π Chips again pull Nasdaq higher. Bitcoin +6% and Buffett definitively passes the baton
Good morning, investors! β We've come to the end of one of the wildest weeks in recent memory. On Friday, the Nasdaq added 0.40%, the S&P 500 0.17%, while the Dow Jones fell 0.18%. But the market was hardly calm beneath the surface β semiconductors continued to rally, bitcoin jumped nearly 6%, and the 10-year U.S. Treasury yield rose back above 5%.
On top of that came a major symbolic change: Warren Buffett is stepping down as chairman of Berkshire Hathaway after more than six decades.
Let's get to the most important parts. π
π Chips rescued the Nasdaq
Friday's trading ended as follows:
π’ S&P 500: +0.17% π’ Nasdaq: +0.40% π΄ Dow Jones: β0.18%
The main driver was once again technology, and especially semiconductor, companies. The tech sector was even the strongest sector in the entire S&P 500.
That's interesting especially in the context of the whole week.
Still at the start of the week, AI and chip stocks took a serious hit after several leading AI industry figures began publicly calling for a slowdown in the development of the most advanced models due to safety risks.
But in the second half of the week, investors started returning to semiconductors.
Overall, the Nasdaq ended the week in positive territory, the S&P 500 essentially flat, and the Dow posted its biggest weekly percentage drop since March.
The AI trade got slapped a few times during the week, but for now it doesn't look like investors are giving up on chips.
β οΈ 10-year yield back above 5%
Here the situation is a bit less pleasant.
The yield on the 10-year U.S. Treasury note again exceeded 5% on Friday.
This matters for technology companies because higher yields mean more competition from bonds and also reduce the present value of future earnings.
And of course, the Fed remains a problem too.
The U.S. central bank raised rates by 0.25 percentage point this week, and the market now sees about a 55.4% probability of another hike as soon as the October meeting, according to CME FedWatch. Just a week ago it was only 42.5%.
So while tech stocks are rising, the environment around them is far from ideal.
Investors are essentially hoping that corporate earnings and continued AI investment can overpower higher rates.
π’οΈ Oil still above $100
Another problem remains energy.
Brent crude fell about 1% on Friday to $103.87 per barrel, giving us at least a little relief.
One reason was that China, at the request of Saudi Arabia, called on Iran to help limit Houthi attacks on Saudi oil infrastructure. That eased some fears of further supply disruptions.
But oil above $100 is still no win.
An even bigger problem is diesel prices, which have hit record levels due to the current situation. More expensive diesel then feeds into transportation, agriculture, and goods prices.
And that's exactly why central banks are tightening monetary policy again.
This week not only the Fed raised rates, but also the ECB and the Bank of Japan, with the Japanese central bank taking rates to their highest level in 31 years. The Bank of England left rates unchanged but also warned about the possibility of future hikes.
βΏ Bitcoin +5.9%. Crypto stocks shot up
One of the biggest moves on Friday was in crypto.
Bitcoin jumped 5.9% and immediately dragged up companies that are heavily tied to the crypto market.
π Coinbase $COIN π Strategy $MSTR π Robinhood$HOOD
These three companies gained roughly 9% to 16% in a single day.
If you don't know Coinbase, for example, it's one of the largest cryptocurrency exchanges in the United States. The more interest there is in crypto and the more people trade, the more the company can earn from fees and other services.
That's why its stock tends to be extremely sensitive to bitcoin's moves.
Just on Tuesday, crypto stocks fell sharply after the U.S. Senate did not advance key cryptocurrency legislation.
A few days later and the mood is completely opposite. Classic crypto. π
π€ AI infrastructure keeps growing at a brutal pace
And we have one more interesting piece of news directly from AI.
British AI cloud company Nscale, backed by Nvidia $NVDA, filed paperwork for an IPO in the United States.
And the numbers are pretty crazy.
The company's revenue for the first half of the year grew 1,252% year over year to $140.6 million. But the firm also lost $1.02 billion.
Nscale provides computing power, data centers, electricity, and other infrastructure needed for training and running AI models. Competitors include CoreWeave and Nebius.
The company already has signed contracts worth more than $103 billion in total, and its infrastructure has a planned energy capacity of over 10 GW.
Anthropic alone committed last month to spend $45 billion on computing capacity at Nscale's data center in West Virginia. Nvidia additionally invested $1 billion in Nscale convertible bonds this week.
This is a nice demonstration that despite nervousness about valuations, real investments in AI infrastructure continue on a massive scale.
On the other hand, Nscale also shows the other side of the current AI boom β enormous growth, but also enormous losses and high customer concentration. Its largest customer accounts for 52% of current revenue.
π΄ Warren Buffett definitively passes the baton
And finally, one piece of news I definitely wouldn't skip.
Warren Buffett, at age 96, stepped down as chairman of Berkshire Hathaway $BRK-B $BRK-A and becomes chairman emeritus.
Buffett already handed over the CEO role to Greg Abel at the beginning of this year. His son Howard Buffett now becomes the new non-executive chairman of Berkshire.
Warren Buffett took over Berkshire back in 1965 and turned a troubled textile company into a conglomerate worth around $1.1 trillion.
Today Berkshire owns, for example, GEICO, the BNSF railroad, and many other businesses, and also holds large equity positions in Apple, Coca-Cola, Alphabet, and others.
Berkshire shares reacted to the news with only a slight decline. That makes sense β the succession has been prepared for years and Greg Abel already runs the company operationally.
Nevertheless, a huge chapter of investment history is closing.
π What to watch next week?
The market will continue to focus mainly on the Fed, oil, and AI.
After the first rate hike since 2023, every further comment from Fed officials will be important. Investors will also get new economic data and will try to gauge whether the October rate hike will actually come.
Meanwhile, tensions in the Middle East continue and oil remains above $100.
And geopolitically, the planned visit of Chinese President Xi Jinping to the United States will be very interesting. Topics are expected to include Iran, Taiwan, and the U.S.-China AI race.
So next week doesn't look boring either. π
Yesterday in one minute:
π S&P 500 +0.17% | Nasdaq +0.40% | Dow β0.18%
π₯ Semiconductors again pulled the tech sector higher
π 10-year U.S. Treasury yield again topped 5%
π¦ Market sees 55.4% chance of another Fed rate hike in October
π’οΈ Brent fell to $103.87 but remains above $100
βΏ Bitcoin +5.9%
π Coinbase, Strategy and Robinhood added about 9β16%
π€ Nscale heading to the stock market β revenue +1,252%, but loss over $1 billion
π΄ Warren Buffett ends as Berkshire Hathaway chairman
And that's all for today! βπ
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