ResearchThree Things (6/19)

Three Things (6/19)

Jun 19, 2024

Nvidia at No. 1

Nvidia’s relentless rally helped the semiconductor giant clinch the title of the world’s most-valuable company on Tuesday. Shares rose as much as 3.4% to about $3.3 trillion, catapulting it over Microsoft and Apple in the ranks. Nvidia’s swift climb to the top has been record breaking, as the company is one of the few firms to have demonstrated significant revenue growth from AI.

Nvidia’s GPU chips are in essence the new gold or oil in the tech sector – what’s important to note, however, is that Nvidia isn’t just selling chips, they’re selling systems with the company’s proprietary software and development ecosystem standing second to none. Something to think about, though: Cisco briefly held the top spot in 2000 – time will tell whether this is history repeating itself or if the race to $4 trillion is on.

US retail weakness

US retail sales barely rose in May and prior months were revised lower, pointing to greater financial strain among consumers. The figures underscore a notable downshift in consumer spending after stronger readings earlier in the year. Economists expect a moderate pace of spending going forward as Americans exercise greater prudence given persistent inflation.

Retail figures largely reflect purchases of goods, which comprise a relatively narrow share of overall consumer outlays. Data due later this month should provide more details on inflation-adjusted spending on goods and services in May. For the time being, though, the report is showing that households aren’t entirely impervious to interest rate hikes and the tides may be turning underneath the surface.

Sunsetting BNPL

Apple announced plans to shut down Apple Pay Later, its buy now, pay later service, just months after launch. In its place, Apple says that users will be able to apply for “installment loans” from credit cards, debit cards, and lenders when checking out with Apple Pay later this year. Sunsetting the feature isn’t all bad as Apple plans to lean into a partnership approach – announcements from their developer conference indicate that credit cards will be able to offer BNPL features directly in the Apple Pay ecosystem.

One of the threats to banks’ credit-card businesses are buy now, pay later options offered by other lenders, including Apple itself. So for banks, it is a win to be able to offer customers the option to convert a card purchase into an installment-payment option right at the point of purchase. Let’s not forget that Apple makes 0.15% off purchases made with a credit card on Apple Pay. The banks get priority real estate while Apple receives steady annuity payments from partners incentivized to drive adoption and volume – sounds like a win, win.


Disclosures:

As of writing, AAPL, MSFT, and NVDA are holdings in Titan's Flagship strategy.

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