🔨 Nvidia’s Concerning Blackwell Update

MARKET UPDATE

Good Morning Investor! On Wednesday, shares of Super Micro Computer ($SMCI) continued to slide a whopping 23% off the back of Hindenburg’s short seller report (which we covered in yesterday’s edition).

In after hours trading on Wednesday, we have a whole bunch of companies report earnings, with buy-now, pay-later firm Affirm ($AFRM) seeing its share price rocket 17% higher after beating earnings expectations. Cybersecurity firms Okta ($OKTA) and Crowdstrike ($CRWD) both reported earnings in after hours, resulting in a drop of 6.7% and an increase of 3% respectively — Interesting reaction given Crowdstrike slashed its revenue forecasts by a whopping 8%.

TODAY’S BIG HEADLINES

Nvidia’s Concerning Blackwell Update

Private Equity Given Green Light by the NFL

Klarna Proves it’s a Winner, Regardless of Interest Rates

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SEMICONDUCTORS

Nvidia’s Concerning Blackwell Update🔨

Nvidia's Chip-tastic Earnings: All week, the market's been trading sideways like a drunk gamer trying to navigate a straight line in GTA. All eyes were glued to what's arguably the most important event for financial markets since the invention of money itself - Nvidia's ($NVDA) fiscal-year 2025 second quarterly earnings. Despite reporting numbers that would make most CEOs weep with joy, the stock dropped almost 7%.

Three-Course Meal of Fiscal Delights: Nvidia certainly brought the sauce, and we're not talking about thermal paste here. They reported a beat on both the top and bottom line of expectations, as well as increased forward guidance, leaving investors salivating like Pavlov's dogs at a bell factory. Let's plug this bad boy in and boot up the report, shall we? Here's the rundown:

• Nvidia’s revenue came flying in at $30.04 billion, up 122.51% year-over-year, and demolishing analyst expectations of $28.7 billion. The largest driver of growth was of course, data center revenue, which came in at $26.27 billion, up 154.55% YoY and beating estimates by $1.1 billion.

• Nvidia’s net income came in at $16.95 billion, up 152% year-over-year and resulting in a diluted earnings per share of $0.68, beating estimates of $0.64 per share.

• For their third act (because two mind-blowing performances weren't enough), Nvidia’s forward guidance which also outperformed expectations. The firm now expects revenue in the third quarter of $32.5 billion — up 80% from the year before and $700 million more than the $31.7 billion analysts’ consensus.

Driving Towards Robotics Domination: The board approved an additional $50 billion for share buybacks, because why not treat yourself when you're crushing it? Nvidia also flexed its automotive muscles, with revenue in that segment growing 37% YoY to reach $346 million. This growth was fueled by AI cockpit solutions and self-driving platforms. Soon, your car will not only drive itself but also beat you at chess during the commute!

Even Superheroes Have Bad Hair Days: The biggest party pooper during the earnings call, which resulted in an after-hours selloff faster than gamers rage-quitting a laggy server, was the production update for the company's upcoming "Blackwell" range of chips. Management said production will only begin to ramp up in the fourth quarter - an entire quarter later than originally expected.

• One additional concern for shareholders was the decline in gross margin from 78.4% down to 75.1%. I know, cry me a river, right? Most companies would kill for a 75% margin.

PRIVATE EQUITY

Private Equity Given Green Light by the NFL🏈

The NFL's Pigskin Private Equity Party: The NFL's franchise valuations are soaring higher than a Hail Mary pass, leaving the pool of potential buyers shrinking faster than a linebacker's patience on a hot day. This financial touchdown has pushed NFL owners into a corner, forcing them to change their tune on private equity firms. On Tuesday, in a special meeting thirty-one of the 32 franchise owners voted to allow a select group of PE firms to become minority investors in their franchises, despite previous being reluctant to do so. Meanwhile, all of the NFL’s league siblings: the NBA, NHL, and MLB all allow PE firms to buy team stakes up to 30%.

When Billionaires Need a Sugar Daddy: This move comes more out of necessity than desire, like ordering a salad at a tailgate party, given that NFL franchises have become so pricey that unless you’re one of the wealthiest 50 people in the world, writing a $5 billion equity check is pretty hard to do. Even though the NFL is loosening its rules, they will remain the most restrictive among the major North American sports leagues.

• A PE consortium including Blackstone, Carlyle, CVC Capital, and Dynasty Equity — reportedly nicknamed "The Avengers" (because nothing says "superhero" like a bunch of suits with calculators) — is among industry heavyweights that will pledge $12 billion for stakes in NFL teams. Approved funds and consortiums can buy a maximum 10% stake in a team and make deals with no more than six teams.

• In a move that would make Tony Soprano proud, the NFL also informed teams it will take a cut of private equity profits on sales of ownership stakes. Because why should the players be the only ones getting tackled?

American Football Stays American: The NFL will still require that the controlling owner of an ownership group, which can’t comprise more than 25 people, have at least a 30% stake. Groups can’t borrow more than $1.4 billion, and sovereign wealth funds, which have taken huge stakes in European soccer, will remain blocked from investing. It's like the NFL is running its own financial defensive play against foreign invasion!

FINTECH & PAYMENTS

Klarna Proves it’s a Winner, Regardless of Interest Rates💳

Klarna's Saucy Swedish Saga: Despite being a buy-now, pay-later service more sensitive to interest rates than a vampire to sunlight, Klarna isn't suffering now or later (pun intended). All eyes have been glued to this Swedish financial temptress as it teases its highly anticipated debut on the US stock exchange, expected to land by early 2025. Yet, despite all this attention, Klarna has found a way to excel — dropping jaws and raising eyebrows with its stellar first-half results for 2024 on Tuesday.

• The company swung back to a profit, demonstrating that its success isn’t entirely reliant on ultra-low interest rates in the process.

A Swedish Massage Gone Wrong: It certainly hasn't been smooth sailing for our Swedish friends — more like a Viking longship caught in a perfect storm. After 2019, Klarna began an aggressive US expansion — resulting in expected losses that left the firm's finances looking like it had tangled with an IKEA instruction manual. Despite this fiscal fumble, by June 2021, Klarna retained its status as a startup unicorn, bagging itself a monstrous $46 billion valuation in a fundraising round led by SoftBank.

• Then, in strutted the dreaded duo of inflation and elevated interest rates — every loan company's worst nightmare. They squashed Klarna's lofty valuation like a marshmallow in a hydraulic press, deflating it to a mere $6.7 billion by its next fundraising round in July 2022.

• After four straight years of losses that would make even a compulsive gambler wince, Klarna last November announced it had eked out a profit of around $12 million in the prior quarter.

The Rise of the Swedish Terminators: On Tuesday, Klarna settled nerves faster than a shot of Akvavit, confirming that its winning streak has continued. The BNPL firm reported an adjusted profit of around $66 million in the first half of the year, up $108 million year-on-year. This financial foreplay was largely driven by new tech and strategies that would make even Silicon Valley sit up and take notice.

• In June, it was revealed that Klarna, along with other BNPL firms like Affirm ($AFRM) and PayPal ($PYPL), began selling debt backed by consumer loans as securities on the private market. By peddling these asset-backed securities, Klarna found a backdoor to cheap funding amid high interest rates.

• Additionally, Klarna has been following the rest of Wall Street's darlings in an aggressive push towards cost-cutting, trimming its workforce from around 5,000 employees to 3,800 in the past year. Many marketing and customer service employees were replaced by AI, proving that even in Sweden, the robots are coming for our jobs.

MORE NEWS

Additional market-moving events🌎

OpenSea Gets Targeted: The SEC has issued a Wells notice to NFT platform OpenSea, threatening to sue the firm. SEC has cited NFTs on the platform as being securities. (TechCrunch)

Fraud Settlement: Self-driving truck company TuSimple reaches $189 million settlement after allegedly defrauding investors by overstating its safety record and concealing three insiders' control of a Chinese trucking rival.. (Reuters)

Disney-Reliance Merger Approved: Indian regulators approved the $8.5B merger of Disney's ($DIS) local media operations with Reliance Industries, creating a major player in India's fast-growing entertainment market. (BT)

Videoconferencing on X: X is testing a video conferencing tool aimed at competing with Zoom ($ZM), Google ($GOOG) Meet, and Microsoft ($MSFT) Teams. No release date has been announced. (TechCrunch)

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