TOP STORY
📉 Nvidia Down 7% After US Bans Exports of AI Chips to China

😅 Finally, a week of relative peace in the markets! (Or at least one in which the S&P 500 didn’t swing + / - 10% overnight…)

📈 While the market is still plagued with tariff uncertainty and remains in a state of ‘extreme fear’, the S&P 500 ended the week green overall, up 0.52%.

🍁 The Canada-based S&P/TSX Composite Index had an even better week, up +5%, driven by gains in energy stocks as the price of oil rose after new US sanctions on Iran oil exports.

📉 However, despite the overall green week, there was one part of the market that took a hit - the tech-heavy Nasdaq-100 - which ended the week down -0.3%.

🤖 The culprit? None other than everyone’s favourite semiconductor stock Nvidia ($NVDA), which took a big -7% hit this week after the US announced a block on the exports of its H20 AI chips to China.

📉 Other key semiconductor players ASML and TSMC also fell, down -4.5% and -5% after reporting earnings.

🤿 So let’s take a deeper look at what’s going on with Nvidia and the other semiconductor giants, and what the tariff-fueled future holds for these stocks…

❌ New Export Ban Will Cost Nvidia $5.5B

So, first off, what’s going on? Well, unless you’ve been living under a rock, you already know there is a trade war going on, especially between China and the US.

On Tuesday night, that trade war took a new casualty, as the US government moved to block exports of Nvidia’s H20 AI chips to China, citing security risks. $AMD’s MI308 chips are also affected.

What’s interesting is that the H20’s are actually already reduced performance versions of Nvidia’s H100 chips, and were built specifically for the Chinese market to meet Biden-era regulatory thresholds.

But now, to sell the H20’s, Nvidia has to obtain licences from the government “for the indefinite future”.

As a result of the sudden change, Nvidia warned it will report $5.5B in writedowns Q2, equivalent to ~14% of Nvidia’s quarterly revenue.

🇨🇳 Will Nvidia Lose the Chinese Market?

China is an important market for Nvidia, currently making up 13% of revenue, and despite the ban Jensen Huang has said Nvidia will “spare no effort to unswervingly serve the Chinese market.”

But that will be easier said than done, as Howard Lutnick, Trump’s commerce secretary, has pledged to be “very strong” on chip curbs.

The long-term problem is Chinese giants like Alibaba or Tencent have been reliant on the H20 chip, and this ban will accelerate China’s development of domestic chips to compete with Nvidia (such as from Huawei). While these still lag behind significantly in performance, the ban will drive Chinese firms to catch up as quickly as possible, posing a stronger competitive threat for Nvidia even if the ban is lifted.

But the chip ban wasn’t the only factor hurting semiconductor stocks this week, with the earnings of giants ASML and TSMC also potentially signalling a potential slowdown in AI demand…

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TOP STORY CONT.
🤖 ASML and TSMC Earnings Tell Competing Stories About AI Demand

The AI chip export ban wasn’t the only thing dragging down semiconductor stocks this week. ASML - which designs the machines to manufacture AI chips, and TSMC - which manufactures the chips, both fell ~5% after reporting earnings.

And even if you don’t hold these stocks, it’s worth paying attention, as these companies are leading indicators of the semiconductor (and AI) space at large, which has seen $2T in market cap wiped out in the past 3 months.

😰 ASML Orders Miss Expectations, Sparking Fears of Slowdown in AI Demand

So what happened? Well, ASML reported orders that were 1B euros (or 18%) less than expected, driving concerns of a potential slowdown in AI demand.

As we’ve discussed at length in previous editions of the Weekly Buzz, semiconductor stocks like Nvidia have benefited massively by the AI arms race that Mark Zuckerberg has said is forcing companies to spend more than needed - if that arms race pulls back, that could spark bad news for semiconductor stocks and chip manufacturers who have become reliant on this overspending.

ASML has also been impacted by Tariff uncertainty, saying that “it doesn’t know how to quantify the impact of recent tariff announcements.”

😍 TSMC Beats Profit Forecasts, Easing AI Demand Worries

In contrast to ASML, TSMC maintained its annual revenue forecast after beating profit expectations which, according to CNBC, was “thanks to a continued surge in demand for AI chips” with analysts pointing to TSMC’s dramatic 91% rise in capex as a good indicator of optimism in the semiconductor business.

Despite this good news, the stock still ended the week down -5% as investors try to assess the potential impact of tariff policies.

While plagued by uncertainty, analysts seem to overall remain confident in the fundamentals of the semiconductor space at large.

 💡 My Thoughts / Summary

Overall, it’s a bit hard to cut through the tariff noise, but I do think Nvidia losing dominance in China is a real threat to the business.

Investors were already worried about Nvidia’s slowing pace of revenue growth, with Q4 reporting the lowest growth since 2023 (here’s a snippet from the Weekly Buzz edition on Nvidia’s last earnings call):

With slowing growth already a concern, effectively losing access to its 4th largest market is quite significant for Nvidia.

While I plan to hold my 3.4% stake, this is a great example where blindly ‘buying the dip’ isn’t wise, as from my perspective, this week’s dip was completely justified given the business impact of the export ban.

ALSO IN THE NEWS
🗞️ Other Key Headlines this Week

📺 Netflix Jumps 6% After Record Profits and 13% Revenue Growth

• Netflix ($NFLX) jumped 6% after reporting record Q1 net income of $2.89B, up 24% from last year and beating expectations

• Revenue climbed 13% to $10.54B, slightly beating the $10.52B analyst’s anticipated

• This earnings report is the first time Netflix didn’t disclose subscriber data, shifting focus to revenue and other financial metrics

• Netflix attributes the success partly to the growth in advertising revenue, which it says is a key focus moving forward, with Netflix even launching an in-house ad tech platform a few weeks ago.

• Since April 2022, the stock has soared over +430%, with controversial bets like launching an ad-supported tier and cracking down on password sharing paying off big time.

💊 Eli Lilly Spikes Up 17% After Its New Weight Loss Pill Works As Well As Ozempic in Trial

• Eli Lilly ($LLY) jumped 17% after its experimental weight loss pill, orforglipron, showed similar results to Ozempic in a key Phase 3 trial

• Patients lost up to 8% of body weight after 40 weeks, beating injectable GLP-1 drugs like Ozempic where patients lost 6% of body weight.

• The once-daily pill could offer a more convenient alternative to injections, expanding access and appeal with Eli Lilly saying it expects regulatory approvals by the end of the year.

• Analysts say orforglipron could become a multi-billion dollar blockbuster if approved, deepening Lilly’s lead in obesity treatments

• Novo Nordisk ($NVON), the Danish pharma company that produces and sells Ozempic, is down 9.4% on the news.

🚘 Hertz Soars 104% After Billionaire Bill Acman Reveals $46M Stake

• Hertz ($HTZ) surged 104% after high-profile investor Bill Ackman disclosed a $46M stake in the company, now owning 4.1% of the company

• The position was revealed via X, marking Ackman’s first public investment in Hertz. Ackman says that Hertz is “uniquely positioned in the tariff environment” to deliver an attractive return on investment.

• Hertz shares had fallen over 70% in the past year amid a disastrous strategy to buy EVs to differentiate, which spiked operating costs and led to Hertz having to later sell vehicles at a loss.

• Ackman’s involvement sparked retail interest, with trading volume spiking more than 5x above average as investors bet on a turnaround.

👎 Trump Pressures Powell to Cut Interest Rates, Says He Should Be Fired

• Donald Trump criticized Fed Chair Jerome Powell, saying he should be fired if he doesn’t lower interest rates soon, adding that he ‘doesn’t think he’s doing his job.’

• Amid the tariffs, Powell has said the central bank will wait for greater clarity before considering rate adjustments, and warned that Trump’s tariffs will increase inflation and slow growth.

• Powell’s term runs through May 2026, and he can only be removed “for cause” under current law, reiterating that the central bank is independent from the government.

• Trump previously appointed Powell in 2017, but has since turned sharply critical of his policies

BIG WIN FOR TEAM BLOSSOM
🤑 Blossom Sets Record for Most Successful Equity Crowdfunding in Canadian History!

🤯 What a wild week. On Monday, we opened up the opportunity for you all to invest in Blossom and in just 6 hours over 1,100 of you invested ~$2M, setting the record for the most successful equity crowdfunding round in Canadian history! Here’s the full story.

🥲 While we wish we could have accepted more folks as shareholders, we actually hit the legal limit that we’re allowed to raise each year, so we had to close the round before the work day was even over!

🙋‍♂️🙋‍♀️ If you want to be the first to know of the next opportunity to invest, make sure you join the waitlist here!

🇺🇸 P.S. For our US folks - unfortunately, this time around the opportunity to invest was only open to our Canadian members due to the limitations of Frontfundr (the platform we used to manage the round), but we’re in talks with other US-based platforms to do a smaller round for our US audience so make sure you join the waitlist too if you’re interested 😊

FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

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