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28 February 2024

Market Round-Up

Rolls Royce, renowned for its expertise in powering ships, submarines, and producing power generation systems, has recently stunned markets by surpassing its profit targets, more than doubling last year's results. The news was well received by the stock market, evidenced by a notable 9% surge in its stock price to 359p per share, reaching heights not seen since 2018. This impressive achievement has been propelled by a resurgence in travel demand post-pandemic, with more Rolls Royce engine-equipped aircraft taking to the skies.

Under the leadership of its new CEO, who hails from a background at BP, Rolls Royce has outlined ambitious plans for growth since the appointment just over a year ago. As such, they are planning to invest a substantial £1bn into enhancing its engine capabilities.

So far, Rolls Royce has been successful in its plans, with their share price soaring over 200% over the past year. As well as this, they hold a dominant position in the industry, being the exclusive supplier for Airbus’ planes and also an engine manufacturer for Boeing’s jets.

Moreover, Rolls Royce's foray into data systems has proven to be a lucrative avenue for expansion, particularly with the uptick in defence spending globally, contributing significantly to the company's positive financial results. Nvidia, perhaps the greatest beneficiary of the 2023 chip and artificial intelligence (AI) mania, shows no signs of slowing down. The world’s fourth most valuable corporation recorded the highest share price growth out of any S&P500 company, at 254%. This year its share price rose by a further 58.6%, registering a 16.4% rally on the 22nd of February, after publishing better-than-expected revenue results the day prior. The US tech giant has overtaken Amazon and Alphabet, in terms of market cap, clenching its position on the podium as America’s third most valuable company.

Nvidia’s success has transformed it into a marker for market sentiment, with investors and analysts perceiving its financial report publication to be as significant as the release of inflation data. The grounds for this success can be found in Nvidia’s expertise in graphic cards and computing chips, positioning it at the forefront of the AI revolution. Their range of products boasts some of the most powerful graphics processing units available, which are crucial to the development of generative AI models, which are relied on by Big Tech players to develop their own models.

Demand seems insatiable at the moment, as industries, ranging from healthcare to financial services, throw billions at AI hardware to reap the benefits that artificial intelligence provides, such as improved automation. Due to this, full-year revenue surged by 126%, to US$60.9bn in 2023.

The question now is whether Nvidia can maintain this extraordinary momentum. Tailwinds show little sign of waning in the near term, but markets are unpredictable and a slight wobble in the future performance could undermine investor confidence in the firm.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the investments mentioned. Investments and income arising from them can fall as well as rise in value. The information and views were correct at time of publication but may have changed at point of reading.
 
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