Sasfin : Nvidia brings its AI computing to cloud data firm Snowflake

MARKET COMMENTARY

Local Market Update

On the Johannesburg Stock Exchange, both the blue-chip Top-40 index and the broader All-Share index closed approximately 0.2% lower at 68,980 and 74,265 points, respectively. Renergen, a natural gas and helium producer, reported a notable 12.8% increase in liquefied natural gas (LNG) production for the quarter ending in May 2023. According to their trading update on Monday, Renergen produced 823 tons of LNG during this period, surpassing the previous comparative period. In other news, German Foreign Minister Annalena Baerbock is scheduled to visit South Africa on Tuesday, intending to discuss the "dramatic developments in Russia" with the country.

European Market Update

European markets concluded slightly lower on Monday as investors assessed weak economic indicators following a downbeat week. S&P Global Ratings revised its forecast for the euro zone's gross domestic product in 2023 from 0.3% to 0.6%, citing the robust labour market, fiscal measures, and rate outlook. However, it cautioned that certain post-pandemic advantages were fading, and higher rates would dampen demand, leading to a revised growth forecast of 0.9% for 2024. A German business sentiment survey fell significantly short of economists' expectations, revealing a marked pessimism among companies.

US Market Update

The Nasdaq Composite experienced a decline on Monday as investors sold shares of technology companies, which had performed well throughout the year, as the final trading week of the first half commenced. The last week of June featured relatively light economic reports, with the highlight being the release of the personal consumption expenditures index for May on Friday. Corporate earnings reports are anticipated from Walgreens Boots Alliance today and Nike on Thursday. Furthermore, powerful storms across parts of the United States, mainly in the Southeast and Ohio Valley, resulted in more than 7,800 flight delays or cancellations on Monday.

Asia Market Update

This morning, Asia-Pacific markets showed mixed performances following the tech sell-off on Wall Street. Chinese Premier Li Qiang stated that the country remains on track to achieve its annual growth target of around 5%, with expectations of faster growth in the second quarter compared to the first. China's first-quarter economy grew by 4.5%, surpassing expectations, but subsequent data indicated a slowdown. Economic data for May fell short of analysts' projections. Li made these remarks during the opening plenary of the World Economic Forum's Annual Meeting of the New Champions.

Commodity Market Update

Gold prices remained relatively flat, hovering just above their three-month lows, while the U.S. dollar strengthened as traders sought to hedge against political turmoil in Russia and the Federal Reserve's hawkish outlook. Oil prices saw a slight increase for the second consecutive session as concerns about political instability in Russia and potential supply disruptions countered worries about global demand. A clash between Moscow and the Russian mercenary group Wagner was averted when the heavily armed mercenaries withdrew from the southern Russian city of Rostov under a deal that halted their advance on the capital.

Currency Market Update

On Monday, the South African rand strengthened against the dollar as investors remained vigilant regarding potential repercussions of the disrupted mutiny in Russia over the weekend. Analysts highlighted that the market impact of the brief rebellion by Russian mercenaries on Saturday remained uncertain. Concerns about Russian stability and crude supply led to a slight increase in global oil prices. Meanwhile, the U.S. dollar maintained its position against major currencies in the morning, as tensions in Russia simmered and traders awaited U.S. data that could impact the timing of interest rate hikes. Russian President Vladimir Putin stated on Monday that he allowed the aborted mutiny to continue for as long as it did in order to avoid bloodshed. This crisis propelled the greenback to a 15-month high against the Russian rouble.

LOCAL MARKETS

INVICTA HOLDINGS LIMITED (IVT) +4.5%

On March 31, the financial summary for the year 2023 compared to 2022 reveals the following changes (in '000's): Shareholder's equity increased by 13.8% to R5,339,135 from R4,692,685. Revenue showed a growth of 8.1%, reaching R7,769,948 compared to R7,188,991. The profit for the period decreased by 35.2% to R587,245 from R906,146*. However, the profit for the period from continuing operations increased by 12.8% to R587,245 from R520,816. Basic earnings per share decreased by 37.0% to 481 cents from 764 cents*, but basic earnings per share from continuing operations rose by 17.9% to 481 cents from 408 cents. Headline earnings per share increased by 47.9% to 488 cents from 330 cents, while headline earnings per share from continuing operations saw a 42.3% rise to 488 cents from 343 cents. The net asset value per ordinary share experienced a 23.1% increase to 4,634 cents from 3,765 cents, and the dividend per share grew by 11.1% to 100 cents from 90 cents.

RENERGEN LIMITED (REN) +3.5%

Key highlights from the quarter are as follows: The US Development Finance Corporation (DFC) has granted approval for a US$500 million loan for Phase 2, having passed both the credit committee and board committee stages. The DFC Congressional notification process has been successfully concluded, with only standard project finance conditions precedent remaining, similar to those of Phase 1. Standard Bank's credit committee has also approved a US$250 million loan for Phase 2. An LNG offtake agreement has been secured with Timelink Cargo, ensuring supply for Phase 1 starting in Q4 FY24. Notably, LNG production has increased by 12.8% compared to the previous quarter, reaching a total of 823 tons. The commissioning of the helium cold box is complete, although a leak in the vacuum circuit has been identified and is currently being repaired. Furthermore, a new well named Morpheus has been drilled, yielding 3.2% helium and a flow rate of 70,000 standard cubic feet per day.

PRIMESERV GROUP LIMITED (PMV) +13.0%

Primeserv has conducted a management review of its financial results for the fiscal year ending on March 31, 2023. Based on this review, it is expected that Primeserv will report earnings per share ranging from 22.70 cents to 24.20 cents, compared to the earnings per share of 18.36 cents in the previous fiscal year. Additionally, the anticipated range for headline earnings per share is between 22.75 cents and 24.25 cents, in contrast to the headline earnings per share of 18.36 cents for the year ending on March 31, 2022. These figures represent a significant increase in earnings per share, ranging from 24% to 32%, as well as a corresponding increase in headline earnings per share by the same percentage range.

INTERNATIONAL COMPANIES

Nvidia (NCDA) -3.7%

Snowflake, a prominent cloud data analytics company, has formed a strategic partnership with Nvidia, a leading computing company. This collaboration aims to empower various industries, including finance, healthcare, and retail, to develop AI models utilizing their own data. The announcement was made during the Snowflake Summit 2023 event. Traditionally, smaller data sets were transferred to computers for processing. However, with Snowflake's vast and valuable proprietary data, along with large data volumes, the approach has shifted. According to Nvidia's CEO, Jensen Huang, the strategy now involves bringing the computing power to the data itself. Nvidia is incorporating its NeMo platform, designed for training and running generative AI models, into the Snowflake Data Cloud. This integration requires a significant engineering effort. The partnership is particularly timely as the demand for AI-driven solutions, exemplified by ChatGPT and its impact on various industries, has prompted companies to refine their AI strategies. Nvidia, as a leading provider of AI hardware, has seen its market value surpass a trillion dollars.

Thomson Reuters (TRI) +1.0%

Thomson Reuters Corporation has announced its acquisition of Casetext, a technology solutions provider for legal professionals based in California, in a cash deal valued at $650 million. This move aligns with Thomson Reuters' commitment to investing in artificial intelligence (AI), as stated by Chief Financial Officer Michael Eastwood last month. The company plans to allocate approximately $100 million annually to AI investments, separate from its merger and acquisition (M&A) budget of around $10 billion allocated between now and 2025. Casetext, which currently employs 104 individuals, serves over 10,000 law firms and corporate legal departments, according to Thomson Reuters. This acquisition marks another milestone in Thomson Reuters' journey to deliver generative AI solutions to its customer base, as highlighted by Steve Hasker, President and CEO of Thomson Reuters.

Do you prefer a full in-depth report you can read offline? Click here to download the full report.