TOP STORY
📉 Nvidia Sends SoundHound Stock Into a Freefall after Selling Position

📈 Despite all the tariff fears this month, the markets has soared to record highs as the S&P 500 posted its third week of gains in a row. Here’s how the key indexes performed:

• S&P 500: +1.47%

• Nasdaq 100: +2.9%

• TSX: +0.16%

• Bitcoin: -0.46%

😬 These gains are despite inflation coming in higher than expected and retail sales recording their biggest monthly drop in a year, down -0.9% in January (far worse than the -0.2% expected).

🤖 Both of these data points would generally be bad news for the markets, but big tech came through to save the day, with Nvidia up 6.8%, Apple up 6.5%, and Meta up 2.5%.

📉 And while the market was green overall, not everyone was celebrating. Nvidia disclosed this week that it sold off three tech stocks and bought two others - causing one stock to crash -30%: SoundHound AI ($SOUN).

🤿 So before we dive into some of the other big news this week (from Warren Buffet’s big portfolio changes, the Bank of America warning of a growth bubble, and Intel jumping 23%), let’s take a look at Nvidia’s buys and sells and what’s going on with SoundHound.

🤑 Nvidia Sells SoundHound and Buys These Two Stocks Instead

💰 While we often wouldn’t think of Nvidia as a big investor, it actually manages a portfolio of ~$400M.

🥜 And while that’s peanuts compared to Warren Buffett’s portfolio of $267B (which we’ll talk about later), when Nvidia buys (or sells) a stock, the market pays attention.

🎢 So when Nvidia revealed in its regulatory filings that it sold off 3 stocks and opened 2 new positions, it caused massive swings in the stock prices. Here’s the summary of Nvidia’s buys and sells this week and the impact on the stocks:

🔴 Nvidia Completely Sold

• SoundHound AI (SOUN) - down 30%

• Nano-X Imaging (NNOX) - down 7%

• Serve Robotics (SERV) - down 30%

🟢 Nvidia Opened New Positions

• WeRide (WRD) - up 94%

• Nebius Group (NBIS) - up 14%

Nvidia also significantly reduced it’s stake in Arm Holdings ($ARM) by 44%, causing the stock to fall 2.2%.

🤔 Why the Changes?

⚙️ While Nvidia didn’t specify any reasons for the changes, most reports say they mark a shift to focus on AI infrastructure.

🚘 The investment in WeRide - a Chinese company developing autonomous driving technology that operates driverless vehicles in 30 cities across 9 countries - is consistent with comments Jensen Huang made at CES where he talked about ‘physical AI’ being the next frontier of AI.

At CES, Huang also discussed the importance of Nvidia’s positioning in the Autonomous Vehicle market (with the launch of DRIVE Hyperion AV), which Wedbush analysts project could present another $1 trillion opportunity for Nvidia over the next few years.

😰 What About SoundHound?

Now, for the 1,253 of you on Blossom who hold SoundHound - what does this mean for you?

Well, even though Nvidia held only a tiny stake in the AI voice company (only ~0.5% of SoundHound’s outstanding shares), since Nvidia' disclosed its stake in the company, the stock has surged over 300% - driving a ton of excitement among retail investors who now own over 60% of the stock:

⚠️ The problem with such high retail investor ownership is retail investors (like me and you) are typically much more emotional and reactive to news and tend to be less sensitive to valuation as institutional investors.

😰 Now, without Nvidia’s support, SoundHound will have to rely on its own merits, and the company is not without its challenges.

❌ Most significantly, the company has never turned a profit - and its losses continue to grow. In its most recent quarter, SOUN posted a net loss of $21.8 million, 45% worse than the previous year. Even with the recent stock drop, the company still has a price-to-sales ratio of ~60x - much higher than the S&P 500’s average of 3.

💰 Despite these struggles, revenue is growing rapidly, with 89% growth in its most recent quarter, as the company expands its AI voice technology to many different applications, including a recent partnership with Lucid Motors on an in-vehicle voice assistant.

💡And while there is much more we could dive into here, I’ll leave the rest to your own research to make sure we have time to dive into some of the other big stories this week - including Warren Buffett’s big portfolio changes…

😎 But first, a quick word from this week’s sponsor Wealthsimple!

PRESENTED BY WEALTHSIMPLE
🎿 Move your RRSP. Get a 2% match. Hit the slopes.

❄️ Make the most of winter with a 2% match and a lift ticket when you transfer an RRSP. Pile up the bonuses with a 1% match on all other eligible account transfers. Minimum $15,000 transfer. Don’t forget to register first!

⭐️ How to claim your 2% or 1% match

1. Register by March 15

2. Initiate a transfer within 30 days of registering (minimum $15,000)

3. You’ll get a 2% match on any RRSP portion, and a 1% match on other eligible accounts — paid out over 24 months into your Cash account

🎿 And, since it’s winter — you can earn up to 5 lift tickets valid at 50 ski areas across Canada when you register, then complete any of the following within 30 days.

• Set up and complete your first direct deposit (paycheque, pension, etc.) of $2,000+ per month: 🎟️ +1 lift ticket

• Successfully refer friends: 🎟️ 🎟️ 🎟️ + Up to 3 lift tickets¹

• Transfer an RRSP as part of $15,000+ in transfers: 🎟️ +1 lift ticket (plus a match!)

^{_{(1) 1 per friend *See Wealthsimple Disclaimer at the end of the newsletter}}

ALSO IN THE NEWS
🗞️ Other Key Headlines this Week

🍕 Buffett Sells Banks and Buys Pizza

Nvidia wasn’t the only one buying and selling this week - legendary investor Warren Buffett also made big changes to his portfolio. Here are the most significant changes:

• 🏦 Sold Banks: Reduced stakes in Bank of America by 15%, Citigroup by 74%, and Capital One by 18%, a ~3% total change to his portfolio

• 🍕 Bought Pizza: Increased his stake in Dominos ($DPZ) by 87%, although it’s still only ~0.4% of his portfolio

• 💄 Sold Beauty: Completely sold position in Ulta Beauty ($ULTA), leading to a 3.5% drop in the stock this week (which jumped 18% when Buffett revealed his stake in the company back in August 2024)

Buffett also sold S&P 500 index ETFs SPY and VOO, leading to some alarmist articles such as one from the Motley Fool calling it ‘Buffett’s shocking move.’

But if you look at the actual numbers in the 13F filing, you’ll see that Buffett held an extremely small position in the ETFs, and the changes amounted to a 0.02% change in his portfolio - hardly the ‘shocking news’ warranting an article (a good reminder to not just blindly trust the headlines).

⚠️ Bank of America Warns Growth Stocks Are in a Bubble

Bank of America strategists issued a warning to clients this week saying the market has started to resemble the dot-com bubble calling out that market concentration has reached new extremes, with the top 5 companies making up 26.4% of the S&P 500 market cap:

• The bank warns a momentum reversal could be sharp, with a possible 40% drop in the event of a drawdown.

• The report calls out ‘passive investing’ as one reason for the market concentration as passive funds have risen to 54% of the market share - causing a big risk in a bust cycle.

• The bank recommended an equal-weight index or investing in baskets of quality stocks with less exposure to the Magnificant 7 as an alternative to the market-cap-weighted index.

📈 Intel Soars 23% After JD Vance’s Speech

• Intel's ($INTC) shares jumped 23% this week - the stock's biggest weekly gain since 2000 - after Vice President JD Vance said the Trump administration would ensure that AI in the US is built with American-designed and manufactured chips (of which Intel is the only American company capable of manufacturing at scale).

• Reports also suggest that the U.S. government is facilitating discussions between Intel and Taiwan Semiconductor Manufacturing Company (TSMC) for a potential joint venture, aiming to bolster domestic chip production capabilities.

• This is welcome news after an exceptionally rough year for Intel - with the stock down nearly 60% in the past year (before this week’s jump) and the CEO recently stepping down.

PRESENTED BY RBC INVESTEASE
💸 Go further with RBC InvestEase

📊 Open a low-cost, actively managed ETF portfolio online with RBC InvestEase and you can get up to 500,000 Avion points* – worth up to $10,000 in travel value¹ — plus $300 cash*.

🔍 RBC InvestEase is a digital-first platform that combines professional portfolio management and dedicated human advice, without all the work or high fees. It’s Time to Trade Up.

^{_{*Offer ends March 3, 2025. Terms and conditions apply. $15,000 investment minimum. (1) Travel value dependent on product held. $10,000 based on Elite tier travel redemption using the Air Travel Redemption Schedule. RBC InvestEase is registered as a restricted portfolio manager in all provinces and territories in Canada, and provides access to model portfolios. RBC InvestEase and Royal Bank of Canada are separate corporate entities which are affiliated. The services provided by RBC InvestEase are only available in Canada.}}

FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

👇 Click to see the full post!