GPU vs. ASIC

Good Afternoon. All major indices ended almost flat this week. The weaker non-farm payroll data this week has sealed the September rate cut odds. The market has been consolidating at these levels for a couple of weeks and is awaiting further clarity on inflation and the rate cut.

Below are the key things to note this week:
Earnings Keep Getting Stronger: Last week, I provided QoQ comparison of this earnings season which showed robust eps and revenue growth. Continuing this week, the earnings kept the momentum, and almost all the major companies surpassed earnings expectations. So, with the earnings season almost over, there are no significant surprises to note. Regardless of the noise on the tariff or anything else, earnings are the most critical factor for stock market returns. Nothing else matters as much as earnings, and they are solid as of now.

Slowing Labor Market: The non-farm payroll data came out a lot weaker than expected. The market was initially up when the weak numbers were released, but later gave up gains on Friday. However, no major sell-off on weak jobs data, as bad news is good news for the markets. Weak jobs data has ensured a 25bp rate cut in the next FOMC meeting, and markets are pricing it.

Next Week - CPI: Consumer Price Index numbers are scheduled to be released next Thursday. Although not the Fed’s official inflation measure, this still gives an early indication of the end-of-the-month PCE. Headline CPI is expected to be at 2.9% and core CPI is expected to cross 3%. This aligns with the expectation that tariffs will result in a one-time price adjustment by the end of the year. As long as the CPI stays around these projections, it will further increase the September rate cut odds, which are at 89% as of today, as per the CME Fed Watch.

For the week:

• The S&P 500 is down 0.31%, the Nasdaq is down 0.02%, and the Dow 30 is down 0.52%.

  

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CNN's Fear & Greed Index now stands at 53(Neutral) out of 100, down 11 points from last week. Details here

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Here is a summary of this week’s key economic releases:

Target Rate Probabilities for September 17th FOMC Meeting:

CME FedWatch

S&P500 Additions: AppLovin and Robinhood will join the S&P 500 before trading begins on Sept. 22. Datadog and DoorDash entered the index earlier this year. Read

Broadcom’s New Growth: OpenAI is working with Broadcom to develop custom AI chips, aiming to ease the shortage of processors needed to train and release new versions of ChatGPT. Read

Fed Chair Shortlist: Trump’s shortlist to replace Powell as Fed chair includes Kevin Hassett, Kevin Warsh, and Christopher Waller. He noted Scott Bessent was also considered, but the Treasury secretary declined interest. Read

Strong Corporate Financing: Investment-grade firms issued nearly $70B in U.S. debt this week, far above the ~$60B forecast for the Labor Day-shortened period. Over 54 borrowers sold $67B by Friday’s open. Spreads stayed tight at 79 bps, just above the record 75 bps hit Aug. 15, reflecting still-low borrowing costs. Read

Slow Job Growth: U.S. job growth slowed further in August with only 22,000 new jobs, signaling a sharply weakening labor market. The report highlights sluggish hiring, longer job searches, rising youth barriers, and higher unemployment for Black workers. Read

Zscaler Beat: Zscaler posted adjusted earnings of 89 cents a share on revenue of $719.2M, up 21% from last year and ahead of estimates. For the current quarter, it guided to 86 cents a share on revenue of $772M–$774M, slightly above forecasts. CEO Jay Chaudhry said AI-driven threats are fueling strong demand, as large-language models help hackers optimize malware attacks.

Credo Beat: For the quarter ended August 2, the company posted adjusted EPS of $0.52, above the $0.36 estimate. Revenue reached $223.07M, topping the $190.63M forecast. For the next quarter, it expects revenue between $230M and $240M, well above the $198.6M estimate.

Salesforce Beat: Second-quarter results beat estimates with adjusted EPS of $2.91 versus $2.78 expected and revenue of $10.24B versus $10.14B. Outlook for Q3 and full year was mixed.

Dollar Tree Beat: Adjusted Q2 earnings were $0.77 per share, well above the $0.42 estimate. Revenue reached $4.57B vs. $4.48B expected, with net sales up 6.5% on 3% higher traffic and a 3.4% larger ticket size. Dollar Tree raised full-year net sales guidance to $19.3B–$19.5B, from $18.5B–$19.1B, now assuming 4%–6% comparable-store growth vs. prior 3%–5%.

Figma Beat: Figma reported adjusted earnings of 9 cents a share on $249.6 million in Q2 revenue, matching analyst estimates. Revenue rose 41% year-over-year. The company guided for 33% growth in the current quarter and 37% for the full year.

HP Beat: For the quarter ended July 31, the HPE posted adjusted EPS of $0.44 versus $0.42 expected, with revenue up 18% to $9.1B against $8.83B forecast. Current quarter guidance calls for EPS of $0.56–$0.60 (midpoint $0.58) and revenue of $9.7B–$10.1B (midpoint $9.9B). For the full year, EPS outlook was raised to $1.88–$1.91 from $1.78–$1.90, aligning with the $1.88 estimate.

Broadcom Beat: Broadcom reported adjusted earnings of $1.69 per share on $15.95B revenue, up 22% YoY, with $9.17B from semiconductors and $6.79B from infrastructure software, including VMWare. Results topped analyst estimates of $1.67 per share and $15.84B revenue. For Q4, Broadcom guides to $17.4B revenue, including $6.2B from semiconductors, with an adjusted EBITDA margin of 67%, above analyst expectations of $17.01B.

Copart Mixed: Copart reported Q4 EPS of $0.41, beating estimates, on revenue of $1.12B, up 4.7% Y/Y. For FY25, revenue rose 9.7% to $4.6B, gross profit increased 10.1% to $2.1B, and net income grew 13.9% to $1.6B. Fully diluted EPS was $1.59, up 13.6% from $1.40 last year.

Lululemon Mixed: Lululemon reported Q2 EPS of $3.10, above estimates, on revenue of $2.5B, up 6.8% but slightly below expectations. For Q3, it projects revenue of $2.47B–$2.50B (+3–4%) and EPS of $2.18–$2.23. Full-year guidance is revenue of $10.85B–$11.0B (+2–4%, or +4–6% excluding the 53rd week) and EPS of $12.77–$12.97.