Wall Street: February

Monthly Market Update: February

In this article, we explore Nvidia's monumental earnings and its impact on the AI industry, reflect on Warren Buffett's insights from Berkshire Hathaway's shareholder letter, and examine Reddit's unique approach to its upcoming IPO.

Nvidia's Latest Earnings Report

Nvidia unveiled its earnings for the fourth quarter and fiscal year 2024 at the end of February. The semiconductor company showed remarkable growth with significant implications for the AI industry. For the fiscal year 2024, Nvidia reported:

  • Revenue of $60.92 billion, a 126% increase from the previous year. 

  • Net income skyrocketed to $32.31 billion, a 286% increase from the previous year. 

It obviously can’t continue to grow this quickly, but the performance in 2023 underscores Nvidia's dominant position in the semiconductor and AI sectors, largely thanks to its GPU technology.

The company's data centre revenue was a notable highlight, with $18.4 billion of revenue for Q4, a 409% increase from the previous year. Nvidia's collaborations with major cloud providers like Google and AWS, and the launch of various AI-driven products and services helped fuel this growth. The gaming sector also contributed significantly, with quarterly revenue of $2.9 billion, a 56% increase from the previous year.

Nvidia's forward-looking statements suggest continued growth, with projected revenue of $24 billion for this quarter. 

Nvidia Q4 2023 earnings

Warren Buffett's Berkshire Shareholder Letter

Warren Buffett, CEO of Berkshire Hathaway, said in his annual letter for 2023 that major investment opportunities for Berkshire Hathaway have become scarce due to its size (it now has a market cap of about $930 billion). Because of this, he said the company might achieve only marginal improvement in performance over the average American firm in the future.

Being a diversified conglomerate with interests ranging from BNSF Railway to Dairy Queen and a 6% stake in Apple, Berkshire Hathaway covers a substantial portion of the US corporate landscape and,according to buffett, “now occupies nearly 6% of the universe in which it operates.

With a record $167.6 billion in cash by the end of the fourth quarter, Berkshire faces limited prospects for substantial growth through acquisitions, especially outside the US.

At age 93, Buffett believes that Berkshire's diverse and high-quality business portfolio should enable it to slightly outperform the average US company but realizes that there are limits on Berkshire’s chance of achieving significantly better results in the coming years.

Despite these challenges, Berkshire Hathaway's shares have seen high growth, moving to new record highs and trading above $620,000 for Class A shares and $400 for class B. The stock performance of Berkshire has outpaced the S&P 500 so far this year, with a 16% increase for Berkshire and a 7.2% increase for the S&P 500.

Reddit's IPO Set for March

Reddit's forthcoming public offering has an unusual clause in it. The company mentioned in its S-1 filing that some popular Reddit users would have the chance to engage in the offering via a directed share program, a move not commonly seen in initial public offerings, which are typically dominated by institutional investors.

Reddit said, “We will invite users and moderators to participate in the directed share program in six phased priority tiers. We will assign each eligible participant to a tier based on that participant’s contributions to Reddit. User contributions will be measured in karma (a user’s reputation score that reflects their community contributions). Moderator contributions will be measured by membership and moderator actions on our platform. If demand for the directed share program in an earlier tier exceeds capacity, eligible users and moderators will have the option to join a waitlist.”

However, the inclusion of Reddit users, or Redditors, in the IPO was also flagged in the "Risk Factors" section of the filing. It highlighted concerns regarding the company's dependency on its user base and specifically pointed out the potential risks associated with their participation in the IPO.

While many investors in IPOs typically adhere to a lock-up period agreement, restricting the sale of their shares immediately after trading commences, Reddit users participating in the IPO will not be bound by such an agreement, potentially contributing to stock volatility. The document did not specify the share allocation percentage through the program.

Reddit users are notoriously open to engaging in volatile stock trades, notoriously on the WallStreetBets subreddit which was the primary driver behind the 2021 meme stock phenomenon, driving up prices for stocks like GameStop and AMC Entertainment.

Reddit IPO

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James Ashoo

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James has been investing for over five years. His aim is to explain the hard stuff, easily! When he's not chewing your ear off about stocks and crypto, he'll most likely be telling bad jokes.

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Harjas Singh

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Harry Harrison

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Harry is an experienced business writer, with a love for all things tech. In his free time, he enjoys reading, playing sport and winning at chess. He also loves posting inside the Shares app!