Looking for volatility in the equity markets for speculative opportunities? We will examine some stocks that have been actively traded by clients in the recent couple of months.
Palantir Technologies Inc (PLTR:US)
Palantir shares have experienced an impressive surge this year, soaring over 200% since the beginning of the year. In the span of just May to November, Palantir has witnessed an additional 150% increase. Despite a general slowdown in the technology stock market since the summer, Palantir continues to thrive amid the correction. What factors are driving this sustained momentum, and are there early indications of a potential slowdown? Notably, the company has capitalised significantly on the artificial intelligence frenzy, leveraging it for data analytics—a domain where it stands as a pioneer. Investors are taking note of these accomplishments.
Additionally, the company secured a $250 million contract for the development and implementation of AI solutions for the US military in late September. An even more substantial accomplishment was a five-year contract with the UK's National Health Service (NHS), promising nearly $500 million in revenue. These developments position Palantir as an appealing long-term investment prospect. However, it's crucial to note that unexpected performance outcomes may contribute to heightened short-term volatility. Additionally, technology stocks are currently not reaping significant benefits from the prevalent risk-off sentiment in the markets, a factor that has already influenced the downturn in Palantir's stock since August.
NVIDIA Corp (NVDA:US)
2023 has marked a revolutionary period for Nvidia, witnessing an astounding resurgence for the chipmaker propelled by advancements in artificial intelligence. Sales and profits have skyrocketed at an unprecedented pace, reflecting in the remarkable growth of the stock, which has surged by more than 200% this year alone. As we anticipate the coming months, questions arise about Nvidia's future performance and the potential extent of its stock growth. The answers may lie in the recently announced Q3 earnings.
Examining the reported numbers reveals Nvidia's remarkable achievements. Revenue has surged over 200% year-over-year, reaching $18.12 billion and surpassing already high market expectations by nearly $2 billion. The profit development is equally extraordinary, soaring from $680 million year-on-year to an impressive $9.24 billion. This level of growth is unparalleled among mega-cap companies. Traditionally, data centres have been a significant revenue driver, contributing $14.5 billion, with Nvidia reaping the benefits of the expanding cloud market, particularly from major providers like Amazon. Notably, approximately half of the revenue is attributed to cloud services. Surprisingly strong results also emerged from the gaming section, with an 80% year-on-year increase that surpassed market expectations.
For the upcoming quarter, the company anticipates sales of approximately $20 billion, marking another year-on-year increase exceeding 200%. Furthermore, the utilization of artificial intelligence and cloud services is poised for continued growth in the coming year. Increased demand for cryptocurrency mining hardware could contribute to this trajectory. As interest rates decline and the introduction of ETFs is anticipated, there's potential for bitcoin to thrive, potentially reigniting interest in mining activities. Notably, major US banks, including JP Morgan and Goldman Sachs, responded positively to the results, with both institutions revising their expected price for Nvidia. Some banks even project a target price of approximately $700 per share. Despite the current valuation, Nvidia's stock appears to benefit from ongoing favourable trends, suggesting the potential for further upward momentum.
Citigroup (C:US)
Dividends – at the time of writing, Citigroup’s dividend yield stands at 4.815%. This March was particularly pronounced for banks, facing substantial pressure in the aftermath of issues at Credit Suisse and various regional US banks. Consequently, insurance against the failure of major banks became exceptionally costly, reaching levels reminiscent of the 2008 financial crisis in certain instances. A subsequent shock hit the banking market in May, ushering in a period of relative calm since then.
Despite notable highs in the overall market, bank stocks have not mirrored this trend as closely. This raises the question of whether there are compelling opportunities in the banking sector now. One potential candidate is Citigroup, counted among the world's largest banks. While its shares has not changed much compared to the beginning of the year, it has surged by over 15% in the past month. Despite this recent gain, Citigroup shares remain nearly 40% below their June 2021 peak.
While elevated interest rates provide banks with a low-risk avenue for profit generation, they concurrently exert a detrimental influence on lending, a fundamental aspect of banks' core business. Consequently, banks may experience advantages from augmented lending volumes in the upcoming year, coupled with an anticipated upswing in merger and acquisition activities. With an enticing dividend yield, Citigroup's stock could present an appealing addition to a long-term portfolio. However, the ongoing restructuring efforts may pose a hindrance to more substantial growth, rendering this investment a speculative endeavour.
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