amortization target will be significantly lower than expected, as well as its debt ratio. The company said it’s now drawing up a comprehensive restructuring and cost-cutting program.

It’s delaying its half-year results by at least two weeks, to Sept. 30 or to a later date....

....MORE