NZ/Aus
The Australian market (ASX200, -0.1%) edged lower again with most sectors down except for energy and materials.
Consumer Discretionary was the worst hit after Australia’s retail sales for the month of August rose +0.2%, a slowdown from the +0.5% increase reported in July.
Australia Retail Sales
Keeping on the retail theme The Warehouse Group was down after reporting its 2023 full year result which was mostly in line with expectations. Group revenue rose +3.2% from last year largely driven by essential sales from the Warehouse rising 9.6%, while Torpedo 7 and Noel Leeming were disappointing reporting sales were down -3.3% and -5.4% respectively, showing the consumer is starting the feel the pinch and cutting back on discretionary spending. It’s hard to see the Warehouse as investable at this point…a fractured retail strategy and an “all over the show” strategy with its main “big red” sheds…what are they, a supermarket? A discount retailer? make it hard to see value…prefer avoiding retail. Things were worse for the retailer on the profit line which slumped -66.6% from last year to $29.8m on weaker margins and higher cost of doing business. We remain bearish on retail, particularly those with discretionary exposure and expect more pain for retails over the horizon.
Has Masa-son found another golden egg?
Masa-son’s next move
If you are Masa-son, you just had a pretty good public debut of the chip architecture company you still own the majority of (ARM) and things are looking up. I mean, you’ve been talking about AI for a long time now and AI is finally here. But there is a problem. You don’t actually have an investment in the poster child of it all, OpenAI. This is a little bit embarrassing if you are Masa-son, the dude who has been talking about golden eggs and AI forever. You missed out on the biggest AI winner of them all! You were maybe too busy investing in WeWork.
So, anyway, the logical next step is to be in talks with iPhone designer Jony Ive and OpenAI, and to be in talks to design the “iPhone of AI”. What does this mean? I don’t even know, honestly. What does an “iPhone of AI” even look like, or do? How is it different to our current phones, which are basically miracle devices we fit into our pockets? But anyway, the talked about figure of investment is ~$1bn USD — Masa-son gets his AI investment, and Ive gets a shot at a second coming. It’s AI, and it’s happening.
How are those AI stocks doing, though?
AI was supposed to be a boon for chipmakers. It has been for Nvidia. Nvidia is one of the most crowded trades of the year — if you are a momentum based fundie, you had to own it. For other chipmakers, though, it’s been a mixed bag — Micron recently reported so-so results; revenue beat by 2.15% — hardly anything to be excited about. Intel is up ~33% YTD but down ~25% on a 5 year stack. TSMC is up only 15%. This isn’t to discredit AI, but it’s perhaps indicative that there’s a lot of bluster about the whole deal at this point.