Is the AI party over after Nvidia falls 10%? Australians Gaslit , China Troubles, Truth Social, AI Theft. And more...

No. 20: Weekly listening & reading & more...

Over 1,000 subscribers in 30 days! Thank you everyone that has subscribed to the Saltwater Fund Insights newsletter.

Area I wanted to brush up on…Is the AI party over after Nvidia falls 10%?

• It's rare for a $2 trillion stock to fall on no direct news, but that's exactly what happened to Nvidia (NASDAQ: NVDA) Friday (19 April 24).
• Nvidia’s share price plunged by 10 per cent on Friday, losing more than $200bn of its market value on the day. The decline accounted for roughly half of the 0.9 per cent fall in Wall Street’s S&P 500 and helped seal the worst run for the US stock markets since October 2022.

• Flashing a huge sell signal - The drop came after data-center hardware specialist Super Micro revealed that it will release its fiscal third-quarter results on April 30. But unlike recent quarters, it didn't update its sales and earnings guidance. Super Micro stock plummeted 23.1%.
• TSMC, the world’s largest contract chip maker, also reported bad news in their first-quarter results Thursday, where the company cut its forecast for overall market growth this year, excluding memory chips, to 10%, down from “more than 10%” three months ago.
• Other AI related stocks got hit too. Nvidia rival Advanced Micro Devices (AMD) dropped 5.4%. Chip designer Arm Holdings (ARM) saw its stock fall 16.9% and recent IPO Astera Labs (ALAB), which makes connectivity chips for AI systems, fell 9.1%.
• Is it just a pullback or a sign of something more serious on the AI party?

“The stock pullback has very little to do with [interest] rates,” said Parag Thatte,?a strategist at Deutsche Bank. “It’s?more to do with investors pricing in slower earnings growth [for Big Tech].”

• Analysts?said Friday’s sell-off was being driven by investors hurriedly repositioning their portfolios ahead of earnings results from Microsoft, Alphabet and Meta next week.?However, Pension Funds have pulled $325 Billion from stocks after a “blockbuster run” and switching to a higher weighting of lower risk bonds.
• No doubt the truth is somewhere in the middle. After Nvidia rallying 200% over the past 12 months many AI investors are taking the opportunity to take profits. Others jumped on the FOMO bandwagon and are not conviction holders, while the industry itself is reporting signs that growth is slowing.

Chart of the week - Don’t rely on interest rate forecasts!

You can see the actual Fed funds rate (thick blue line), and what investors expectations (in aggregate) were at different points in time and how much they differed from what actually happened.

Viewed on Youtube or listening

Some of the videos that caught my eye last week. I download videos I like into my YouTube Downloads and listen when exercising, driving, walks and any other spare moments I have:

• Chris Sacca's True Unfiltered Opinion on Facebook and Softbank | Full Interview - 20VC with Harry Stebbings
• Bill Ackman On Why He Keeps Buying So Much Google - Daniel Pronk
• Things I (Don’t) Worry About:: Collapse of the Semiconductor Industry || Peter Zeihan
• ByteDance’s Blowout Profit, Kalshi & Events Betting, and Dude Perfect’s Big Deal | Prof G Markets
• CHINA Economy IMPLODING - Exports Collapse, Property Price Crash, Imports & Factory Prices Down - Joe Blogs
• How the US-China Semiconductor War Shapes Global Politics? What Happened to TSMC in the U.S? - VOC - Vision of China
• China, AI and Geopolitical Dynamics - Question Time with Peter Zeihan: Episode 4 - Zeihan on Geopolitics
• We Turned $5M Into $419M Buying Cashflow Businesses ft. Jeremy Giffon - My First Million

Reading - Articles

Some articles also catching my eye this week:

• “This is the largest theft in the United States, period.” Large Language Models (LLMs) need huge amount of training data. In late 2021, OpenAI faced a supply problem. It had exhausted every reservoir of reputable English-language text on the internet, so created a speech recognition tool to transcribe the audio from YouTube videos to text, in a move likely against YouTube’s rules. All the major tech giants are likely guilty.
• China’s second-largest builder by sales - China Vanke Co. - denied rampant market rumors as the nation’s unprecedented property downturn and developer defaults enter a third year.
• Apple Inc. removed social media services including Meta Platforms Inc.’s WhatsApp and Threads from its Chinese app store, responding to orders from Beijing to close the apps over national security concerns.
• The Australian Federal Government champions “Future Made in Australia” and then funds a large public investment into a foreign quantum company at the expense of local companies.

About Saltwater Fund

Saltwater is an evergreen global crossover fund focused on private and public technology companies. We’re a long-term investment partner with a disruptive fund structure designed to align manager and investor interests.

Saltwater was founded by entrepreneurs that are committed to enabling innovators realise grand visions, transform industries and ultimately enrich lives.