News and analysis

Shares of this giant computer systems design company, which is also a world leader in graphic processor supplies, are trading with a 20% discount compared to their record peaks of $346.47 in November 2021. Market actions were clearly running ahead of the unfolding of the story at some point amid a global shortage of chips, which created a panic demand. During this time its shares fell below $210 for a few months, providing a good opportunity for a mid-term rally. 

The tailwind blowing with the continuing deficit of chips and rampant inflation worldwide pushed Nvidia shares by 40% above $280. Yet, the price still looks rather attractive. Acceleration of the uptrend was supported by the news that Nvidia and its Intel rival announced their common production plans. Jensen Huang, the chief executive of Nvidia, made a statement that his company is going to use Intel's industrial facilities to source more of Nvidia's designed chips. Intel CEO Pat Gelsinger commented soon after that his company is "thrilled for their interest in using our foundry capabilities", while adding that he had "no particular timeline" but Intel had "ongoing discussions" with Nvidia. The point is that Intel did not manage to distribute more Intel chips over the last two or three years and after this time it then decided to diversify its business by launching the so-called "foundry" projects. Nvidia does not want to miss this opportunity for its global expansion. 

"They're interested in us using their foundries. We're very interested in exploring it," Jensen Huang responded later. He even removed some scepticism about his company's willingness to make Nvidia technology explicit to competitors by saying that "Intel has known our secrets for years" because Nvidia has already been partnering with many companies including Intel, and so "trusting and working with industry partners is key" for Nvidia management. Some organisational aspects and technical details, including mutual coordination of supplies, may still take quite a long time, but that could benefit shares of both companies. The announcement of the co-operation with Intel pushed Nvidia stocks up by almost 10% the next day. However, in April these shares have a good potential to become as hot as they were in March.

Market prices of aluminium futures rolled down from its March 7 highs by more than 12%. However, that peak was updated recently and was seen to be closer to a similar price pattern last autumn when short-term downward movements stopped within three weeks and the rally resumed in December. Mining companies and distributors in the commodity sector, fortunately, are far from being a linear function of the current changes in market prices of commodities but they are certainly taking advantage of persisting high prices. 

The revenue of Alcoa for the Q4 2021 accounted for $3.34 billion. Its earnings of $2.5 per share is beating not only the average Wall Street expert forecasts of $1.93 but is also three times higher compared to Q1 2021, setting Alcoa’s all-time record. The next report is going to be released on April 14, which may increase investment appetites. 

Alcoa shares have already set fresh price records twice in March, exceeding the January peak levels by 150%. However, the company that produces bauxite, alumina, and which globally distributes aluminium products  may receive additional advantages from further fragmentation of the world's metal market after sanctions against Russia have definitely disrupted regular supplies and which are prompting spot and futures prices to rise. 

London wheat futures (LWBc1) rose to £307.50 per tonne by March 31. This is more than 35% higher than £226.5 recorded a couple of days before the start of military conflict in Ukraine. By the beginning of April wheat contracts were about 61.5% higher than in the same season a year ago. Barley was up by almost 44% during March 2022, while U.S. Corn Futures were almost a quarter more expensive than at the beginning of January. 

In some parts of the world there are food shortages due to crop failures and supply disruptions following the corona crisis. Top level politicians, including speakers of the French agriculture ministry and U.S. President Joe Biden, are referring to this as direct consequences of war as well as consequences of economic and financial sanctions that were placed on Russia. Russia and Ukraine together account for up to a quarter of global wheat exports and almost a fifth of all corn deliveries, as well as 12% of the total calories supplied to the world market, according to Bloomberg. These two countries produce grain at lower prices than North America and Europe. In recent days, Russian authorities have also been actively discussing options like selling resources for national currency or even only to "friendly countries". 

Anyway, even if food prices did partially stabilise, they probably remain high. One of the largest agricultural originations and processing companies, Archer-Daniels-Midland may further benefit from the situation. It offers sustainable nutrition for humans and animals, and it is also engaged in developing energy and bio-based alternatives. Big money may continue to lift the stock even though the ADM price is almost 40% higher compared to pre-Christmas dates. It could easily become the next hot stock. The company's cap now exceeds $50 billion, but it may become even higher before the release of the next quarterly report scheduled for May 3. ADM sales and earnings are growing at double-digit rates, as its one-year sales growth rate was 32.4%, and three-year equity per share (EPS) growth rate was above 19%. Nearly 9% of the short-term correction of the ADM shares which were priced down on March 25-29 have already met active demand, causing quotes to quickly recover more than half of the correction losses.

The chains of discount stores in the United States like Walmart or Target look to be immune to inflation surges or even may win in consumers' attention when the prices are going up all over the country. Consumer inflation almost reached the level of 8% year-on-year in March. Financial regulators are not in a hurry to act decisively against it. Until recently, the Federal Reserve considered inflation as a transitional phenomenon. In such conditions, many households tend to save their money by visiting stores where they have a chance to buy cheaper. During the pandemic, Walmart has increased the number of its customers by offering free deliveries and a smart loyalty program. This process is only going faster in the face of rising retail prices for food and convenience goods. 

Walmart's financial report on February 17 revealed an all-time record sales of more than $150 billion in the history of this chain of stores, plus an increase in net profit compared to the previous quarter and only a slight decrease in profit compared to the first half of 2021. A solid report helped Walmart stocks to gain almost 8% in the following four weeks, but the peak values of 2021 are still about 6% higher. So these stocks could be characterized as potential value stocks with at least enough free space above the current price to previous records. And with a tailwind, such kinds of stocks could be a rather stable anti-inflation instrument for investors.