Alibaba posted better-than-expected results on Thursday, but the Chinese ecommerce giant doesn't intend to rest on its laurels.
What does this mean?
Hopes weren’t exactly high for Alibaba’s update, given that Chinese retail sales have fallen for the last two months on the back of countrywide lockdowns. But trapping shoppers in their homes actually turned out to be a blessing in disguise, forcing them to turn to the company for their most basic needs. That pushed the number of Chinese customers who’ve bought something on the platform in the last 12 months past the 1 billion mark for the first time. Throw in a 12% uptick in cloud computing sales, and overall revenue grew by a better-than-expected 9%. And while the company opted not to give an outlook for the coming year, investors – who have watched its stock fall around 33% this year – took it as a win: they sent it up 10% after the news.
Source: Google Finance
Why should I care?
Zooming in: Alibaba goes to Europe.
Still, this was the second-straight quarter of single-digit revenue growth for the company, which isn't what investors expect from the high-flier. It’s partly down to competition from rivals like JD.com and Pinduoduo, partly down to the zero-Covid policy, and partly down to government tech crackdowns – all of which Alibaba is hoping to offset by boosting its presence abroad. Case in point: it’s reportedly planning to expand in Europe via its offshoot Lazada, in hopes of quintupling the value of transactions made on the platform to $100 billion a year.
The bigger picture: China loses its bravado.
Alibaba might be right to look beyond China: data shows that the country’s economy is in tatters, with small business confidence dropping to the second-lowest level on record this month. Things are so dire, in fact, that economists are now forecasting that the Chinese economy will miss its growth target by one percentage point this year, and even the government acknowledged this week that the country would struggle to grow at all this quarter.
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Chipmaker Nvidia Gave An Impressive Quarterly Update
Nvidia reported its best quarterly revenue ever earlier this week, but the future doesn't exactly look straightforward for the US chipmaker.
What does this mean?
Nvidia’s gaming business boosted its revenue by 31% last quarter from the same time last year, with its graphics chips making their way into everything from laptops to Nintendo Switches. The company’s data center business one-upped even that, growing its revenue by 83% as more firms switched to the cloud and AI solutions. So even a drop in its automotive and crypto mining chips – caused by cuts in car production and the drop in the crypto market – couldn’t drag on results too much: overall sales still grew by a better-than-expected 46% to a new quarterly record.
But that streak looks like it’s at an end: Nvidia said it’ll need to limit costs in a “challenging economic environment”, and gave a disappointing revenue outlook for this quarter too. So investors didn’t much care about last quarter’s successes: they sent its stock down 10% after the announcement.
Why should I care?
For markets: Is Nvidia going cheap?
It wasn’t long ago that Nvidia was being touted as the next $1 trillion company, but the tech stock collapse has made that prospect a thing of the past. Its stock has since tumbled 50% from its all-time high in November, meaning its market value is now closer to the $400 billion mark. In fact, it’s now so far from its peak that analysts reckon it could be good value: they’re expecting the stock to return an average of 87% over the next 12 months.
Source: The Wall Street Journal
The bigger picture: The old-new normal.
Intel reiterated this week that it’s expecting the chip shortage to continue well into 2024, but Nvidia’s seeing signs that this cold war is starting to thaw: the company said that inventory of its gaming graphics chips – which have been particularly difficult to get hold of over the past year – had “normalized”.
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