The New Nvidia

The new Nvidia is about to go public. I’m sure Jensen Huang is more nervous about the competition of people buying their stock than their product, but find out what the latest threat to the AI kingpin brings to the table.

October 02, 2024

Silver banana goes to…

In this issue of the peel:

  • If the U.S. economy is entering a slowdown, we know who’s leading us there. The country’s manufacturing sector continued contracting for yet another month, but it’s not as bad as that might sound. Find out why below.

  • The world’s biggest meat rider just secured a new 20 year contract, getting investors hyped. Meanwhile, I was very pleased to see that my odds of dying on a foreign battlefield on behalf of Lockheed Martin drastically increased, but Coinbase shareholders weren’t too pleased. Finally, CVS might be splitting up.

  • The new Nvidia is about to go public. I’m sure Jensen Huang is more nervous about the competition of people buying their stock than their product, but find out what the latest threat to the AI kingpin brings to the table.

Market Snapshot

Banana Bits

3 Reasons Why You Are Striking Out At Your High Finance Job Search

The recruiting game is changing. Computers are taking over most aspects of application screening. You are filtered out before you get a chance to talk to the recruiter.

Gone are the days when you could afford to have a shit resume but still walk out with a job. Or get a job because you attended a certain school. The competition is much higher, and your odds are much lower.

The old-school mentality of let’s apply and hope we get an interview does not work. Below are 3 things you could be doing that will get you insane results.

  1. Crappy resume. Wrong format. Typos. Wrong keywords. Things no one wants to know about you. You name it. In our experience, 99% of resumes have massive gaps. And most of them think they could no better. Our academy students (including ones from the top target schools) are awestruck every time we complete a resume review session with them. Here’s just one review so you hear from them, not us.

    “She was absolutely amazing - she evolved a resume review into a full-packaged guidance for recruiting strategy and how I should frame myself for the whole upcoming recruiting process.”

  2. 100-500 LinkedIn connections. Really? Those connection requests are free. You don’t pay for them. And it can be done while you take a break from scrolling on your phone🙂 No, seriously, what’s stopping you? At WSO Academy, we help you draft proven outreach templates to 10x your LinkedIn networking success rate and push you to achieve weekly targets.

    “He was phenomenal help and provided tangible steps to take in order to strengthen LinkedIn profile, in conjunction to additional feedback on courses to take to strengthen LinkedIn profile.”

  3. AI. You hear AI can pass standardized tests and will eventually rule over us, but you still haven’t started using it. At this point, there’s no excuse for not leveraging the power of AI. Tools exist. Many tools. And we use them at WSO Academy to supercharge your job hunt. From resume reviews to LinkedIn reviews and much, much more. As part of the academy, you have not just natural but artificial intelligence working for you. Here is a computer-scored report card of a resume before and after the mentor review and finally after the AI review.

As part of WSO Academy, we help you address these problems and much more and get you a job in high finance. Can’t wait to start hearing from recruiters?

Macro Monkey Says

Extreme Mediocrity

The U.S. manufacturing sector looks a lot like me in high school: ugly on its face, underachieving across every metric, but still hoping for the best.

Now that my parents can brag to their friends about my 2.7 GPA and having dozens of podcast listeners, I’d say it worked out just fine.

Hopefully, we can soon say the same about U.S. manufacturing. 

September’s Purchasing Manager Index (PMI) for the country’s manufacturing sector just dropped, giving us a peak into the growth—or lack thereof—of goods production in the United States.

Let’s get into it.

The Numbers

Last month, manufacturing activity continued to contract at the exact same rate as in August, clocking in at 47.2%. 

As a reminder, anything below 50% represents contraction within the manufacturing sector, and above represents expansion. If the headline PMI falls below 42.5%, this usually signals an economy-wide slowdown or recession.

Manufacturing tends to act as a leading indicator, meaning that changes in this sector can portend changes to the broader economy.

The excruciatingly mid-performance in August and September underscores the current uncertainty plaguing the economy. Purchasing managers are hesitant to make big decisions amid an opaque outlook on rates, supply chains, and aggregate demand.

Fed Chair JPow, speaking in his native language of Fedspeak, did his damndest to be as vague as possible in describing the policy path forward on Monday. 

Meanwhile, the continent's largest longshoremen union just went on strike. If this lasts more than a few days, nearly half of the U.S.'s inbound ocean freight will be halted, severely threatening supply access.

Finally, if we dig deeper into the report, we get a front-row seat at the extreme mediocrity seen in aggregate demand.

 

On the positive side, New Orders, Production, Backlogs, and Supplier Deliveries all increased in September, with Supplier Deliveries entering expansion territory.

A 5.7% decline in prices to 48.3%, the first decline seen this year, could mean a few different things. On the one hand, distributors and end consumers will more than welcome lower input costs, slowing price increases while maintaining margins.

However, lower prices are also reflective of a slowdown in demand. In the context of the rest of the report, this could have been triggered by a 6.4% decline in Inventories.

That’s because producers, wholesalers, and other intermediaries could have simply required fewer new orders due to a surplus of inventory already sitting on their shelves. 

Maybe demand was fine from end consumers, but intermediaries didn’t need to go on a purchasing spree to meet that demand. Given that the New Orders rose a slow 1.5% while Prices and Inventories fell and Production expanded along with Deliveries, this seems reasonable.

The most depressing data, of course, comes from employment.

The manufacturing Employment Index fell 2.1% in September. We don’t know how many lazy b*stards that exactly translate too, but we’ll find out on Friday with September’s jobs report.

However, what we do know is that—again—manufacturing is a leading indicator. Employment in this sector led to the post-pandemic recovery in broader employment as well as the current slowdown we’re experiencing.

So, declines in this index could point to growth in laz b*stards economy-wide. Obviously,  I know you apes are perma-dedicated to shareholder value creation, but it’s the rest of ‘em where there’s reason for concern.

The Takeaway?

Not only has the percent of total employment in the manufacturing sector reached a new all-time low of 8.3% as of June 2024, but compared to other economies, the U.S. is tied for the lowest reliance on manufacturing.

Last quarter, GDP growth came in hot at 3%. According to the Atlanta Fed’s GDPNow estimate, Q3 growth is expected to slow to a still-healthy 2.5%. Meanwhile, total unemployment at 4.2% remains near record lows.

Despite the extreme mediocrity within manufacturing, the U.S. economy is still cleared to continue its soft landing.

Career Corner

Question

When an application for a program asks you to detail your individual experiences, is it ok to copy and paste the role description from your resume, even when it asks you to also submit the resume?

Answer

It’s fine, but I think the better approach is to rephrase a bit so you can use the space to your advantage, highlight your biggest achievements, and write in prose instead of bullets. But in the end, it probably won’t make a huge difference either way, so if you’re tight for time, it’s ok.

Head Mentor, WSO Academy

What's Ripe

Arcos Dorados Holdings (ARCO) 14.56%

  • Potentially the world’s largest meat rider (literally), Arcos Dorados’ shares surged as the McDonald’s master franchise holder of Central and South America just re-upped its contract.

  • Arcos locked in another 20 years as the master franchiser of McDonald’s across most of Latin America. Getting prices locked in was the best part.

  • The company’s new deal runs through 2045 and guarantees a fixed 6% royalty to McDonald’s for the first decade from Jan 1, 2025. 

War Stocks (LMT, LHX, OXY, XOM) 3.64%, 3.12%, 3.32%, 2.31%

  • Finally, it appears that we all may soon have our chance to die for a worthy cause like Raytheon’s profit margin or Lockheed’s dividends. 

  • U.S. officials warned that a ballistic missile strike from Iran on Israel was “imminent,” increasing the odds of an Israeli ground attack on Hezbollah-backed forces in Lebanon.

  • Obviously, defense stocks spiked. Energy stocks also did as the literal war threatened to disrupt global oil supply from the Middle East, putting upward pressure on crude prices.

What's Rotten

Coinbase (COIN) 7.39%

  • Wasn’t inflation supposed to be good for digital assets? Don’t rising geopolitical tensions threaten fiat currencies? Nevertheless, BTC found a way to fall.

  • The decline in the king of cr*pto triggered a pullback in digital asset-inked stocks. Plus, uncertainty on rates and potential war hit the whole equity market hard.

  • As one of the stock market’s most unhinged, volatile companies, Coinbase suffered heavily from declining BTC bullishness and rising uncertainty. 

CVS Health (CVS) 2.13%

  • I recently had to go to CVS to get a tetanus shot (don’t ask why) and didn’t pay a dollar during the process. So, for me, it’s not hard to guess why shares are falling.

  • The convenience store and healthcare firm sank on news of a strategic review of its business, potentially involving a spinoff of Aetna, its health insurance arm.

  • It appears that the firm’s business model as a whole is not working, with major issues in insurance, pharmacy, and retail traffic. The stock has lost 24% YTD but is still doing much better than rival Walgreens, down almost 70% YTD.

Thought Banana

Shaking In Their Shoes

Rumors are swirling that Nvidia hasn’t gotten sleep in weeks out of fear of a new competitor coming to public markets.

This became clear on Monday when Bloomberg and the Wall Street Journal reported that Nvidia had peed its pants due to the filing of this S-1.

Cerebras, an AI chipmaker, is going public. Let’s dive in.

What Happened?

Founded in 2015, Cerebras describes itself as “an artificial intelligence company” with a mission to “accelerate AI by making it faster, easier to use, and more energy efficient, making AI accessible around the world.”

At least they didn’t promise to “save humanity” like most tech startups.

As reported in their S-1, Cerebras has seen Nvidia-like growth in recent years. Revenue exploded by 219.85% in 2023, growing another 73.22% in just the first 6 months of 2024 to $136.4mn. 

Losses are narrowing too, declining 28% to $127mn last year. However, the firm still lost ~161% of its revenue in 2023.

So, what kind of products is Cerebras slingin’ for it to have the balls to call itself An AI company” while losing 7.3x its revenue just 2 years ago? I’m so glad you asked…

Cerebras is locked in on hyper-technical AI use cases. While Nvidia is f*ckin’ around with gaming and cars in addition to its AI and data center specialized GPUs, Cerebras so far has exclusively targeted extreme AI applications.

Those “extreme AI applications” primarily involve AI model training and inference. Cerebras provides the hardware that allows companies to do so.

That right there is the holy grail.

Cerebras’ primary product is its Wafer Scale Engine (WSE), the world’s largest semiconductor (chip) purpose-built for AI deep learning workloads.

According to the firm, larger chips allow AI tasks to be performed faster with less energy, making them more efficient. 

Class AI hardware, if such a thing exists, from Nvidia and others, relies on a cluster of smaller cores working together, whereas Cerebras puts >850k cores on a single chip, allowing for highly parallel computation that massively speeds up processing times.

The Takeaway?

Cerebras is targeting an extremely specialized hardware market while competitors like Nvidia, AMD, Intel, and others have built businesses around general purpose and AI-specialized tech.

The firm is targeting a $7-$8bn valuation and counts large VCs and even OpenAI CEO Sam Altman as investors. 

However, 83% of revenue comes from just one UAE-based customer, and TSMC is the sole supplier of Cerebras chips. That means the firm has extreme reliance on just two firms that aren’t exactly in the safest geographies for avoiding World War 3.

The Big Question: You buying $CBRS when it lists on the Nasdaq? What’s the bull/bear case?

Banana Brain Teaser

Previous

A certain university will select 1 of 7 candidates eligible to fill a position in the mathematics department and 2 of 10 candidates eligible to fill 2 identical positions in the computer science department. If none of the candidates is eligible for a position in both departments, how many different sets of 3 candidates are the to fill the 3 positions?

Answer: 315

Today

There are 5 cars to be displayed in 5 parking spaces, with all the cars facing the same direction. Of the 5 cars, 3 are red, 1 is blue, and 1 is yellow. If the cars are identical expect for the color, how many different display arrangements of the 5 cars are possible?

Send your guesses to [email protected]

❝

Embrace the unknown and embrace change. That’s where true breakthroughs happen.

Jensen Huang

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Happy Investing,
David, Vyom, Ankit & Patrick