Markets Tease, Then Tank

📉 The market extended declines for another day after giving investors brief hope.

March 28, 2025

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In this issue of the peel:

  • 📉 The market extended declines for another day after giving investors brief hope.

  • 🏦 Avis soars on rental demand, Dollar Tree ditches Family Dollar, while TD Synnex and Oklo struggle.

  • 💻 Nvidia investors might be cooked as China weighs a chip ban on select products.

Market Snapshot

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Macro Monkey Says

Slow and Steady

It’s been a busy week, packed with economic reports to end the quarter. Yesterday, we got revisions for US GDP along with another reading of Initial Jobless Claims. Let’s see what they showed and what that means for both the economy and the market. 

The U.S. economy expanded at an annual rate of 2.4% in the fourth quarter of 2024, according to the third estimate released today. 

This is a slight uptick from the previous 2.3% estimate and a deceleration from the 3.1% growth in the third quarter. The growth was primarily driven by increases in consumer spending and government expenditures, though business investment took a bit of a nap, decreasing by 8.7%. ​

Over in the labor market, initial claims for unemployment benefits edged down by 1,000 to a seasonally adjusted 224,000 for the week ending March 22. This is just below the 225,000 claims economists had forecasted and indicates that layoffs remain relatively stable. Despite some political drama and trade tensions, the labor market continues to show resilience. ​

So, how did the markets react to this news? In all honesty, it’s hard to tell. 

​Market turmoil is largely being driven by tariff fears. But these reports are a good sign that the economy is holding up pretty well and may cause analysts to dial down those recession probabilities. Investors will probably take a "wait and see" approach, checking for more data before making any big moves.​

The Takeaway?

The economy is growing at a moderate pace, and the labor market remains relatively stable. 

However, challenges like trade tensions and policy uncertainties are always at the back of everyone’s mind. All in all, we seem to be in a good place considering everything that’s happening.

What's Ripe

Avis Budget Group (CAR) 20.5%

  • It turns out that auto tariffs can be good for car companies, just as long as you’re in the rental business and not a manufacturer. Avis Budget saw its stock spike on expectations that more expensive vehicles will force people to rent instead of buy.

Dollar Tree (DLTR) 11.2%

  • Dollar Tree is shedding some dead weight. The stock went up after announcing it would sell Family Dollar to a group of Private Equity firms. The struggling retail store was a sore spot in Dollar Tree’s portfolio and has been a terrible investment. They purchased it a few years back for $8 billion but only received $1 billion from the sale.

What's Rotten

TD Synnex (SNX) 14.3%

  • IT distribution may not be the hot sector to invest in anymore. TD Synnex reported earnings in the morning, and shares proceeded to freefall throughout the rest of the day. They pretty much missed on every metric that matters, revenue, operating profit, earnings, you name it. Cash flow was also a weak point, with SNX reporting negative free cash flow for the year.

Oklo (OKLO) 9.7%

  • Oklo, which designs fission power plants, faced a major setback in one of its key nuclear projects. The company announced a delay in the project due to reduced funding from investors after failing to meet key development milestones. Translation: there are serious concerns regarding Oklo’s long-term viability.

Thought Banana

Is Nvidia Cooked? 

Nvidia is getting some unexpected pressure from China, with reports surfacing that the country may impose a ban on its high-performance chips. 

Why? Well, it’s not about gaming graphics (though that’s a big chunk of Nvidia’s market), but more about how crucial these chips are for AI, deep learning, and high-tech infrastructure—all things China is eager to develop domestically.

What could this mean for the company? For one, Nvidia has seen incredible stock growth recently, but it might be in for a rough ride if China follows through with the ban. 

Shares are already dipping, with Nvidia's price down by 6.2% following the news of the blocked Arm acquisition, a move that could further erode investor confidence.

China's push to develop a self-sufficient tech ecosystem has been well-documented, with homegrown alternatives to foreign tech gaining momentum. 

While Nvidia’s GPUs are widely used in data centers and AI-driven applications, China’s government might see its reliance on Nvidia as a weak spot. Plus, with major geopolitical tensions around tech dominance, Nvidia could be seen as a target.

For Nvidia, losing access to the Chinese market would be a major blow. China is one of the largest consumers of Nvidia's chips, particularly for its data centers and supercomputers. The potential loss could force Nvidia to scramble, either by developing new partnerships or ramping up production of chips designed to sidestep the restrictions.

But will it really happen? There’s still a lot of back-and-forth in the global semiconductor scene, and many companies are investing heavily in alternative markets and production lines to hedge their bets. Nvidia is known for adapting, so this might just be another bump on its path to dominance.

The Takeaway?

If the ban materializes, Nvidia’s stock might take a hit, but don't count them out just yet. The chipmaker is a resilient player in an increasingly fractured global tech landscape.

The Big Question: If China cuts off Nvidia, will companies like AMD or local chipmakers like SMIC step up to fill the void, or is Nvidia’s tech simply too dominant to replace?

Banana Brain Teaser

Previous

At a regular hourly rate, Don had estimated the labor cost of a repair job as $336, and he was paid that amount. However, the job took 4 hours longer than he had estimated, and, consequently, he earned $2 per hour less than his regular hourly rate. What was the time Don had estimated for the job, in hours?

Answer: 24

Today

In a small snack shop, the average revenue was $400/day over a 10-day period. During this period, if the average daily revenue was $360 for the first 6 days, what was the average daily revenue for the last 4 days?

Send your guesses to [email protected]

❝

Only those who dare to fail greatly can achieve greatly .

Robert F. Kennedy

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Happy Investing,
Chris, Vyom, Ankit & Patrick