Vested Shorts: Business of luxury, Threads usage declining, and exceptional NVIDIA’s Q2 earnings

by Parth Parikh
August 26, 2023
3 min read
Vested Shorts: Business of luxury, Threads usage declining, and exceptional NVIDIA’s Q2 earnings

In today’s edition

  • Under the Spotlight: LVMH, a luxury conglomerate
  • Meta’s Threads update
  • Semiconductors are in high demand
  • Nvidia’s exceptional Q2 2023 earnings

Market Snapshot

Federal Reserve Chair Jerome Powell’s cautious remarks on future interest rate changes boosted investor confidence, lifting major U.S. stock indexes on Friday. While Powell did not rule out future rate hikes, his “proceed carefully” approach seemed to alleviate market jitters. 

For the week, the S&P 500 was nearly flat, but the Nasdaq climbed 2.2%, partly due to anticipation of Nvidia’s quarterly earnings. Meanwhile, the Dow slipped by 0.44%, partly due to Boeing’s decline.

Data as of market close 25 Aug 2023

The week ended on 25 Aug 2023. Source: AlphaScreener

Under the Spotlight

Despite facing economic challenges and a downturn in 2020 due to the COVID-19 pandemic, the luxury goods market has made a remarkable recovery. The personal luxury goods segment, in particular, witnessed substantial growth in 2022, recording sales of approximately $353 billion. The industry is now being molded by three pivotal trends: personalization, purpose, and inclusiveness, with LVMH at the forefront of this evolution.

LVMH has experienced robust growth and is particularly strong in the American and Chinese markets. Its growth drivers include the rising middle class in China and the recovery of the travel retail sector. However, the conglomerate also faces various risks, such as foreign exchange risks, key man risks, and potentially weak consumer discretionary spending.

LVMH’s operational synergy and innovative leadership style under Bernard Arnault give the conglomerate an edge in the luxury market. Although its continued growth seems promising, LVMH needs to navigate risks carefully, especially in foreign markets like the U.S., to maintain its success.

For a detailed analysis of LVMH’s business, head to our comprehensive blog, part of Vested’s ‘Under the Spotlight’ series.

News Summaries

Meta is introducing a desktop version of Threads. This comes as Threads faces challenges in sustaining its initial rapid growth; it achieved 100 million users faster than any other app but saw a significant drop in daily active Android users from 49 million to 23.6 million in one week. This is in contrast to X, which, under Elon Musk’s leadership, despite undergoing massive changes and workforce reductions, saw a surge in its user base, reaching over 540 million users monthly. Given the challenges faced by past social media platforms, it’s still being determined whether Threads can maintain its initial momentum.

Semiconductors are in high demand due to new U.S. policies that limit AI hardware exports to China. As a result, many countries are panic-buying to stockpile these chips. The U.S. aims to hinder China’s AI sector to prevent the advancement of military technologies, leading to a surge in underground chip sales. American chipmakers, including Nvidia, are feeling the effects as they lose access to one of their largest markets. Nvidia has expressed concerns that ongoing export restrictions could undermine U.S. competitiveness and has called for a de-escalation of tensions. However, despite the sanctions, the company’s semiconductor business continues to be lucrative despite the sanctions. 

Nvidia’s exceptional Q2 2023 earnings signal that the tech industry is at the beginning of a major artificial intelligence boom. The semiconductor giant reported a stunning Q2 revenue of $13.51 billion, marking a 101% surge since last year. A significant portion of this revenue ( $10.32 billion) came from the company’s Data Center segment, which soared by an impressive 171% YoY. A significant catalyst in this revenue hike is the adoption of NVIDIA’s GPUs, a move endorsed by numerous industries across the globe. Jensen Huang, NVIDIA’s CEO, emphasized the growing relevance of generative AI and mentioned notable partnerships with global cloud service providers and IT enterprises such as ServiceNow, Accenture, VMware, Snowflake, WPP, and SoftBank.

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