The main macro news of note was the 25 bps rate hike by the Bank of Korea but as expected and where the Governor said with respect to their reaction to inflation worries, “There’s a Korean saying that if you fail to stop something with a hoe, you’ll end up having to stop it with a shovel, meaning the cost of responding too late is much greater.”
Also of importance, seemingly laying the groundwork for a September rate hike, the BoJ Deputy Governor Himino said today “We should pay greater attention to the upside risk to prices than in the past. In-depth deliberations should be held at each monetary policy meeting with these perspectives in mind.” The 2 yr JGB yield though was unchanged as market odds of a hike are already at 82%. It was 25% right before the latest FX intervention the day before the last BoJ meeting, subsequently joined by the US.
On to the micro, though we know Nvidia’s business has major macro implications.
Nvidia of course put up another incredible quarter and that fiscal ‘28 (Jan ‘28) figure was quite the surprise. With some uncertainty as to how many data centers will get built in the US over the coming years due to the community pushback, I wonder how they have that kind of visibility but I guess at least for the construction being done next year it is already locked in and their business is expanding well past just the US hyperscalers.
The negative is that it seems that profit margins have peaked at 75% and the guidance down from here by a touch with the higher cost of memory the issue now and I believe ever more competition later. Also, their accounts receivable jumped by 55% sequentially vs the 18% rise in revenue from the prior quarter.
As for the existential question for all the spending going on, ‘if you build it, will they come?’ in terms of GenAI customer usage that will make this massive level of CapEx eventually worth it. We just don’t know yet.
From Nvidia:
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