Nvidia to determine whether US stocks can achieve new highs
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Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the host and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only.

Hello, everybody. It is 20th of May, 2025, Wednesday. And we have markets in a strong mood, resentment-wise, certainly not getting spooked by some further signs of trouble in the Japanese bond market overnight. We had a 40-year auction. So this comes the day after there was the Reuters story talking about the Ministry of Finance questioning bond market participants on the size of auctions.

And indeed, we got a smaller auction than normal for this 40-year JGB last night, 500 billion versus what had been for at least the last couple of years that I look back, consistently 700 billion yen auctions. And despite that reduced size, there was quite weak demand for that issuance. And we saw yields backing back up the –

10-year was also backing up. It still hasn't reached new highs, though, for the cycle, the 10-year, which is a bit more key because of the size of that market. But just for perspective on what this means, so I looked at a 2061 – that's a year, by the way – a 2061 0.7% coupon, believe it or not, JGB.

Clearly, that was a 40-year when it was issued in 2021 at par, 0.7% at par issued in 2021. That is now trading at a price of between 48 and 51 over the last couple of days. So you can imagine what the mark-to-market looks like for these pension funds, life insurance funds that are doing their duration matching. Pretty ugly out there. So some incredible losses on the books if you're mark-to-market. So yeah, yeah.

It's a touchy situation, but it's one we need to continue to follow, and it's affecting the market. And I think this type of dynamic, this type of pressure on the long end of the yield curve will happen eventually again in the US treasury market, as we've been talking about. But for now, with sort of orderliness back in the market in the US, we're seeing a risk sentiment able to continue to piece together

a strong rally, hoping that the Trump tariff threats are going away, et cetera. And we still don't know where this big bad bill or big beautiful bill, whatever your perspective is, when that's going to – when the Senate is going to come up with its version of it. It looks like there's enough resistance to that that it could take some time to square away a deal that may have some decent alterations to the size of the deficits before it finally gets passed. Yeah.

And, Ula, in your space, looking at sort of this back and forth in treasuries and foreign exchange, it's hard to establish what the correlations are. So the dollars sort of come back in. I think the returned orderliness to the treasury market seems to have inspired a bit of a bid back into the U.S. dollar. Maybe some of that excitement about U.S. tech space returning is sort of reducing this U.S. unexceptionalism trade, what have you.

Gold's been a bit all over the shop and pretty closely correlated to what we're seeing in the likes of Eurodollar. But is anything sticking out to you in gold and the metal space here? Well, you're absolutely right, John. I think the gold's trading behavior right now is just indicating a market that it's on hold. It's in wait and see. We're consolidating. We had a bit of a

The rally we saw last week got rejected earlier this week. If you look at the chart, we've got a descending trend line coming from the 3,500 high last month. And we basically just tried a couple of days to break above, failed. There was also a key Fibonacci level, and now we are closer to 3,300. But

I think looking ahead, the debt situation is still one that will continue to attract demand. So yes, for now, the market is just taking a bit of a breather and that's allowing some profit taking to come in. But the setback has really been quite minimal.

If you look across the others, this is also allow something like silver to do a little bit of outperformance. The gold-silver ratio has come down a bit. And if we are looking at the lower risk of tariff and trade war, then obviously that should underpin some of the industrial focused metals. So that's why silver is doing okay.

We talked a lot about platinum last week, which broke higher. For now, the jury is still out whether this is just a range extension or whether we're actually seeing a sustained break to the upside. So we're watching this $1,100 level right now. And above that, really $1,135, which I believe is a 2023 high. It's really a level that we need to take out for this to be more than just a range extension. Yeah, we talked about...

I can't remember if it was the last podcast or the one before that on your comment there on reduced fears of trade tensions. And Trump was out making some noise about the things were going well with the negotiations with Europe. But I also read up on that Bloomberg piece on China's considering this sort of doubling down on its existing economic model. So the headline is Xi's most new made-in-China plan despite U.S. call to rebalance China.

So there's certainly plenty of tension shaping up for the long term there if China is going to continue to double down. We're not there yet. And actually just looking at the U.S. market yesterday, and yeah, it's one that – it's always one that –

People like to discuss, but we saw something like Tesla actually break higher once again on a day where we saw sales in Europe once again showing a really dismal performance. We saw SpaceX rocket exploding once again. But I think the fact that he was out basically voicing some concerns that all this extra spending that now has been put through with this beautiful bill is basically just a counter to all the efforts of Doge.

So maybe just the market is kind of wondering whether it's starting to be a little bit of a split, and that's allowing Moscow, I'll say, the benefit of doubt from some of those that would, in recent weeks and months, have been divesting from Tesla. Yeah, I think it's chiefly that space is about the enthusiasm from the retail crowd and not the headlines. And the anticipation around this

robo taxi launch in austin next month so it's really going to be very interesting when you start to get the on the ground reports of um you know these robo taxis moving around if if it launches at all and if it does how many rides it's getting so you actually get some real metrics of what's happening and what is unfolding on the ground uh if that launch does come in on schedule um and speaking of the speculative space we'll get to nvidia in a moment i just wanted to wrap up um a couple of um

Or one more thing. So the U.S. Consumer Confidence reading, the conference board one for May, came in, and it's really the expectations component of that that has been super volatile of late. It cratered all the way down to 55.4 in April, ripped all the way back up to 72.8. So clearly this sort of Liberation Day gasp moment for the market, everyone holding their breath after this, and then the free fall in the markets, and then the subsequent recovery.

has really helped to sort of stabilize this thing back into the range. The expectations reading that is from May is back in the range. So we're a little bit feeling like we're back to square there. And then I'll talk about NVIDIA in a second. Yeah, before you do that, John, just finishing off the commodity space, because I think it's just two things that we need to just to keep in mind or look at.

The energy sector, both from uranium and crude oil, is for now just going nowhere. It's quite amazing the amount of news that we get fed into the market and we're really struggling to break. First of all, this very wide range that we settled into, we're more or less mid-range right now, but also the market is more or less pricing in another bumper increase from OPEC when they make the decision here on May 31st.

So you could almost argue that there perhaps could be a small risk skewed to the upside if they should go for a lower than expected increase from July. And then we had this – a lot of excitement coming back into the uranium market over the weekend. Trump signed an executive order basically making it – wanting to make it easier to find or to explore for uranium in the US also –

expanding the capacity of the energy production capacity from nuclear. And we saw the mining companies race ahead.

But at the same time, we've also seen spot uranium hardly move. It's up less than 2% while some of these companies were up 10%, 20%, 30%. So I think it just highlights once again, this is a future growth business, no doubt about it. But the market just tends to get extremely excited when we get this kind of news. But it just takes time before that demand or improved demand starts really to kick in. So I think just a little bit of a caution here because obviously the underlying problems

price of what they actually produce needs to rise as well in order for it to justify the gains we see in the stock markets. Yeah, it's such an unusual market relative to so many other markets. The whole, you know, the length of time between you talk about we need to do nuclear energy and when there's actually nuclear energy being produced is a very long time span there. That's it.

Cool. And then just on that note, I think I mentioned this when it was out, but the Financial Times prominent article, Oil Chiefs Warn of the End to U.S. Shale Boom. And that is what you've been banging on about so often, that these prices were at that level where it doesn't pay, but certainly do a lot of extra exploration, much less production of shale. And that's probably what –

And one of the – well, even though they're not saying it's probably one of the reasons why we could potentially see another bumper increase from OPEC Plus because they're obviously the eight members that have cut production by 2.2 million barrels in the past couple of years. They're also the ones that have suffered the consequence of lower production. So now they're raising production and clearly with it.

with that in mind to increase competition with the high-cost producers. So I think we will see a result of that with U.S. production rolling over. Whether it's enough to underpin prices, prevent them from falling further, that also remains to be seen. Sure. So substitution from the one supply source versus the other, but not a huge change in price potentially.

All right, NVIDIA, let's look at this stock. We've seen an incredible comeback. I don't have the percentages here, but it's a really tight range as established after a very, very sharp comeback. So just from a purely technical point of view, it does look very strong ahead of this earnings report. I have absolutely no idea what the earnings report will deliver.

have a bias to believe that there's some risk of upside surprise here. Just the scale of which AI is just transforming so many things I'm seeing in people's everyday, my own work, the demand. If I just think about what I'm doing personally and how much that must be

If other people are doing the same, how much they're seeing a demand for these types of services on the data center side of this from everybody increasingly engaging with this technology and people starting to look at what this technology can deliver in terms of its future promise. That and you've got, for example, on Trump's recent Middle East tour, these incredible data center announcements. So players with pretty deep pockets looking for diversifying their oil-based economies,

With things like AI data centers. And there was even a story I saw this morning about Japan potentially looking to in some sort of trade deal, including things like investing $7 billion in chips for AI. Basically, most of that would be going to Japan.

So a very interesting earnings release, to say the least. It's going to be obviously feeding broader market sentiment. This is the marquee company. Microsoft did pass up NVIDIA to become the world's most valuable company. Those tables may be turned this evening if there's a spectacular strong upside to whatever they're reporting as well as their outlook.

Focus on margins, focus on just the vibe as well. And I just looked at the options market, which of course for NVIDIA is massive. And so Friday expiry, 140s. So the stock is currently trading around 135. So it's still 140 is a couple percent away. Traded at 277, so two spot 77. Seems to me that we could see quite a gap either up or down on this earnings report. A bit more anticipation than I think we've had in some time.

And that is, though, a 78% annualized implied volatility. So everything, that's not an encouragement to trade that. It's just to point out where the pricing is, where the implied volatility is. And I think this will be a very, very interesting test of sentiment, whether it launches us towards all-time highs, again, in the U.S., in the equity market there across the board, whether it's the S&P or the NASDAQ 100.

Stay tuned for that. We are actually on a break, I must say. There is a holiday tomorrow, and financial sector employees are also off on Friday. So we will be back on Monday of next week. Stay careful out there, and we'll be back soon, of course, with the next Saxo Market Call.