Markets Jittery Over NVIDIA's $300B Rout, Slowdown Fears

Dollar Tree sinks 12% amid poor outlook...

Author

Adam Garcia
September 04, 2024

Good morning. It’s September 4th, and today we’ll take a look at the struggles of Dollar Tree, why U.S. Steel might shutter its Pittsburgh mill, and the $300 billion NVIDIA rout that left markets reeling yesterday.

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Stocks ended yesterday with significant losses, marking the worst day since the August 5 sell-off. Chip stocks came under pressure after NVIDIA’s DOJ subpoena news, and recent economic data pointing to slower U.S. growth added to the gloom.

Futures

Stock futures are also in the red today, following a weak start to September for the major indices. Futures for the S&P 500 and Nasdaq 100 are down by 0.54% and 0.8%, respectively, while Dow Jones Industrial Average futures are 0.34% below their previous close.

What to Watch

Even though earnings season is mostly behind us, there are several big names to watch out for today.

Dick's Sporting Goods (NYSE: DKS) and Hormel Foods (NYSE: HRL) will provide their numbers in the premarket session.

After the day’s close, Hewlett Packard Enterprise Company (NYSE: HPE) and Casey’s General Stores (NASDAQ: CASY) will also release their earnings.

On the economic data front, expect to see the July U.S. Trade Deficit numbers at 8:30 a.m. Job Openings and Factory Orders for July will also be released at 10:00 a.m.

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Entertainment

Dollar Tree Shares Plunging by 12% Amid Weak Sales and Earnings Outlook

Dollar Tree reduced its annual sales and earnings forecasts, citing difficulties in attracting price-sensitive shoppers to purchase its more profitable, higher-margin products amid persistent inflation.

This announcement is sending the company's shares down by about 12% in premarket trading.

The company now expects annual sales to range between $30.6 billion and $30.9 billion, down from its previous estimate of $31 billion to $32 billion. Dollar Tree is also lowering its adjusted-earnings-per-share outlook to between $5.20 and $5.60, significantly lower than its earlier forecast of $6.50 to $7 per share.

The discount retailer's revision mirrors that of its competitor, Dollar General (DG), which also slashed its annual forecasts after reporting quarterly sales that fell short of expectations.

The struggles reflect tightened spending among lower-income consumers and a shift in value-seeking behavior among middle and higher-income households.

Dollar stores have faced intensified competition from larger retailers like Walmart, Target, and PDD Holdings' e-commerce platform Temu, all of which are vying for the same customer base.

Dollar Tree, headquartered in Chesapeake, Virginia, is grappling with the challenge of maintaining profit margins while attracting budget-conscious consumers amid a challenging economic environment marked by elevated inflation and shifts in consumer behavior.

Technology

US Steel Could Exit Pittsburgh and Shut Down Mills If $14.9B Deal With Nippon Collapses

U.S. Steel is preparing to close several mills and possibly relocate its headquarters away from Pittsburgh if a $14.9 billion acquisition deal with Nippon Steel collapses.

In an interview, CEO David Burritt emphasized that the $3 billion investment Nippon Steel has committed to infusing into U.S. Steel's aging mills is vital for the company to stay competitive and protect jobs.

The proposed deal, announced in December, has faced mounting opposition from U.S. lawmakers and the United Steelworkers Union, raising national security and job preservation concerns.

Democratic presidential candidate Kamala Harris recently advocated for U.S. Steel to remain under domestic ownership, while Republican candidate Donald Trump pledged to block the acquisition if he were elected.

To alleviate these concerns, Nippon Steel has stated that if the deal proceeds, the majority of U.S. Steel's core senior management and board members would be U.S. citizens.

However, Burritt indicated that if the acquisition fails, U.S. Steel would likely shut down its Mon Valley plant—its last steelmaking operation in Pittsburgh—and potentially relocate its headquarters to the southern United States, where a newly expanded mill in Arkansas would become more central to the company’s operations.

The deal has already received approval from international regulators and U.S. Steel shareholders, but it remains subject to regulatory review in the United States.

Retail

NVIDIA Slides Another 2% During Premarket Trade After $300B Rout Post-DOJ Subpoena News

NVIDIA shares are down 2% in premarket trading again today following a report that the U.S. Department of Justice (DOJ) has issued a subpoena to the company as part of an antitrust investigation.

The stock had plummeted nearly 10% during regular trading hours yesterday, wiping out approximately $279 billion from its market capitalization.

The DOJ's inquiry has not yet advanced to a formal complaint, but the agency is reportedly examining whether NVIDIA's business practices make it difficult for customers to switch to other suppliers of artificial intelligence (AI) chips.

NVIDIA currently holds over 80% of the AI data center chip market, a strong position that has fueled its rapid growth in recent years.

The firm’s ascent has been driven largely by its early investment in AI chip development for data centers, long before competitors such as AMD and Intel made significant moves in this space.

A decade ago, it launched its proprietary programming language, CUDA, which has become essential for engineers building advanced AI models like those used in ChatGPT. Key customers for NVIDIA’s AI chips include major cloud service providers and internet giants such as Microsoft, Alphabet, Meta, Amazon, and Tesla.

To enhance its value proposition, NVIDIA has also rolled out new software subscription services and promoted its networking products as vital for optimizing the performance of its AI chips.

Additionally, the firm has shifted from purely a parts supplier to providing comprehensive systems, as evidenced by its latest AI chips pre-installed in NVIDIA-designed server racks.

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Movers and Shakers

WiSA Technologies, Inc. [WISA] - Last Close: $1.36

WiSA Technologies' stock is skyrocketing by more than 60% in premarket trade after it announced a $210 million deal to acquire Data Vault's intellectual property and IT assets.

This acquisition will enhance WiSA's spatial audio technology and add high-performance computing capabilities.

The purchase will include issuing 40 million shares of WiSA at $5 each and a $10-million, 3-year note.

The deal is set to close by December 31, 2024.

My Take: Though the deal does seem to bring in valuable assets to the firm, WiSA hasn’t exactly had a stellar run in the last few quarters. Keep this on your wait-and-watch list for now.

Conifer Holdings, Inc. [CNFR] - Last Close: $1.15

Conifer Holdings continues to surge by more than 25% in premarket trade today after a massive rally yesterday.

Its shares climbed 66% on Tuesday after it announced the sale of its insurance agency operations for $45 million, with potential additional earn-out payments up to $25 million based on future performance.

Conifer also sold its interest in Sycamore Specialty Underwriters for $6.5 million, exiting the insurance agency business entirely.

Additionally, Brian Roney was appointed as the new CEO following the resignation of former CEO Nick Petcoff, signaling a strategic shift for the company.

My Take: The market seems to believe Conifer’s exit from the insurance business is a very positive sign. I would definitely keep this on my radar.

Atara Biotherapeutics, Inc. [ATRA] - Last Close: $6.81

Atara Biotherapeutics shares are trading 16% higher than the previous close during premarket trading.

The company announced a new registered direct offering to raise approximately $36 million yesterday.

The capital will come from the sale of shares and pre-funded warrants (with no expiration on the warrants) to be used for working capital and general corporate purposes.

The offering, which includes participation from Mr. Gregory A. Ciongoli’s firm, is set to close by September 5, 2024, and is contingent on his appointment to the Board of Directors, signaling confidence in Atara's strategic direction.

Atara simultaneously announced the appointment of Mr. Gregory A. Ciongoli to its Board of Directors, fulfilling this condition.

My Take: The company is doing well in recent quarters and the new capital infusion is a positive sign for its future. Keep this one in your sights.

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Everything Else

  • Bluesky sees millions of new users in Brazil after the ban on Musk's X.

  • Robinhood launched a U.K. stock lending program for passive income on shares.

  • Alibaba integrated Tencent’s WeChat Pay amid the changing tech landscape in China.

  • VW's cost-cutting plans trigger fears of job losses and plant closures in Germany.

  • An oil price drop prompts OPEC+ to rethink an October output boost.

  • U.S. ports face a potential strike over wage demands this fall.

  • Blackstone is set to expand its digital infrastructure portfolio with a $24B AirTrunk acquisition.

  • Intel is facing further setbacks as Broadcom tests fail, impacting its manufacturing business.

That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
Elite Trade Club

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