In this issue of the peel:

• 📈 After Tuesday’s large gains, the NASDAQ 100 and the S&P were both down 0.45% and 0.56%, respectively.

• 🌎Nvidia reported positive earnings after market close, meeting analyst estimates, but what does this mean for the future of AI infrastructure?

• 💪 Japanese bonds saw a much-needed decrease in yield after hitting all-time highs on Monday, partially due to the Bank of Japan’s commitment to keep interest rates under control.

Market Snapshot

Banana Bits

• Donald Trump wants Harvard to limit their enrollment of international students to 15%, approximately half of their current international student population of 31%.

• The Fed has forecasted stagflation for the American economy due to looming tariff concerns and overall economic uncertainty.

• How America's increasing budget deficit is plaguing the demand for U.S treasuries.

• Some Wall Street professionals believe that investor confidence in the coming months will be purely dependent on tariff news.

• Asian investments in American assets are now proving inadequate as the dollar continues to depreciate despite Tuesday’s improvement.

• Global interest rates are on the rise amid mass bond sell-offs.

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Macro Monkey Says

Nvidia’s Earnings Call and Its Effect on Big Tech 

Yesterday, around 4:30, Nvidia reported its Q2 fiscal year earnings and largely met analyst expectations, ending a productive earnings season for big tech. 

Nvidia reported about $45 billion in revenue during the second fiscal quarter, which was approximately what analysts expected. Another notable point is that Nvidia reported an $8 billion loss in China due to ongoing reciprocal tariffs, which could negatively impact Nvidia’s long-term growth. Nvidia was unable to ship $2.5 billion worth of chips due to China’s market restrictions.

Despite Nvidia’s struggles in China, they were still able to meet analysts’ expectations due to incredibly strong demand for AI infrastructure. But what does this continued demand mean not only for big tech companies but also for the expansion of AI? 

First of all, it means that the stock prices of big tech companies, especially Nvidia (duh), are going to surge as soon as the market opens today. Secondly, since AI is still in the early stages of innovation, this increased demand for AI infrastructure represents the continued growth of the industry, which will undoubtedly increase consumer confidence. 

Furthermore, Nvidia’s positive performance despite tariff-related pressures will likely increase overall consumer confidence beyond big tech, as it demonstrates how certain companies can still meet expectations despite tariffs. 

In addition to a surge in XLK (an ETF that tracks the tech sector), we are also likely to see, at a minimum, a marginal increase in the major indices like the S&P and the NASDAQ today. Despite this, it is worth noting that inflation has yet to have a significant impact on the United States, and Nvidia’s positive earnings call could push the country into a bull market, which could come crashing down with negative tariff news. 

The Takeaway?

While Nvidia’s positive earnings report is definitely good news, tariff-related price hikes have yet to take effect, with some companies, like Walmart, announcing impending price increases. 

Additionally, if trade negotiations eventually fall through, then Nvidia’s positive earnings report will be less relevant, and most will start panic selling. In other words, be cautious when hopping on the current big-tech hype train, because although it's a positive thing for the American economy, the odds of a recession are still significant. 

Career Corner

Question

If I agree to an interview with a person through LinkedIn without using email, should I send a thank-you note on LinkedIn or via email?

Answer

Stick to LinkedIn if they have been responsive on that.

Head Mentor, WSO Academy

Check out WSO Academy!

What's Ripe

Joby Aviation Inc. (JOBY) 28.8% 

• Joby Aviation, an electric vertical takeoff and landing aircraft (like an electric helicopter) company, saw a tremendous surge in stock price after Toyota announced a strategic $250 million investment in their business. Toyota now owns about 15% of shares, and has invested about $894 million into their business. 

Abercrombie & Fitch (ANF) 14.7%

• Abercrombie & Fitch, a global clothing retailer, saw its stock price surge today after an extremely positive Q1 2025 earnings report. ANF beat out expectations with an EPS of $1.59 and $1.1 billion in net sales. Despite their Q1 success, ANF has had a rough year, being down 42.27% YTD.

What's Rotten

Tempus AI Inc. (TEM) 19.2%

• Tempus AI, an artificial intelligence company, saw its stock price plunge in light of allegations of securities laws violations and a short-selling report by Spruce Capital Management. 

• Spruce Capital Management released a report alleging that 2% of their 2024 revenue was from AI-related services, raising concerns regarding ethical accounting practices. Additionally, several law firms launched investigations regarding violations of several securities laws. 

Okta Inc. (OKTA) 16.2%

• Okta, a cybersecurity company, saw a sharp decline in share price today despite positive Q1 2025 earnings. This decline was because Okta did not change their 2025 revenue expectations in response to positive Q1 2025 earnings, partially due to uncertain macroeconomic conditions. 

• This led to not only a sharp selloff of the stock, but also for some financial institutions to lower their price target for the company. 

Thought Banana

Japanese Bond Market Turmoil 

Yesterday, the yield of Japanese bonds experienced a much-needed rebound after yields hit an all-time high on Monday. 

The bond selloff was largely due to concerns surrounding global trade and tariff conditions, as well as expectations of rising inflation. In response to record-high bond yields and a massive selloff, the BOJ (Bank of Japan) took action, which partially restored consumer confidence and led to a slight decrease in bond yields.

Kazuo Ueda, the governor of the BOJ, said that the BOJ would “closely monitor” the rising interest rates in response to the high bond yields in order to maintain the health of Japan’s economy. 

This response led to many bonds being bought by investors, leading to a slight decrease in bond yields. Additionally, part of the reason that yields were so high in the first place was due to the BOJ “rolling back” its purchases of Japanese bonds and the general hesitation of investors to buy those bonds. 

The BOJ currently owns over 50% of Japanese bonds in order to keep interest rates low and to avoid a deflationary macroeconomic environment. Unfortunately, as a result of this yield curve control, Japan’s interest rate has stayed extremely low, which has caused the Yen to weaken, therefore making imports more expensive. 

To combat this, the BOJ began rolling back its bond purchases, but investors weren’t eager to buy, causing the yield on Japanese bonds to skyrocket. 

Despite the activity in the Japanese bond market, Japanese bonds aren’t the only bonds that are rising. Yields are spiking for Australian, German, and UK treasuries, but what is causing the global yield spike? 

Firstly, many countries have increasing inflationary expectations, which is partly why yields have risen globally. Additionally, many of these countries, particularly the United States, have been running extreme budget deficits, making lending money to debt investors far more risky. 

These reasons, coupled with extreme trade and tariff uncertainty, were enough for many investors to sell their bonds, resulting in a significant increase in treasury yields globally. 

The Takeaway?

Despite the overall increase in treasury yields across the board, the BOJ’s action shows some promise in its efforts to maintain interest rates. 

Furthermore, the primary driver behind uncertainty in the bond market is tariff uncertainty, which is increasing inflationary expectations in most countries and forcing yields upwards due to general economic uncertainty. 

Regardless, these record-high bond yields, caused by economic uncertainty, represent an opportune time to buy when bond yields inevitably decrease, thus increasing the bond's price. On the contrary, if Trump’s tariffs go haywire and bond yields hit new highs, then you may regret your decision.  

The Big Question: Can the BOJ successfully juggle inflation, the Yen, and investor confidence all at once?

Banana Brain Teaser

Previous

Exchange Rates in a particular year were $1 = 5.3 francs and $1 = 1.6 marks. An American dealer bought a table in Germany for 480 marks and sold the same table in France for 2,385 francs. What was the dealer’s gross profit on the two transactions in dollars?

Answer: $150

Today

One inch represents 20 miles on Map K and one inch represents 30 miles on Map L. An area of 3 square inches represents how many more square miles on Map L than on Map K?

Send your guesses to [email protected]

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Happy Investing,
Chris, Vyom, Ankit, Mithun, Colin & Patrick

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