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Vested Shorts: Silicon Valley backs xAI, Nvidia nears $3T market cap, China’s chip strategy, Ether ETF advances

by Parth Parikh
May 25, 2024
3 min read
Vested Shorts: Silicon Valley backs xAI, Nvidia nears $3T market cap, China’s chip strategy, Ether ETF advances

In today’s edition

  • xAI: Capital expansion
  • Nvidia: AI demand drives growth
  • China: Boosting domestic chips
  • Crypto: Gaining mainstream acceptance

Market Snapshot

US stock markets had a mixed performance in the week leading up to the holiday weekend. The Nasdaq Composite notched its fifth consecutive weekly gain, climbing 1.4% to close at 16,920.79, thanks largely to strong earnings from Nvidia. Conversely, the Dow Jones Industrial Average fell 2.3% to 39,069.59, while the S&P 500 remained flat at 5,304.72.

Investor sentiment was influenced by economic data released on Friday. The University of Michigan’s final Consumer Sentiment Index for May showed an improvement, climbing to 69.1 from an earlier reading of 67.4 and surpassing the consensus forecast of 67.6. This uptick suggests a growing optimism among consumers. Additionally, the report revised downward its one-year inflation expectations to 3.3% from 3.5%.

Stock market closing data for the week of May 20th to May 24th, 2024

News Summaries

Nvidia (Explore: NVDA) has reported a 262% increase in revenue to $26 billion for the past quarter, surpassing expectations and signaling a robust demand for AI chips. This growth is fueled by the high demand for Nvidia’s Hopper GPUs and the anticipation surrounding their new Blackwell chips, which promise even greater performance and have already started shipping. The company’s data center segment alone saw a 427% increase in revenue, reaching $22.6 billion. Nvidia’s share price has responded positively, doubling in value this year, as it becomes the third most valuable US-listed company. Looking ahead, Nvidia anticipates continuing this momentum with revenue projections around $28 billion for the current quarter, reflecting the ongoing robust demand for AI computing capabilities.

Elon Musk’s AI venture, xAI, is nearing the close of a significant funding round aimed at raising $6 billion, with a post-money valuation targeted at $24 billion. Despite a shortfall of a few hundred million, venture capital heavyweights like Lightspeed Venture Partners, Andreessen Horowitz, Sequoia Capital, and Tribe Capital have pledged their support. The funding is critical for xAI as it strives to compete with established AI leaders by leveraging synergies from Musk’s other businesses, which could offer early revenue and technological support. This move comes amid broader concerns about the exclusivity of the fundraising process and ongoing legal disputes with OpenAI, highlighting the strategic yet challenging path xAI is navigating to develop its AI technologies.

China is strategically directing its top carmakers like SAIC Motor and BYD to boost their local chip procurement to 20-25% by 2025 to strengthen its semiconductor supply chain amid growing tech tensions with the US. This move is part of a broader initiative to reduce dependence on foreign technology, especially as the US plans to impose significant tariffs on Chinese EVs and semiconductors. With the global push towards electric vehicles and the recent disruptions in chip supplies, Chinese carmakers are presented with an opportunity to integrate domestic chips more extensively. Although the current local supply is around 10%, the plan reflects a substantial increase, aiming to leverage the rising semiconductor demand, which is expected to see the semiconductor value per vehicle grow significantly by 2028.

From the World of Crypto

The US Securities and Exchange Commission (SEC) has approved initial rule changes that may pave the way for the launch of several Ether-based exchange traded funds (ETFs). This preliminary approval affects prominent financial groups such as BlackRock, Fidelity, Invesco, and Ark Invest, which marks a significant step forward since the SEC’s first-ever approval of bitcoin ETFs earlier this year. While a second, more conclusive round of approvals remains necessary, the anticipation of these Ether ETFs has already influenced market dynamics, propelling Ether’s price upwards by more than 20% in the recent days.

This movement underscores a broader trend of increasing acceptance of cryptocurrencies in mainstream financial products, despite ongoing concerns over regulatory and compliance issues highlighted by SEC Chair Gary Gensler. The optimism around Ether ETFs reflects a wider shift in the political and regulatory landscape regarding cryptocurrencies in the US, with recent events suggesting a potential softening of stance towards crypto regulations. This evolving scenario, combined with the significant price movements and the expected influx of institutional investments into cryptocurrency, suggests a pivotal moment for Ether and the broader crypto market.

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