Nvidia beats forecasts on AI chip demand but warns of $8bn China hit

Local Market Commentary

South Africa’s equity benchmarks closed slightly higher, with the Top 40 up 0.13% to end at 86,246.1 points and the All Share index rising 0.11% to close at 93,868.9 points. However, investor sentiment remains cautious amid regulatory tensions. The Independent Communications Authority of South Africa (ICASA) has launched a formal investigation into whether Elon Musk’s Starlink is operating unlawfully in the country, signalling a possible escalation to the International Telecommunication Union if any breaches are confirmed. Meanwhile, the Electricity Resellers Association of South Africa is mobilising to oppose a proposed 30% electricity tariff hike for sectional title residents, warning that the increase—affecting financially strained households using ~400kWh monthly—could spark widespread non-payment and pressure Eskom’s revenue collection and broader municipal finances.

European Market Commentary

European equities ended lower, with the STOXX 600 weighed down by uncertainty over EU-U.S. trade alignment and conflicting economic signals. German data disappointed, with a surprise drop in import prices and a modest rise in unemployment, fuelling concerns over stagnation in Europe’s largest economy. Meanwhile, geopolitical anxieties remain high following Russia’s conditional peace overture, which includes demands for a halt to NATO enlargement and rollback of Western sanctions—proposals widely seen as non-starters, keeping the diplomatic outlook fragile.

U.S. Market Commentary

U.S. equities slipped as investors digested cautious commentary in the latest Fed minutes and soft guidance from chipmakers, although Nvidia’s strong earnings report offered a late-session reprieve. The Fed reiterated its concern over the delicate balance between curbing inflation and avoiding an economic slowdown. Adding to the complexity, a U.S. trade court ruling partially dismantled the Trump-era tariff regime, creating fresh legal ambiguity over the scope of executive trade powers and potentially reshaping the future trajectory of U.S. protectionist policy.

Asia Market Commentary

Asian equities posted modest gains as global sentiment improved following a pivotal U.S. court ruling that curtailed Trump-era tariff powers, signalling potential relief for export-heavy economies. South Korea’s central bank responded to persistent headwinds by cutting rates to 2.5%, marking its fourth reduction in the current easing cycle amid slowing global demand and heightened domestic political volatility. Markets across the region are increasingly pricing in a coordinated shift towards accommodative monetary policy to offset rising external risks and anaemic trade flows.

Currency Market Commentary

The rand remained range-bound ahead of the SARB’s upcoming rate decision, as market participants weigh domestic inflation risks against broader global monetary trends. The U.S. dollar staged a modest recovery after a key trade court ruling cast doubt on unilateral tariff policies, providing a short-term floor for the greenback amid a backdrop of rising fiscal concerns and tepid foreign demand for Treasuries. Currency markets are increasingly sensitive to shifting legal and political narratives, particularly as trade policy uncertainty begins to intersect with monetary expectations.

Commodity Market Commentary

Gold prices eased to a one-week low as markets rotated out of safe-haven assets following legal developments that may temper global trade conflict. Crude oil edged higher amid supply disruption concerns linked to Canadian wildfires, a sharper-than-expected draw in U.S. inventories, and market anticipation that OPEC+ may opt to accelerate the phasing out of voluntary production cuts. Separately, the U.S. is reportedly considering additional sanctions targeting Russian oil logistics, which could further tighten medium-term supply dynamics.

Tiger Brands Limited (TBS) +3.76%

Tiger Brands delivered a solid performance for the six months ended 31 March 2025, underpinned by like-for-like volume growth and focused portfolio optimisation. Group revenue rose 2% to R18.5 billion, with operating income climbing 30% to R1.8 billion. Segmental highlights included a 37% increase in Milling and Baking profits and a notable 673% surge in Grains. Earnings per share from continuing operations jumped 78% to 1,508 cents, while headline earnings per share rose 34% to 1,021 cents. The group completed R500 million in share repurchases and generated R4.3 billion from non-core asset disposals, boosting net cash by R8.6 billion. A special dividend of 1,216 cents per share was declared, alongside a 19% increase in the interim dividend.

Hosken Consolidated Investments Limited (HCI) -0.19%

Hosken Consolidated Investments issued a trading statement forecasting a significant rise in basic earnings per share for the year ended 31 March 2025—expected between 8,273.9 and 8,354.5 cents versus 806.1 cents in the prior year—largely due to a R4.5 billion fair value gain on the Impact Oil and Gas acquisition. However, headline earnings per share are anticipated between 1,427.5 and 1,572.8 cents, reflecting a potential year-on-year movement between -1.8% and +8.2%, due to continued losses from Impact Oil and Gas and Africa Energy Corp., including a US$74 million writedown on AEC’s Block 11B/12B interest. Final results are due on or about 29 May 2025.

Reunert Limited (RLO) -0.40%

Reunert posted a 5% decline in group revenue to R6.2 billion and a 16% fall in operating profit to R585 million for the six months ended 31 March 2025. Headline earnings per share dropped 20% to 238 cents, while attributable profit decreased 19% to R382 million. Although the Electrical Engineering and ICT divisions maintained operating profit levels, group performance was weighed down by the deferment of a key defence cluster contract, subdued local power cable demand, and persistent losses in the battery storage segment (now classified as held for sale). The absence of prior-year COVID-19 insurance income further contributed to the decline. The interim dividend was maintained at 90 cents per share.

Tsogo Sun Limited (TSH) +1.12%

Tsogo Sun recorded a 3% drop in income to R11.2 billion for the year ended 31 March 2025, with adjusted EBITDA down 11% to R3.5 billion. Headline earnings fell 16% to R1.5 billion, with adjusted headline earnings per share declining 14% to 142 cents. The final dividend was cut 25% to 30 cents per share. Operating costs edged up 1%, while net interest-bearing debt and guarantees declined 6% to R7.2 billion, resulting in a covenant net debt to EBITDA ratio of 2.09x. The results reflect margin pressure and a softer trading environment across the group.

Nvidia Corporation (NVDA) -0.51%

Nvidia beat quarterly sales forecasts driven by strong AI chip demand ahead of tighter U.S. export controls on China, but warned these restrictions will reduce next quarter revenue by $8 billion, resulting in a cautious outlook below analyst expectations. Despite this, Nvidia’s shares rose 5% in after-hours trading, supported by robust sales of its new Blackwell chips and a smaller-than-expected $1 billion charge related to H20 chip export limits. Data centre revenue for Q1 was $39.1 billion, slightly below estimates, while commitments for future manufacturing fell quarter-on-quarter. Nvidia projects Q2 revenue of around $45 billion, reflecting the impact of curtailed China sales.

Chevron Corporation (CVX) -1.31%

Chevron’s annual meeting saw investors dismiss three shareholder proposals, including demands for human rights and renewable energy risk reports, signalling a diminished appetite for ESG initiatives amid weaker returns from green investments. The rejection of a proposal to allow shareholders to call special meetings highlights ongoing control by management. Exxon Mobil experienced no shareholder resolutions for the first time in decades, underscoring a shift back to prioritising traditional oil and gas profitability. Both companies secured full approval for directors and executive pay.

HP Inc (HPQ) -4.02%

HP lowered its full-year profit outlook citing higher tariffs and inflationary pressures that have dampened PC demand and increased costs, particularly in its Personal Systems division. The company reported Q2 revenue of $13.22 billion, slightly exceeding estimates, but adjusted earnings per share of 71 cents missed consensus. Despite a 7% rise in PC sales, elevated tariff-related expenses hindered margins, with management targeting cost mitigation by Q4. The Q3 profit guidance was set below analyst expectations, reflecting ongoing market uncertainty.

Macy's Inc. (M) -0.33%

Macy’s cut its 2025 profit forecast due to tariff-related cost pressures and planned early spring collection discounts aimed at inventory management. The retailer, facing intensified competition from off-price and big-box players, cited a cautious outlook with adjusted EPS now expected between $1.60 and $2.00, down from previous guidance. Tariffs are estimated to reduce annual earnings by up to 25 cents per share, affecting around 20% of Macy’s private label goods sourced from China. Q1 sales of $4.6 billion exceeded expectations, while adjusted EPS of 16 cents narrowly beat estimates.

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