Jensen out, Kress in, buyers defend $150, broader market weakens

Well, now we know…. Jensen is out – NVDA lost another 4.4% - which was a win considering that it was down 14% when the market opened …..News that CFO Colette Kress will assume the position until a permanent replacement is found - was met with a bit of relief – buyers did not abandon the stock and by the end of the day it was only down $7.

In yesterday’s note, I said I was watching $150 – because it was KEY on the chart…. while we briefly pierced it – we managed to close well above it – suggesting to me that there were plenty of buyers and the lower it went, the more aggressive they became…This morning NVDA is up 2.5% in the pre-mkt as no new news has hit the tape.

Now what is also interesting is that investors did not abandon the chips trade, oh no, they went all in on AMD up 6% and AVGO which gained 5.5% - suggesting that investors believe customers have options – the question is now – will they move?

So, again, does this change the buy thesis? Well, It changes what some investors are willing to pay. Look, Jensen was part of the premium. Investors were buying him as much as they were buying the stock…. The counted on him to lay out the roadmap.

Colette Kress knows the business in and out and now she gets her first shot to lay it all out when NVDA reports on Tuesday. Are customers walking out the door? (unlikely), Are the next chips shipping on time? (I’m gonna say yes they are) What’s happening to margins? Give investors those answers and then we can talk about what multiple makes sense.

And then there’s Anthropic.

On the same day NVDA was getting the sh*t kicked out of it, Bloomberg reported that the investment bankers were telling the street that the deal was six times oversubscribed…..demand is huge…..Now, the pricing range is $70-$78 – and if it were priced at the top of that range, the public offering could total $64.4 billion and value Anthropic at about $1.4 trillion. The rumor is that the bankers are already talking about pushing the price range higher to see if it tempers demand and while no formal revision has been filed, that doesn’t mean it won’t. Pricing is next Wednesday evening and trading on Nasdaq begins on Thursday the 19th.

And do not forget the $26 billion private placement…. and guess who’s writing one of the biggest checks in the private placement? NVDA. It’s agreed to buy $10 billion of Anthropic stock. Anthropic, in turn, has committed tens of billions of dollars to ‘secure access’ to NVDA’s chips. So, when you hear those chip commitments, remember that NVDA is also helping fund one of the companies using them. We’ve been asking for weeks who’s paying for this buildout and when the cash comes back. Tuesday, expect analysts and investors to demand to know what Kress has to say about the cash coming back.

MSFT is still experiencing a major widespread ‘global’ outage that leaves millions of users without access to outlook, teams and other tools.. ..to be clear – we are told that this is NOT a cybersecurity issue – ok great – but it is an issue just same…MSFT is down 2.3% in the pre-mkt and if they don’t get this problem fixed fast – the ramifications could be huge……If Outlook and Teams are down, meetings get pushed, customers wait for answers, and work backs up. The longer it goes, the bigger the business problem becomes.

Ok – so by the end of the day – stocks ended lower…. The Dow lost 0.4%, the S&P lost 0.4%, the Nasdaq lost 0.4%, the Russell lost 1.66%, the Transports lost 0.6%, the Equal Weight S&P lost 0.9% while the Mag 7 ended the day flat.

Every one of the 11 sectors was lower with the exception of Energy – it gained 1.5% (see below).

Away from that we saw weakness in a range of other sectors and that was evident by looking at what happened to the Equal Weight S&P – down 0.9% while the SMIDS lost 1.7%.

Now, while all this was going on – Oil rose…ending the day up 2.6% to close at $88.75. Trump dragging his feet, apparently in no hurry to make a deal, while the Houthi’s attacked some of the Saudi energy infrastructure. This morning oil is a bit lower – down 36 cts - on headlines that Iraq’s oil output surged in October to 4.6 million bpd while the UAE continued to produce at their highs…. All of this despite the shipping disruptions thru the Strait and the conflict in Iran. Even after all of this – oil remains in the $84.50/$92.50 trading range – down from the early November high of $104.

Bonds got hit…the TLT down 1.5% while the TLH lost 1.2% and that sent yields higher…the 2-yr jumped by 14 bps to end the day at 4.86%. The 10-yr jumped by 12 bps to end the day at 5.10%- putting us back in the ‘danger zone’ while the 30 yr added 10 bps to close at 5.45%. This morning bond yields are unchanged.

Yesterday’s eco data showed that existing home sales fell even further than the estimates…. down 5.5% vs. the expected 3.5% and that is with 5 ½ months of supply on the market. Yes, buyers have more to choose from, but they still have to make a monthly payment and with mortgage rates at 7.25% - it is a bit of an issue. But let’s not forget, it is the fall – which is typically a slower time of the year.

Eco data today is all about the latest PPI report…. Prices at the Producer level…. What will they tell us about inflation…and then what will that tell us about what the FED will do next month. If the PPI runs hot – watch what the bond market says about where it thinks rates are going.

This morning – European markets are unchanged to slightly higher.

US futures are up ever so slightly….… Dow futures up 30 pts, S&P’s up 11, Nasdaq is up 2 while the Russel is up 1 pt.

The S&P closed at 7,592 – down 27 pts. leaving us between the trendlines…7,330/7,620.

Chicken rollatini

One of my favorite childhood dishes.

Prep time: 20m

Cook time: 20m

Total time: 40m

Serves: 4-6

Ingredients

8 Thin sliced chicken breasts

Ham or Salami (your choice)

Provolone Cheese - you can use a cheese of your choice.

s&p

Butter

Chicken stock

Olive oil

Preparation

Step 1

Preheat your oven to 350 degrees

Step 2

Begin by laying out the chicken breasts – season with s&p, line them with a slice of the meat and then the cheese – (whichever you used), roll and then pin with 2 toothpicks.

Step 3

Heat up ½ stick of butter and splash of olive oil - and when it starts to bubble – add the rolled chicken pieces and brown on all sides. - remove.

Step 4

Deglaze the pan with some chicken stock – add a bit more butter.

Step 5

Place the browned chicken in a Pyrex baking dish, pour the butter and chicken stock from the frying pan, cover and place in the oven.  Cook for 15 mins.

Step 6

Remove and serve with a fresh salad.  I used Romaine and arugula, red onions, sliced cucumbers, cherry tomatoes and scallions.  I dress it with fresh lemon juice and a splash of olive oil, season with s&p, and dried oregano.