SELLING IN MAY = DELAYING YOUR PAY
Hello and welcome to this week’s No Straight Lines Investments blog, I am grateful for your time and attention.
The SPX returned a cool 6.15% for the month of May, marking the best result for the month since 1997 and ranking in the 92nd %ile for all monthly returns on the SPX since 1953.
Further, the S&P is now positive on the year, having been down close to 20% post Liberation Day upheaval.
Keeping your chips on the table has not been comfortable, but it is certainly preferable to gazing from the sidelines as the market has rapidly recovered all of it’s YTD losses.
NVDA’s Q1 numbers of $44B/$0.81 for the top and bottom line were solid, but crucially, the call not only assuaged investor concerns about excess DC capacity (hyperscalers are deploying 72k Blackwell GPU’s/week), it highlighted the broadening out of AI to governments, enterprise and industrial applications.
From a fundamental perspective, NVDA is trading at 31.4x this year’s consensus on an implied earnings growth rate of 44%. No question the growth is slowing, but that seems to be mostly reflected in the stock. To be clear, I do not have a position in the name.
The cumulative Q1 earnings growth of the Mag7 was 32% y/y. Irrespective of your ownership of any/all of these names, these co’s still account for the lion’s share of S&P 500 earnings growth this year (for Q1 the scorecard is 32% vs 8% for the 493).
From an AI Power demand perspective, Frank Long of GS highlighted that NVDA’s Kyber system, with 576 GPU’s in a single rack will require 600 KW/rack, as compared to 20KW-40KW for the 8 GPU configuration used when ChatGPT was launched in late 2022.
Before we dive into the macro charts of the week, I wanted to revisit last week’s discussion around yield levels and equity returns, as I dug up some interesting data points worth sharing.
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This week I add a new name to the portfolio that has been dislocated due to a misunderstood acquisition.
If this is it for you, thanks for reading and best of luck with your investments!
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