pre mkt thoughts - 20 May 26

US yields at highs. For context, 5.18% on the 30Y is the highest since the 2007-2008 era. On the 10Y we are at 4.65%. Previously the 5% mark for the 10Y saw heavy jaw boning and intervention. Levels im looking at - 5.8% on the 30Y, 5% on the 10Y.
$NVDA reports earnings today after market close. Expectations are for revs of 79bn and EPS of ~1.8. However caveat is that everyone is expecting $NVDA to beat these numbers. So what are the real expectations? IMO, unless we see a very strong beat, $NVDA will probably not do much. The past earnings price action have been rather lacklustre as well with $NVDA mostly falling. The core questions investors have for $NVDA are that - "will growth sustain" "will margins continue to remain strong" "will $NVDA hold market share". IMO, these questions are unable to be answered by the earnings call. In fact, there is more downside than upside going into earnings and expectations.
As of the mkt close, options mkt are implying about 6% move for earnings.
On memory, Jonathan Ross (NVDA & Groq) is also saying that “if memory is too expensive and if people don’t build enough of it, people are going to solve that problem technologically.”. This is IMO a warning shot for the memory makers to rein in their profit margins and try to be long term greedy instead of max extracting and forcing the players in the stack to find workarounds.
This is also similar to DC players who are increasingly seeing the cost of building DCs sky rocketing. For context, a DC build out was est at 6B/GW 2 years ago, today it is at 20B/GW and GS estimates the new class of DCs to be at ~25B/GW
My personal read is that as more players get increasingly aware of the shortages and "bottlenecks" - we are seeing the market price them simultaneously. However there is a final constraint which is the CAPEX amount. If it gets too expensive, players will reduce what they can build. Why is this different? Pre 2027, hyperscaler capex can come from OCF. However for the 2027 capex numbers of 1.2trn - external debt has to be raised. This marks a regime shift in my opinion that people will start to price in later this year.
Beyond companies - Karpathy joining OAI as i pointed out was bearish for Softbank and $ORCL as well as the rest of the OAI complex. Softbank is down 6% today. Longer term consequences if OAI runs into further problems might be a slowing down for the compute race. This has dire effects on the bottle neck plays like memory turbines etc. I am making a mental note to track this.
Rumours are also making the rounds in chinese circles that SMIC has produced chips comparable to TSMC's 3nm process....not sure if this is real but BIG if true. Correspondingly...SMIC (981HK) is up ~10% in HK trading today.
$YMTC is also entering the IPO process (CITIC as sponsor). As a refresh, $YMTC is the NAND player while $CXMT is the DRAM player for China's domestic memory expansion. We should see more details coming out from $YMTC soon
Good Luck!