ResearchThree Things (5/22)

Three Things (5/22)

May 22, 2024

Nvidia earnings

Heading into its quarterly earnings report later this afternoon, Nvidia finds itself at the center of the action in technology, a position that’s become increasingly commonplace for the $2 trillion chipmaker. The company is set to disclose earnings after hours and the expectation is the company should report year-over-year revenue growth in excess of 200% for a third straight quarter. The growth rate is not only staggering but also profitable, causing the stock to soar over 90% this year after more than tripling in 2023.

The AI gold rush has been foundational for the latest run higher as the benefits are even broadening out to other sectors like utilities (up 18% over the last three months), energy (up 11% over the same period) and commodities. As increased compute requires more energy, cooling, and warehousing space, it’s not just the traditional technology companies that are benefitting from the AI boom. There’s a lot riding on the AI trade and Nvidia is most certainly at the center of the conversation.

Freemium AI

The race to give away free AI tools is growing more competitive as OpenAI intends to give away its conversational GPT-4o while Google also launched new versions of its free AI model, Gemma. No one has done this more explicitly than Meta, however, who has built their AI business around the concept that the technology, and the underlying code should be free and available to the mass market. Zuckerberg has been steadfast in the idea that giving away the technology should drive down competitors’ prices and spread Meta’s version of AI more broadly.

One clear advantage of releasing these tools for free is that folks like Meta can watch a whole community of open-source developers refining the tool and iterate off the learnings. Not only this, but Meta is learning from their past mistakes with mobile – they’ve been beholden to the likes of Apple and Google’s operating system (h/t Apple ad permissions) and they don’t want to make the same mistake again. If we were to believe that these models can or will be commoditized, the free model may be the best solution to achieve scale.

Dimon’s departure

Jamie Dimon, CEO of JP Morgan Chase, told shareholders that the timetable for his retirement is “not five years anymore”. The largest US bank is “well on the way” with its succession plans for the next head honcho. The announcement comes after the CEO moved some of his top lieutenants into new senior roles, positioning them for more experience running the firm’s operations.

Dimon has long been the featured alpha in the US banking system for well over a decade. His departure would undoubtedly leave a meaningful impact in its wake and prioritizing a smooth transition will be imperative to minimizing shareholder and customer anxiety. Time will tell who will step in, and when, but it's interesting to know that it may be much sooner than we originally thought.


Disclosures:

As of the date of publishing, META, GOOGL, AAPL, MSFT, and NVDA are holdings in Titan's Flagship strategy. OpenAI is a 4.38% holding in the ARK Venture Fund.

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