Skip to content 
In today’s edition,
- Expectations from Nvidia
- OpenAI is scaling new heights
- Walmart is outperforming
- Sony and PS5
- Telegram’s tumult
Market Snapshot
August on Wall Street began with uncertainty but ended with a strong rally, marking the fourth consecutive month of gains. Early in the month, recession fears fueled by shaky jobs data drove the S&P 500 to three-month lows, nearly 10% off its mid-July peak. However, the market quickly recovered as economic indicators improved and the Federal Reserve hinted at a possible September rate cut.
By the month’s end, the Dow Jones Industrial Average reached new highs. This indicated market strength beyond just tech and big companies. Investor confidence received a boost from July’s PCE Price Index data, which met expectations. This raised the likelihood of a 25-basis point rate cut by the Fed.
This week, the S&P 500 was flat, the Dow rose nearly 1%, and the Nasdaq fell almost 1%. This reflected varied investor sentiment. Despite early challenges, markets ended August strong, boosted by good economic data and policy hopes.
Stock market closing data for the week of Aug 26th to Aug 30th, 2024
News Summaries
Nvidia’s (Explore: NVDA) revenue soared to $30 billion this quarter, marking a 122% increase and exceeding expectations of $28.7 billion. This growth is fueled by strong demand for its AI chips. Despite this success, its stock fell due to not surpassing the very high forecasts. Nvidia expects revenue of about $32.5 billion next quarter. This closely matches analyst predictions. The company has delays in its next-gen Blackwell chips. But, it has adjusted production processes to start full-scale manufacturing by fiscal 2026. Meanwhile, its existing Hopper chips continue to see strong demand. As major tech companies heavily invest in AI, Nvidia remains a key player in supplying the necessary hardware, predicting significant growth in its data center revenue next year.
OpenAI is gearing up for a significant funding boost, aiming for a valuation of over $100 billion. Nvidia, Apple, and Microsoft are in talks. Nvidia is considering a $100 million investment. Thrive Capital is leading the round, aiming to contribute $1 billion. This underscores OpenAI’s success after the ChatGPT launch. This valuation surge, potentially exceeding $110 billion on secondary markets, showcases OpenAI’s critical role in the tech ecosystem. Microsoft, already OpenAI’s main backer with $13 billion invested, integrates OpenAI’s AI into its products to spur growth. Similarly, Apple plans to enhance AI features in its iPhone operating system, while Nvidia supplies the essential AI hardware. This funding will help develop GPT-5 and keep OpenAI ahead of competitors like Google and Elon Musk’s xAI. It shows the tech industry’s strong commitment to AI, backing OpenAI’s growth to $2 billion in annual revenue.
In August, Walmart Inc.’s (Explore: WMT) stock rose 12%, its best since October 2017. This added about $64 billion to its market value, thanks to strong second-quarter earnings and appeal to budget shoppers. Meanwhile, Dollar General Corp. and Dollar Tree Inc. saw declines. Their strategies were less effective, and their quarterly results were weaker. Dollar General’s shares fell 32% after it cut its sales forecast. This reflects struggles among discount chains to attract budget-conscious shoppers. Meanwhile, Walmart’s strategic enhancements in both e-commerce and physical stores, coupled with its ability to maintain low prices through diversified revenue streams, have solidified its position as a preferred retailer during economic downturns, even as it trades at a premium valuation compared to peers.
Sony’s (Explore: SONY) PlayStation 5 is experiencing a sales surge nearly four years after launch, thanks to strategic pricing and popular games. Initially, it struggled to meet the 21 million unit target. However, a 19% price increase in Japan changed its fate. This move was well-timed, aligning with rising wages and spending power. The timing was perfect. New games, like Helldivers 2 in the U.S. and “Black Myth: Wukong” in China, sparked fresh demand. The latter, based on Chinese mythology, sold 10 million copies in days. This surge drastically boosted PS5 sales in China, where consoles usually trail behind mobile and PC gaming. This unexpected surge in console popularity was reflected on Alibaba’s platform, where PS5 transactions doubled in the week preceding the game’s launch. Sony’s strategies have raised its share price by 18% in a year. It is now well-placed in China’s booming gaming market, worth $43 billion last year and home to 668 million gamers.
From the World of Crypto
Pavel Durov’s arrest in France for failing to control crime on Telegram, his messaging app, has sparked debates about free speech and big tech’s moderation duties.
Telegram’s 2023 financials show a heavy reliance on cryptocurrency. Yet, it also faces a significant operational loss. The company is based in the British Virgin Islands and mainly operates in the UAE. It earned $342.5 million but lost $108 million in operations. Notably, over 40% of its revenue came from crypto. This was through “integrated wallet” services and “sale of collectibles,” paid for with Toncoins. Toncoins are crucial to Telegram’s financial strategy.
Telegram’s digital assets are vital for its accounting. Initially, they are recorded at cost and then adjusted based on market conditions. This led to a $86 million gain last year, which was reported as other comprehensive income. It highlights the volatile yet profitable nature of Telegram’s crypto assets. Revenue is recognized when Telegram gives collectibles or facilitates wallet transactions. It leverages its large user base for blockchain-based revenue.
Telegram has successful new revenue streams, but it faces financial challenges. Last year, its costs exceeded $450 million, far more than its income. This resulted in big losses, casting doubt on its business model. The model relies heavily on cryptocurrency transactions. So, the platform’s future is uncertain as it deals with these financial issues.
The arrest of founder Pavel Durov adds uncertainty to the company. It could affect operations due to changing laws. The company has warned investors about these risks in its financial reports. These risks stem from its focus on privacy and involvement with digital assets.
