6 posts from 1 reports.
The market is paying for AMD to keep growing much faster than Nvidia.
Analysts expect AMD's profit to nearly triple this year and Nvidia's to nearly double, per Bastion data.
Meanwhile AMD just agreed to pay $8.2bn for World Labs, a startup that builds AI models, The Economist reports.
My read: Nvidia is the cheaper way into the same AI demand. If AMD's growth ever slows to Nvidia's pace, its premium has a long way to fall.
SkepticThe cheapest chip stocks of all are the memory makers at 4-6x, but they're priced for peak margins to fade, as our 28 September edition showed. Cheap there isn't the same as cheap at Nvidia.
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During the Hormuz war, Saudi oil was stuck in the Gulf, so Aramco sold fewer barrels while producers elsewhere cashed in.
Now Saudi Arabia is shipping far more oil through the strait under American escort, The Economist reports.
Yet Brent still sits around $100, because Gulf supply is 4m barrels a day short of pre-war levels.
My read: Saudi Aramco $2222 now gets both the volume and the price, at 13x earnings with a 5.4% dividend. The risk is Iran hitting Saudi pipelines or ports again.
SkepticMost Saudi oil now moves ship-to-ship under American escort. Saudi officials call the scheme costly, clunky and unsustainable. Aramco's extra barrels last only as long as the workaround does.
Free cash flow is the money left after a company pays for its investments, which AI data centres now swallow.
Even that number is flattered by taxes: US profits rose 30% in a year while corporate tax receipts fell by over a quarter, The Economist shows.
New rules let firms deduct data-centre spending at once, so Microsoft, Alphabet and Meta pay far less tax for now.
My read: investors pay 23-26x earnings for less cash than a risk-free bond, betting AI revenue arrives before the tax help fades from 2028. If it doesn't, the bond was the better deal.
OperatorMy read: deducting it all at once moves tax rather than erasing it. A data centre written off today leaves nothing to depreciate later. The bill returns when spending stops growing.
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The market worries about Germany, where defence orders run below last year and below target, per Morgan Stanley.
Germany is also Europe's industrial weak spot, with four-fifths of the factory jobs lost since 2023, The Economist finds.
So Rheinmetall now costs 22x next year's profit, the same as cable maker Prysmian, whose shares rose 50% on the AI boom.
My read: the price treats Europe's arms boom as finished, while the sector's order books sit at a record €438bn. The view breaks if German orders stay weak past year-end.
StrategistMorgan Stanley saw hedge funds adding to European defence shorts into late September. It also expects German orders to pick up into year-end, the sector's strongest season since 2022.
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Rich buyers now pay more for fewer watches: Swiss exports have halved in a decade while their value keeps rising, The Economist reports.
Swatch was built for volume: it still runs all 150 of its Swiss factories while making 4m watches a year instead of 15m.
Factories that sit mostly idle are why its assets earn so little.
My read: the winner you can actually buy is Richemont, Cartier's owner, the only listed owner among the brands gaining share. Swatch stays cheap until it closes factories.
SkepticBook value only matters if the assets can earn. Swatch's net profit fell almost 90% last year, so cheap on paper hasn't meant cheap in practice.
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Investors don't believe Paris will fix its budget: the new plan leaves a 5% deficit for a fifth straight year, The Economist reports.
France now pays 1.28 percentage points more than Germany, the widest gap since the 2012 euro crisis.
My read: the European Central Bank isn't expected to step in until that gap reaches 2 points. Until then French bonds and the CAC 40, down 2.3% this year, have no safety net unless a budget passes by year-end.
StrategistPolitics adds risk. Eurasia Group puts the chance that the government falls this autumn at 35%. Polls suggest next spring's run-off could pit two populists.
QuantDebt service rises from €79bn this year to €91bn in 2027. That increase alone eats about a fifth of the €54bn of savings in the new budget.
