From May 26, 2023

The biggest story in markets this week was the explosive earnings report coming out of Nvidia (NVDA). The company generated $7 billion in revenue in the last quarter as the demand for the company’s GPU chips exploded along with the emergence of AI in mainstream society. That was exciting enough until the company announced that it expects $11 billion in revenue next quarter! The AI opportunity not only drove the stock price of Nvidia, but also many other semiconductor companies.

In this week’s letter, we also cover the fact that the recent market rally has been quite narrow in scope, with the 10 largest stocks in the market doing quite well and the average stock in the index actually down for the year. We discuss whether we think this may continue and where we think this distortion may be creating opportunities in other segments of the market.