U.S. stops Nvidia and AMD from exporting AI chips to China
U.S. chip giants Nvidia and AMD caught in the tech battle between the United States and China
The U.S. government has asked chip designers Nvidia Corp (NVDA) and Advanced Micro Devices (AMD) to stop selling their top artificial intelligence chips to China due to national security concerns.
The move is aimed at crippling China’s technological capabilities as geopolitical tensions over Taiwan heat up. With the ban affecting sales of Nvidia’s A100 and H100 chips and AMD’s MI250 chips, both companies are expected to be adversely affected by the order.
As a result, Nvidia plunged around 15% and AMD fell about 11% last week.
Meanwhile, the highly anticipated Friday jobs report showed that the U.S. economy added 315,000 jobs in August. While the figure exceeded economists’ expectations, it is far below the 526,000 job positions added in July.
However, the unemployment rate increased to 3.7% last month from 3.5% in July as more people entered the labour market for job search. The labour force participation rate increased to 62.4%, which is still below the pre-pandemic level of 63.4%.
For the week, the S&P 500 ended 3.29% lower, the blue-chip Dow fell 2.99%, and the tech-heavy Nasdaq Composite dropped 4.21%.
Starbucks names Indian-origin Laxman Narasimhan as the new CEO
Adding to the long list of multinational companies being headed by Indian-origin executives is the latest entrant Starbucks Corp (SBUX). The coffee house chain named Laxman Narasimhan as its new Chief Executive Officer on Thursday.
Narasimhan will join Starbucks on October 1 but will take the reins from April 1, 2023. In the meantime, he will work closely with interim CEO Howard Schultz to learn about the company and its plans. During the transition period, he will meet employees, visit coffee farms and manufacturing plants and spend time as a barista.
Prior to Starbucks’ announcement, Narasimhan stepped down as the CEO of Reckitt Benckiser, the British conglomerate known for brands like Lysol and Durex. In September 2019, he was the first external candidate to take charge of Reckitt since its formation in 1999.
He is credited for leading the company during the pandemic when sales of health and hygiene products skyrocketed. Narasimhan also successfully navigated Reckitt through a very recent baby formula crisis in the United States, helping the company raise its annual outlook earlier this year.
A former PepsiCo global chief commercial officer, the 55-year old Narasimhan is a mechanical engineer from Pune and an MBA from the Wharton School of the University of Pennsylvania.
As Narasimhan takes charge of the world’s largest coffee chain, he will oversee about 35,000 stores and 383,000 employees worldwide. However, Starbucks faces many challenges currently.
Over 200 Starbucks stores in the United States have unionised in a push for better wages and benefits amid rising inflation. Moreover, COVID-related restrictions in China have hurt the beverage giant’s business in one of its largest foreign markets.
A popular choice of many for remote working, Starbucks is known for encouraging long visits. However, the company is now redirecting focus to mobile pickup and delivery as labour and ingredient costs are surging.
Narasimhan will navigate the company through its “Reinvention” plan and will work towards better barista pay and improving customer experience.
According to Starbucks board chair Mellody Hobson, “His deep, hands-on experience driving strategic transformations at global consumer-facing businesses makes him the ideal choice to accelerate Starbucks growth and capture the opportunities ahead of us.”
Disney mulls Amazon Prime like subscription plan
You may soon see yourself signing up for a Disney membership as Walt Disney Company (DIS) is exploring an Amazon Prime-like subscription plan, bundling its streaming services, resorts and merchandise together.
According to a report by the Wall Street Journal, the discussions at the entertainment giant are in the initial stages. Hence, no further details regarding the membership charges or launch date are available yet.
In a bid to encourage customers to spend more money on Disney products and services, the program could include discounts and exclusive perks for the members. This would also allow the company to gather more data on consumers’ tastes and preferences and ultimately enhance its ability to cross-sell.
Cross-selling is a common sales tactic used to sell related or additional products to an existing customer in order to increase revenue per order. Companies like Walmart (WMT), Starbucks (SBUX) and Amazon (AMZN) are known for their membership plans that not just ensure customer loyalty but also provide useful insights into customer’s purchasing habits.
Disney owns one of the largest entertainment empires in the world that encompasses popular content like Star Wars to Marvel, recreational parks, film studios and whatnot. This is exactly what differentiates it from a typical streaming service like Netflix (NFLX) or any other leisure entertainment company.
Combining its offerings together will help Disney leverage its competitive edge over others. Under its pre-existing special program, the D23 Official Fan Club, provides members exclusive access to events and merchandise. It costs between $99.99 and $129.99 annually.
The new membership would likely target more casual Disney customers and fans.
While Disney stock is down about 29% so far this year, its business is thriving better than pre-pandemic times on all fronts. The Parks, Experiences and Products segment reported a whopping 70% jump in revenue in the most recent quarterly earnings.
While streaming rival Netflix is struggling to add more subscribers, Disney is gaining market share. At the end of June quarter, Disney had a total of 221.1 million streaming subscribers, while Netflix had 220.7 million users.
While inflation can play a spoilsport in the near term, the long-term prospects for Disney do look rosy.
Lululemon posts market-beating results despite high inflation
Shares of sportswear giant Lululemon (LULU) surged 6.7% after the fiscal second-quarter earnings cruised past analyst expectations, as shoppers kept buying workout gear despite rising prices hurting other retailers’ apparel sales.
The company reported $1.87 billion in revenue, up 29% year-on-year, and $2.20 in adjusted earnings per share. Markets were expecting earnings of $1.87 a share on sales of $1.77 billion.
Same-store sales increased by 23%, beating the analysts’ estimate of 17.6%. The apparel company claimed that despite rising inflation restricting consumer spending, both in-store and online traffic remained robust. During the quarter, store traffic surged by over 30% and e-commerce traffic rose by over 40%.
Lululemon is hoping to boost customer loyalty with a soon-to-launch membership program. The company announced the membership program at the end of the first quarter. It features a free tier and a paid tier that costs $39 a month. Paid tier members will receive invitations to in-person events as well as early access to product drops and exclusive products.
Lululemon’s higher-income clientele appears to be mostly unaffected by inflationary pressures. However, other higher-end retailers like Nordstrom (JWN) and Macy’s (M) slashed their outlook. On the other hand, Lululemon has boosted its guidance in two consecutive quarters.
The company said it now expects 2022 revenue in the range of $7.87 billion and $7.94 billion, up from the range of $7.61 billion to $7.71 billion it stated last quarter. The company also raised its 2022 adjusted earnings per share outlook to a range of $9.75 to $9.90, from last quarter’s guidance of $9.35 to $9.50 adjusted earnings per share.
The release also maintained the company’s long-term outlook of doubling net revenue to $12.5 billion from 2021 to 2026. The plan includes an expansion of its menswear business, footwear, and membership-based fitness classes.
If Lululemon can deliver its promise, then its stock seems to be available for a bargain, nearly 19% down so far this year.