Some News in the Financial Market: 19/02/2024 – 25/02/2024
Some News in the Financial Market: 19/02/2024 – 25/02/2024
Writer: Klinsmann Lee
1. Japan’s Nikkei 225 index reached to record level since the late 1980s [1]
Background:
Japan’s Nikkei 225 index risen to 38,098 points, a record not seen since 29 December 1989.
The rises have been attributed to the following factors including:
A weak Japanese Yen which boosted the profit of export-led companies.
Global Capital flowing in especially from China given the slowing economy and global tension.
Investment from domestic households in Japan.
Bank of America forecasts that the Nikkei 225 index will reach 41,000 points by year-end.
Klinsmann's Analysis:
Following the Japanese stock market peak in 1989, the price bubble eventually collapsed and Japan entered a period of “Lost Decade”.
Over the past 30 years since the 1990s, Japan has experienced deflation and low inflation, partly fuelled by a lack of confidence from the price bubble and aging population.
For Japan’s Nikkei 225 index to reach back to its peak in 1989 is an important milestone for the financial market.
At the same time, the rise in the index drives further increase as more domestic investors invest in the stock market on the idea of “fear of missing out”. This is reflected in the comment made by Koji Toda in the article “We also can’t be left behind so we have to go along”.
2. Nvidia’s shares jumped following its announcement of quarter revenue. [2]
Background:
Nvidia reported a fourth-quarter revenue increase of 265% to $22.1bn, exceeding market expectations of $20.4bn.
Fourth quarter net income jumped 770% to $12.3bn, exceeding market expectations of $10.4bn.
Nvidia’s shares jumped 16.4% higher on Thursday at a record $785.38.
Nvidia’s data centre division remains the biggest revenue driver and contributes around 84% of its total sales.
The company’s leading product, the H100 chip, is the industry standard for AI developers to crunch data for its language models.
Klinsmann’s Analysis:
Following my previous week’s analysis of Nvidia, it looks like the demand for Nvidia’s products continues.
However, I think the question is whether the supply can keep up with demand (something we often witness when there is a huge demand for a product, such as the demand and supply of face masks during the coronavirus pandemic).
If supply cannot keep up with demand, this will be a constraint to Nvidia’s growth.
Nvidia also faces other problems such as:
Increasing competition from other companies to develop its own AI chips.
Nvidia to maintain its growth and momentum in its revenue.
Global tension between countries that restricts Nvidia’s ability to sell its product to certain countries.
As the interest continues around artificial intelligence, the demand for Nvidia’s product should continue to grow.
There is not an investment recommendation – I do not own Nvidia (publishing date of this article).
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