The Trillionaire Club’s Newest Member (Almost)

Plus: Behold the new weapon against inflation: Walmart ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

May 26, 2023

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TOGETHER WITH

Good morning and happy Friday.

What does a game of horseshoes have in common with air safety? Near misses count.

While it’s been nearly a decade-and-a-half since the last major fatal US airline crash, the top dogs in the aviation world are growing concerned about the continued safety of the supposedly friendly skies. A recent meeting of A-list aviation officials and executives hosted by the FAA featured heavy conversation and consternation over a string of recent near-miss collisions at US airports this year, according to a report from The Wall Street Journal. The most distressing part: nobody can quite explain what’s going almost-catastrophically wrong. You know what sounds great right now? A road trip.

The Daily Upside will be off on Monday for Memorial Day. Enjoy the long weekend!

Morning Brief

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Nvidia’s got a very valuable chip on its shoulder.

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Is Walmart Jerome Powell’s best inflation-fighting friend?

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Time to disrupt 1930s air travel.

Markets

A Surge in Chip Stocks Puts Nvidia Near $1 Trillion Market Cap

Make room, Amazon, Apple, and Microsoft. Nvidia looks like it’s about to enter the trillionaires’ club.

After the world’s leading microchip producer released its sales forecast Wednesday, Nvidia’s stock didn’t just bump but rather leaped up the charts like a rebuilt Steve Austin. Cue the bionic sound effects.

Putting Up Big Numbers

Not only did Nvidia rake in $7.2 billion in revenue for its first quarter, but it projects to do roughly $11 billion in the next. That’s more than 50% higher than some Wall Street predictions. The incredibly bright outlook caused its stock to jump 26% when the market opened Thursday morning, and it added roughly $170 billion to its market value, marking one of the biggest one-day gains ever for a US stock, according to Bloomberg data. Its cap now sits at more than $950 billion. The rally swept up others in the chip industry including Taiwan’s TSMC and Japan’s Advantest.

You might be asking, “How’d Nvidia get so big?” Well, it all comes down to the tech that will apparently either lead us to salvation or doom us for all eternity: artificial intelligence. The intricate computer programs have a long way to go before they resemble anything like Steven Spielberg’s vision of a futuristic Pinocchio with the face of Haley Joel Osment, but Nvidia is becoming the company to build and advance AI generative systems:

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Nvidia’s H100 processor is the go-to hardware for big players and start-ups in the tech field looking to train and deploy AI software. These are the chips needed to develop large language models like OpenAI and ChatGPT, dude.

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In an interview with the Financial Times, CSS Insight CEO Geoff Blaber said, “We are obviously seeing a huge spike in AI demand and Nvidia is at the very front. They are without doubt in pole position because they provide a very comprehensive toolchain that no other company is able to currently.”

Decisions, Decisions: In other chip news, the political strife never stops with the US and China, putting pressure on more neutral-ish parties. US subsidies will offer companies millions to manufacture their chips in the states, but they also limit those businesses from certain expansions and upgrades into Chinese markets. And at the same time, China has placed a ban on its companies buying chips from the American-based Micron Technology. So now South Korea and its leading chipmakers, Samsung and SK Hynix, are in a real predicament. On the one hand: free money in the US. But on the other: A Chinese market ripe for the taking. Our advice — ask ChatGPT.

– Griffin Kelly

Retail

Walmart Wants to Fight Off Supplier Price Increases

Consumers just scored a valuable ally in the fight against inflation: Walmart.

As inflation continues to eat into consumer discretionary spending, the big-box king — long a formidable price negotiator — is going to war with suppliers over price increases, according to a new report from Bloomberg. It’s Walmart’s take on monetary policy.

Go to the Mattresses (Section)

Inflation makes you do crazy things. Especially if you’re a consumer goods producer. According to first-quarter earnings results, major consumer-goods multinationals such as PepsiCo, Coca-Cola, Unilever, Proctor & Gamble, and Mondalez — you know, the ones who fill Walmart’s shelves — have enjoyed bumper revenues by increasing prices by 10% or more, even if it means selling fewer units. It’s what former Fed vice chair Lael Brainard called a “price-price spiral”, what UBS Global Wealth Management chief economist Paul Donovan termed “profit margin-led inflation”, and what the more handlebar mustache-stroking, Jacobin-reading population dubbed “greedflation.”

But what’s good for Mondalez and PepsiCo isn’t so good for Walmart. As Bloomberg points out, the retail giant makes its bones on higher-margin discretionary spending products, like PlayStations and air-fryers, which are unsurprisingly being slashed out of kitchen-table budgets battered by inflation. It’s the catalyst for its new hard-driving tactics:

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Despite posting a nearly 8% year-over-year increase in consolidated revenue in its most recent earnings report — a very high watermark among industry peers — Walmart’s gross margin still fell 18 basis points due to “ongoing pressure from category sales mix globally,” CFO John David Rainey told analysts in a call last week.

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Walmart is “working with those suppliers that are on the prepared foods and consumable categories to get costs down more as fast as we possibly can would help them drive unit volume,” CEO Doug McMillon said in the earnings call, with the aim to “free up cash for customers to use for discretionary goods.”

Too Big to Flail: While other big-box retailers like Kohl’s, Best Buy, and Dick’s Sporting Goods have struggled to wield their pricing power against suppliers’ prices-vs-volume profit-margin-led inflation tradeoff, Walmart is another beast entirely. The company’s $600 billion in annual revenue makes it twice the size of Target and Costco combined, Bloomberg noted, giving it nearly unparalleled sway. Only one question remains: Can you lend a hand, Jeff Bezos?

– Brian Boyle

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Tech

Google Founder’s Airship Company Takes The Stage

(Photo Credit: Jake Blucker/Unsplash)

While Jeff Bezos and Elon Musk go cyberpunk, Sergey Brin is more of a steampunk kinda guy.

On Thursday Bloomberg published a glossy feature on an airship company backed by Google co-founder Sergey Brin. The piece was authored by Ashlee Vance, a journalist well-versed in tech billionaires’ sky ambitions, since he wrote a seminal biography of Musk.

Whatever Floats Your Sky-Boat

Vance says that Brin’s company, Lighter Than Air (LTA), allowed him to observe the construction of their airship model the Pathfinder 1 over the past few years, which the company is preparing to unveil. The Pathfinder 1 is 400 feet long and attractively retro-chic, but there’s no indication yet when it might actually be able to grace the skies. It’ll have to undergo rigorous testing, not to mention relentless “oh, the humanity” jokes.

LTA has been quietly trundling along in the background for a while now, occasionally getting press attention. In 2020 it sold a 59-foot airship for just $18.70 (which is less silly than it sounds, it was sold for a nominal fee to an engineering professor who was working for LTA). This isn’t the first time a Google founder has tried to take to the sky:

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Google co-founder Larry Page attempted to launch a flying car startup called Kittyhawk, but the venture shut down in October 2022.

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Brin has also dipped his toe into the airship industry before, according to Vance. He spun up a company called Airship Ventures in 2008, but it ran out of money in 2012.

Shadow Sergey: Brin himself doesn’t actually appear in Vance’s writeup of LTA, although CEO Alan Weston details how the company hopes to one day “darken the skies” with its dirigibles, which he says could be used for hauling cargo as well as luxury cruises.

– Isobel Asher Hamilton

Extra Upside

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Pain at the pump: Gas is cheaper than last summer, but still not as cheap as you’d like.

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You love Tetris, right? Well, we bet you would love it even more on a Chicken McNugget.

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Wait, not like that: OpenAI CEO Sam Altman, who’s called for increased AI regulation, bemoans the EU AI Act.

Just For Fun

Know your role.

10, 10, 10.

Have a great weekend!

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