Head of Equity Strategy
Summary: As the corporate earnings season approaches its final lap, Saxo's Peter Garnry takes a closer look at three key bluechips – Home Depot, Tencent and NVIDIA
The Q3 earnings season is losing steam with only 126 companies reporting earnings next week out of the 2,000 companies we track during the period. 90% of the companies in the S&P 500 Index have already reported earnings with positive earnings surprise across all sectors. In our previous Earnings Watch publications we have highlighted the earnings weakness in Europe, but the recent string of earnings releases have helped improving there. Revenue growth y/y is slightly higher in Q3, following dismal growth in the two previous quarters.
Today’s Earnings Watch publication focuses on Home Depot, Tencent and NVIDIA. The US housing market has been soft in the past year as mortgage rates have climbed on the back of tighter monetary policy. Home Depot’s earnings may be a first warning shot on housing cooling in the US as home improvement is partly driven by housing sentiment and the ability to take home equity loans.
Tencent is the worst performing large technology stock globally this year as China’s gaming addiction curb has hit sentiment hard with shares down 33% year-to-date. Tencent’s Q3 earnings are important for investor sentiment in China and Asian equity indices due to its index weight.
NVIDIA has been riding the boom in the semiconductor industry for years and last year saw a big boost from crypto mining operations. The big question is whether the comparables are getting too tough to beat and whether the semiconductor industry is hitting an intermediate peak here. Our view is that the US-China trade war will not see a deal anytime soon and the semiconductor industry is a strategic industry for both countries so the global supply chain in this industry could come under severe pressure in 2019.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
