May 25, 2023

Nvidia pumps the AI bubble

Macro & Overnight

The AI bubble is inflating rapidly. Nvidia said it expects sales to reach $11bn in the three months ending in July, versus the $7.2bn analysts expected. The shares were up 20% after hours. Nvidia is well on its way to being the world’s next trillion-dollar company. It trades on a trailing c30x revenue and a PE of 76x.

UK interest rate markets are now discounting terminal UK rates of over 5% following yesterday’s poorly received inflation data. Reports suggest that mortgage lenders are pulling offers.

The dollar is up again, and the £ is weaker, suggesting investors are more concerned about the UK’s stubborn inflation than the prospects for rising rates.

UK Company News

AJ Bell, the investment platform, announces its interim results with revenue up 37%, PBT up 61% and EPS up 57%. Assets under administration were up 7%. It maintained strong customer retention. However, it expects a slight compression in revenue margins beyond FY23, as it shares some of the benefits of our scale with customers through pricing. Longer-term, it sees the continuing structural shift from non-platform providers to platforms continuing to drive growth in AUA. 

Headlam, the floor coverings distributor, said that revenue for the first four months was 3.4% above the same period in 2022 despite declining volumes in the residential sector market. In the future, lower residential volumes and moderation in price increases have reduced gross margin. Cost reduction benefits will be second-half weighted, and overall profit performance remains dependent on consumer sentiment in the residential market.

Defence services provider QinetiQ reports orders up 41%, to a record-high of £1.7bn, growing its backlog to £3.1bn. It enters FY24 with confidence, a healthy order book and positive momentum, with 61% revenue under contract. Consistent with its upgraded long-term guidance, QQ expects to deliver high single-digit revenue growth, which with the impact of M&A, equates to high teens total revenue growth. 

Defence supplier Cohort said that trading was slightly ahead of expectations. It has seen order intake up 84% underpinning current market revenue expectations.  

Unsurprisingly defence is proving itself to be on an upswing as defence budgets are being refreshed amid conflict in Europe and rising tensions in the Far East.  


NB Prices are as at the previous day’s close.

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