🍋 The Next $NVDA

Why Wall Street is looking at emerging markets for the next Nvidia, plus Morgan Stanley probed.

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Good Morning and Happy Friday! Morgan Stanley’s in some hot water over its wealth unit. Amazon CEO Andy Jassy said he’s committed to cost cutting while investing in AI in his shareholder letter. Meanwhile, Wall Street is busy reclaiming $16 billion worth of deals lost to private credit. Washington is targeting private equity health care deals, and Wall Street banks have helped push New York City’s return-to-office rate to almost 80% of its pre-pandemic levels.

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SQUEEZ OF THE DAY

The Next $NVDA

Source: Bloomberg

Wall Street’s keeping its eyes out for the next big AI wave. And this time? Investors are looking outside the U.S. as they make their latest bets.

Investors looking towards emerging markets means Wall Street probably doesn’t think stocks like Nvidia have as much room to run as emerging markets do. After all, the global AI hype has led to a 50% jump in the semiconductor manufacturer index in less than a year.

So, if you’re a value investor, you’re probably looking overseas for your next bet. And it makes sense - while Nvidia is trading at around 35x its projected earnings, many of its Asian peers are trading at between 12-19x.

Analysts predict a 61% increase in emerging-market earnings, compared to just 20% for its U.S. peers.

Goldman Sachs says they’re especially looking at manufactures of AI supply-chain components like cooling systems makers. Morgan Stanley, on the other hand, is looking at players where AI is reshaping business models in non-tech sectors.

Emerging-market companies previously known for their tech are now leading the AI investment wave. For example, TSMC and Hon Hai Precision Industry are top holdings in significant emerging market funds and ETFs.

The investment enthusiasm is spreading to other regions as well, with companies like Vietnam's FPT Corp and South Korea's Hanmi Semiconductor seeing remarkable gains this year.

Takeaway: Emerging markets are not only presenting lucrative AI investment opportunities but also offering these at more attractive valuations than in the U.S. This shift suggests a broader, global approach to AI investment, but investing in emerging markets isn’t without risk. While the rise in stock prices can make investors feel like they're on top of the world, stocks in emerging markets can drop just as quickly, proving that what goes up might just take a scenic route down.

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HEADLINES

Top Reads

  • Morgan Stanley’s wealth arm is being probed by multiple regulators (Reuters)

  • Amazon CEO Andy Jassy in shareholder letter says he’s committed to cost cutting while investing in AI (CNBC)

  • Wall Street reclaims $16B of deals lost to private credit (YF)

  • Private equity in health care becomes a bigger Washington target (Axios)

  • Private equity fundraising shows small signs of Q1 rebound (WSJ)

  • Wall Street wants answers from big banks about the economy (CNN)

  • McKinsey begins hundreds of job cuts with client demand muted (BB)

  • As U.S. bank profits drop, focus shifts to interest income outlook (Reuters)

  • NYC return-to-office rate nears 80%, driven by Wall Street banks (BB)

  • Goldman promotes Carey Halio to Global Treasurer (CNBC)

CAPITAL PULSE

Markets Rundown

Stocks rebounded on soft inflation data as investors eye softer earnings.

Movers & Shakers

  • (+) Nike ($NKE) +3% after an upgrade by Bank of America.

  • (–) Morgan Stanley ($MS) -5% after a probe into the bank’s wealth unit.

  • (–) CarMax ($KMX) -9% after the used car dealer missed on earnings.

Private Dealmaking

  • Vertex Pharmaceuticals bought Alpine Immune Sciences for $4.9 billion

  • Peak Rock bought HuFriedyGroup, a dental business, for $787.5 million

  • Nexamp, a solar company, raised $520 million

  • Cyera, a cloud data security startup, raised $300 million 

  • FloQast, a workflow automation software provider, raised $100 million 

  • Elucent Medical, a surgical treatments tools provider, raised $42.5 million

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DAILY VISUAL

M&A Activity Picking Up

IG issuance rising after the Fed pivot in December

Source: Apollo

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ENLIGHTENMENT

Short Squeez Picks

  • Investment Banking vs Private Equity - which is better?

  • How baseball prepared Derek Jeter for business

  • 3 smart money moves to make in your 20s to be more successful

  • How to find joy in your life

  • When playing it safe is the riskiest strategic choice

  • Why you should concentrate on your reputation, not brand

  • Learn from people who do - not people who preach

MEME-A-PALOOZA

Memes of the Day

 

 

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