Plus: the typo that (briefly) tanked the market May 27, 2024 Sign Up | View online IN THIS ISSUE 8 min read 🙏 Rate relief 😰 Typo trouble 🤖 Chipmaker conquers Nvidia chips have come a long way since they were used to render the zombies in Quake I. Read more in the Big Story below. | GT Interactive THE WEEK IN MARKETS Nothing Doing Except For Nvidia It’s been said investing is like that old adage about war — “long periods of boredom punctuated by moments of sheer terror.” Last week was one of the boring periods. Nearing its end, Q2 earnings season let out a satisfied yawn, and both the U.S. and Canadian markets were flat, which is to say, still hovering around all-time highs. Not even news that interest rates might finally get cut (more like a trim; see below) could jolt investors out of their cat nap, maybe because they’ve all heard that one before? The week’s only non-boring bit of action was Nvidia’s 13.5% stock jump — more on the chipmaker’s enduring dominance below. THE WEEK IN ONE CHART As CBC’s Robson Fletcher reports, “Alberta’s recent population boom has been well documented,” but new numbers from StatCan show just how drastic that boom was (and why Calgary house prices led the country in growth last year). WHAT HAPPENED LAST WEEK IMPORTANT The interest-rate-cut wait might end in June. For real this time. Okay, probably. Maybe. We’ll see. After four consecutive months of slowing prices, Canada’s inflation rate currently stands at 2.7%. Since that’s well within the Bank of Canada’s 1–3% target, economists now widely suspect that Team Tiff will pull the rate-cut trigger. (Early this year, markets thought, wrongly, that the first cut could come as early as April.) The trouble is that even if Tiff does start cutting rates, it’ll likely be a mere 0.25% trim, not a deep slash, so high rates could still be a serious stressor on banks, homeowners, and borrowers alike. INTERESTING A typo costs Citibank US$79-million. Bloomberg has the full story of how a single Citi trader made a nine-figure oopsie, but here’s the gist: in 2022, a U.K. trader woke up on a holiday morning to make a trade and accidentally typed in 58 million as the quantity of the shares they wanted to sell instead of US$58 million in value. Then, for some reason, the trader overrode 711 warning messages and sent the trade through, triggering a US$1.9-billion “flash crash” across Europe that vaporized two years’ worth of revenue for Citi’s trading desk. Worse, regulators fined Citi US$79 million for ruining their holiday. In a related story, a U.K. trader is looking for a new job, in case you’re hiring. The U.S. shoots another cryptocurrency into the ether. The Securities and Exchange Commission officially blessed Ether Exchange Traded Funds last week, transforming it, Pinocchio-style, into a real security and making it easier for traders to invest in the Ethereum network’s token, by trading it like a stock instead of on a crypto exchange. No surprise, then, that the price of ETH — number two in the crypto value standings behind BTC — jumped more than 22%. So is the SEC finally surrendering to crypto or is this more of a “keep your enemies closer” situation? The latter, writes Alex Tabarrok at Marginal Revolution, who observes that regulators are becoming convinced “that crypto doesn’t have to be destroyed, it can be tamed.” China is crushing Canada’s EV makers. Chinese EV exports to Canada grew fivefold last year, thanks to low tariffs (6%), government cash-back rebates, and the fact that heavy subsidies make Chinese EVs pretty cheap to begin with. That all poses a problem for North American EV makers, who can’t compete on price. The Biden administration recently increased its 25% tariff on Chinese EVs to 100%, to protect the U.S. auto industry, and Canada’s trade minister is floating the idea of following suit. That could mean a stronger domestic EV industry but also pricier cars. —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🔬 Alarming new study finds microplastics present in every human and dog testicle it looked at. Microplastics not thrilled about it either. Source 🫒 Heart-healthy-olive-oil prices up more than 25% in Canada since January. Wallet-healthy canola looking better and better. Source 🧊 Perfect for when taste and hunger are not an issue: Nestlé releasing frozen meals for people on weight-loss drugs. Source 🕥 Millennials are “quiet vacationing” instead of using their PTO. Want to save that for “quiet looking for other jobs.” Source CRASH & BURN TO THE MOON ✈️ Pilot shortages to blame for WestJet’s delay in integrating Sunwing. That, and Sunwing keeps cancelling and rebooking them. Source 🫎 Ontario ambulance responding to car/moose collision crashes into different moose. Moose/vehicle relations at all-time low. Source ✊ Disneyland characters and parade actors vote to unionize. First demand: Mickey and Minnie get regular cheese breaks. Source ☕️ Man who’s been to 19,300 Starbucks plans to visit every location in the world. Might even finish that screenplay. Source WHO CARES WHAT’S UP THIS WEEK Canadian banks report earnings. TD reported a solid second-quarter performance last week, with profit falling by 22% but still well above analyst estimates, which might provide a preview of how Scotiabank (Tuesday), BMO (Wednesday), CIBC and RBC (Thursday) are doing. THIS WEEK ON THE PODCAST THE BIG IMPORTANT STORY 1 COMPANY, 1 CHART How Nvidia Slowly, Then All at Once, Conquered the World A few weeks ago, we traced the history of Microsoft. This week, we’re turning our attention to the company that’s all but owned market news for the past two years: Nvidia, the maker of the world’s most bleeding-edge microchips and supercomputers. The company has continuously blown past analysts’ expectations, even as expectations have grown almost impossibly lofty. As a result, shares in Nvidia — which is America’s third-most valuable company, worth US$2.6 trillion — have rocketed up since 2022. And its stock went even higher last week after it announced that it had tripled its quarterly revenue, to US$26 billion, from a year earlier. Its stock finished the week up 13.5%. Nvidia, despite its rapid rise of late, is far from an overnight success. THE VIDEO-GAME ERA 1993: At a Denny’s in San Jose, California, Jensen Huang (now CEO) and two microchip designers decide to launch a company — Nvidia — that builds graphics chips for PCs and, above all, video games. It’s a “fabless” chipmaker, meaning it outsources manufacturing to companies like TSMC, which frees up money for R&D. Aiming to make the core building blocks for supercomputing, Nvidia at first struggles to find its exact use case — and customers. Within three years, Huang would have to lay off half of the company’s 100-person headcount to keep the firm afloat. 1996–2005: Nvidia survives in part thanks to a US$5-million lifeline investment from video-game manufacturer Sega. Then its fortunes reverse in 1997, when it launches the RIVA 128, a chip used in Dell and Micron products, followed by the GeForce 256, which Nvidia markets as the world’s first graphics-processing unit, or GPU. What’s that? A GPU is a circuit board with a souped-up chip that can solve multiple calculations at once, resulting in superior video-game graphics. The GeForce 256, which kicks off a new computing epoch, catches on among players of the über-popular game Quake. Nvidia, riding high, goes public in 1999 with an almost US$600 million value. It soon wins contracts to develop GPUs for Microsoft’s Xbox console and Sony’s PS3. THE MACHINE LEARNING ERA 2006–2008: Nvidia dominates the video-game market with its GPUs, but Huang wants more. (A mercurial corporate oddity, Huang famously has 50(!) direct reports and loves black leather jackets.) He notices that pioneering academics, like U of T’s Geoffrey Hinton (the godfather of AI), are using GPUs for machine-learning research. In late 2006, Nvidia launches CUDA, an innovative supercomputing platform. But sales are initially underwhelming, and Nvidia’s pivot to supercomputing is seen as a flop. In 2008, its stock falls by 80%. 2012–2019: Maybe CUDA wasn’t a failure after all: Nvidia’s bet on the platform begins to pay off as it gains traction as a crucial tool for machine-learning processing. One Friday in 2013, Huang, sensing that a major shift is afoot, sends a fateful email to colleagues: Nvidia is now a machine-learning company, he says, not a graphics-card company. The gambit works. Google and other tech giants buy Nvidia chips to beef up their machine-learning capabilities. From September 2016 to September 2018, Nvidia shares climb by almost 340%, giving it a US$170 billion value. THE AI ERA 2022: Nvidia’s stock gets a lift thanks to COVID, which spikes demand for gaming and data-centre chips. But the launch, in late 2022, of OpenAI’s ChatGPT, a chatbot that can converse (almost) like a real human and was trained on Nvidia supercomputers to handle complex computations, sends Nvidia’s stock straight up. AI’s potential world-changing significance becomes so clear that the U.S. government bans Nvidia from selling its cutting-edge GPUs to China. 2023: The AI boom accelerates, and companies depend on Nvidia, now undisputably one of the great powerhouses in the history of computing, not just for chips but also for AI data centres and software — it’s the whole package. Nvidia hits US$1 trillion market cap and then reaches the US$2 trillion milestone a mere 270 days later. Its stock finishes the year up 239%, and it’s responsible for 15% of the S&P 500’s annual gains. Thirty years after struggling to find a niche, Nvidia has cornered three major markets: gaming, machine learning, and AI. 2024: Last Wednesday, Nvidia reports that its net profit grew sevenfold, to $14.88 billion, from a year earlier, thanks to continued demand for AI chips. Its shares are up 121% on the year. Will the company that is arguably the big winner of the AI goldrush continue to defy expectations? We’ll have to wait until its next earnings announcement, in August, to find out. —Claire Porter Robbins OTHER VERY GOOD READS 📚 Nairobi to New York and Back The lives of Kenyans who study at elite schools abroad. | The Guardian 🎒 Why Did a B.C. Student Die in a Dorm Filled With People? A timeline of an overdose response with national implications. | Vancouver Sun 🖥️ The Code That Controls Your Money COBOL underpins the entire financial system. | Wealthsimple Magazine THE WISDOM OF X Real pain is knowing that you were a full-grown adult when Nvidia was $4/share, in 2014, and you didn’t buy it. THOUGHTS ON TODAY’S ISSUE? 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