??Superconductor Wars – the next frontier ?? Also: Bad news is now bad news; Fast Retailing, NVDA, GOOG, QCOM ?? The Dow and The Nikkei

The MoneyFitt Morning will be off tomorrow for Good Friday and return on Easter Monday. Enjoy your weekend!

US large-cap S&P 500 closed 0.25% DOWN ??

Tech-heavy Nasdaq Composite closed 1.07% DOWN ??

Pan European STOXX Europe 600 closed 0.25% DOWN ??

HK's Hang Seng Index closed 0.66% DOWN ??

Japan's Nikkei 225 closed 1.68% DOWN ??

?? Focus

• Superconductor Wars – the next frontier

?? In the Markets

• Bad news is now bad news; Fast Retailing, NVDA, GOOG, QCOM

?? MoneyFitt EXPLAINS

• ?? The Dow and The Nikkei

?? Focus

Superconductor Wars – the next frontier

On March 7th, Ranga Dias from the University of Rochester startled the scientific community at the world's largest physics meeting in Las Vegas, announcing that his team had created a superconducting material at a pressure and temperature suitable for practical applications. What happened next was a flurry of experiments to verify the claim. Researchers from Beijing and the US state of Illinois reported that they were only able to achieve superconductivity in their experiment at -203 degrees Celsius (-333 Fahrenheit). A pressure of 218 gigapascals was also required to reach that state. In other words, the whole world was out to prove Ranga’s claim was fake.

? Superconductors make highly efficient electronics, but the ultralow temperatures and ultrahigh pressures required to make them work are costly and challenging to implement. Room-temperature superconductors promise to change that. A working superconductor will allow ultra-efficient electricity grids, ultrafast and energy-efficient computer chips, and ultrapowerful magnets that can be used to levitate trains and control fusion reactors.

? Currently, room-temperature superconductors don’t need special equipment to cool them. They need to be pressurised, but only to a level about 10,000 times more than atmospheric pressure. This pressure can be achieved by using strong metallic casings. This makes superconductors unviable.?

? One of the key battlefields for the future is in quantum computing. Superconducting circuits are also a promising technology for quantum computing because they can be used as qubits. Qubits are the basic units of quantum processors, analogous to but much more powerful than transistors in classical computers. China is planning to leapfrog the US via quantum computing and, if successful, could mean China will no longer be hostage to the US’s semiconductor sanctions.?

The commercialisation of quantum computing is currently expected to be two decades away, but if we have room-temperature superconductors, as in the University of Rochester research, we could see quantum computing in just a decade. This could transform lives immensely. Energy companies would see a quicker demise while the technology landscape would be completely revamped. Imagine a world that's moved on from semiconductors to quantum. In that scenario, ASML and TMSC could turn out to be like Kodak, while software / Artificial Intelligence players emerge as winners.?

Guest writer:?Woo FC, a veteran investment manager with over 25 years of Asia and global market experience.?This article is for information only and not investment advice. The writer may have long or short positions in the companies mentioned above. Please see the important disclaimer at the bottom.

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?? In the Markets

Japan's headline benchmark Nikkei 225 stock index fell sharply on Wednesday, ending a three-day winning streak, on fears bled across the Pacific about the higher risk of a US recession, exacerbated by the related strength in the Yen. Automakers were particularly weak for both reasons (the stronger Yen cuts the "value" of overseas sales when translated back into Yen terms, while both export and domestic sales would be weaker in a recession.) Toyota, Nissan and Honda all sank around 2%.

Uniqlo flagship store in Umeda (ユニクロ大阪およびGU梅田店を撮影。)

- Image credit: Tokumeigakarinoaoshima?

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? With 2/3rds of sales from overseas, fast fashion giant Fast Retailing (9983), owner of Uniqlo, also dropped and was the biggest drag on the Nikkei 225 ??. Though huge, it's only the 9th largest company in Japan by market capitalisation (number of shares X share price). However, it's the largest component of the Nikkei as --like the Dow Jones Industrial Average ?? in the US-- it's "share price-weighted." At a price per share of JPY29k, Fast Retailing has a bigger weighting at over 10% than Toyota (2.5 times bigger but priced at just JPY1.8k per share) with a weighting of just over 1%. Go figure. (This is why most professional investors benchmark against the TOPIX rather than the Nikkei, as it's a broad market-cap weighted index that covers all the domestic common stocks listed on the First Section of the Tokyo Stock Exchange.)

In the US, stocks extended their losses from yesterday, with the tech-heavy Nasdaq taking a beating on fresh new worries about the strength of the economy. As we discussed yesterday, fears of a recession (growth too weak or even negative) have supplanted fears of inflation (growth too strong, interest rates climbing.) Now the tone has switched from "bad news (e.g. slower growth, weaker employment) is good" to "bad news is bad." Recent economic data continues to send investors into "safe haven" or "defensive" names like Procter & Gamble (PG), Coca-Cola (KO), and Walmart (WMT) with utility company stocks --as in the Utilities Sector Select SPDR Fund (XLU)-- also catching bids.

- Image credit: SpongeBob SquarePants / Nickelodeon, Paramount Global via Tenor

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? A report from payroll processor ADP showed that private employers hired far fewer workers than expected in March. The 145k new jobs reported were over 100k fewer than in February and over 50k fewer than expected. This adds to Tuesday's job openings ("JOLTS") data showing that the still red-hot labour market was finally cooling... and increases concerns about a slowdown in the economy. As with the JOLTS data, any such cooling a month earlier would have been seen as a bullish sign that inflation was easing and the markets would have shot UP.

? And then the Institute for Supply Management's March survey showed the all-important services sector (2/3rds+ of the US economy) slowing more than expected last month as well. Anything 50 or above still shows growth, but the non-manufacturing PMI fell to 51.2 from 55.1 in February and was well short of a Reuters economist poll of 54.5. Still better than manufacturing which reported on Monday had fallen to 46.3, the lowest since May 2020 and the 5th month in a row of contraction.

Semiconductor giant (with the biggest market cap in the sector by far) Nvidia Corp dropped 2.1%, dragging down both the S&P 500 and Nasdaq after Alphabet's Google unit claimed in a paper that its own chips used in its supercomputers to train its artificial intelligence models were faster and more power-efficient than comparable components made by Nvidia. Markets seemed to ignore that they compared speeds with Nvidia's A100 chip that was on the market at the time, but NOT to its current flagship H100 chip! (See late-Feb MFM Focus piece on NVDA and its AI chips.) See the Focus piece above on superconductors.

Chips with that?

- image credit: Tenor

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..... ? It's not a new venture for Google. This is the fourth generation of a Google-designed custom chip called the Tensor Processing Unit (TPU, for high volumes of low precision computing) and has been used in Google's data centres since 2015. Large Language Models used in AI are too large to store on a single chip, so models must be split across thousands of them. Google strung together over 4,000 chips into a supercomputer using custom-made optical switches, and said its chips are up to 1.7 times faster and 1.9 times more power-efficient than a system powered by Nvidia's A100 chip... but not Nvidia's current, newer flagship H100 chip made with newer technology. (Meanwhile, wireless-focused chipmaker Qualcomm's Cloud AI 100 chips beat Nvidia's H100 in two out of three measures of power efficiency --server queries for chip per watt-- according to testing data from MLCommons, an engineering consortium that maintains AI testing benchmarks.)

MoneyFitt EXPLAINS?

??The Dow Jones Index and the Nikkei 225

"The Dow" is one of the world's most famous and widely followed stock market indexes, though not very often used as a benchmark for active or index funds and ETFs.

Originally set up in 1896, it's more correctly called the Dow Jones Industrial Average or DJIA. It's made up of 30 large, liquid blue-chip US companies listed on the New York Stock Exchange and Nasdaq and needn't actually be an "industrial" company, just not a utility or transport company. Current components include McDonald's, Visa, JPMorgan Chase and Disney. Having only 30 components, however, means the index is not that representative of the economy. (The Wilshire 5000 Total Market Index would be closer, but even so, no stock market or index is exactly the same as the economy it's in.)

Unlike the S&P500 and most other major indexes, the DJIA is not weighted by market capitalisation (share price X number of shares), but an average of their share PRICES… so companies which have a higher share price have a greater weighting in the index, which makes little sense to many investment professionals. (To partially get around this rather eccentric approach, they came up with a continuously adjusted divisor to smooth the effect on the index of dividends, stock splits and one-off changes like corporate spin-offs.)

The Dow Jones company, which owns the Wall Street Journal, was bought by News Corp in 2007. The index business (including the DJIA) was sold off five years later to a joint venture between S&P Global and the CME Group.?

Japan's headline index, the Nikkei 225, is also price-weighted as it was originally developed by Dow Jones in 1950 as the Nikkei Dow Jones Stock Average... hence most professional investors benchmark against the TOPIX (or other indexes, like MSCI Japan).