Nvidia Is #3, Lyft Benefits From a Typo, and Mortgage Rates on the Rise
Editor’s Note: Just like that, it’s Friday again!
Of course, on Tuesday, the week certainly seemed a lot slower.
Anyway, let’s get to it!
Nvidia Reaches the Top 3
Stock gains from the artificial intelligence (AI) buzz weren’t limited to 2023.
Nvidia (NSDQ: NVDA) closed out Wednesday at $739 per share. That meant the company’s market capitalization reached $1.83 trillion — making Nvidia the third most valuable publicly traded company in the U.S.
As I write, Nvidia is worth more than Amazon (NSDQ: AMZN) and Google parent Alphabet (NSDQ: GOOGL). The chip designer is below only Apple (NSDQ: AAPL) and Microsoft (NSDQ: MSFT), which is still enjoying its spot above $3 trillion.
A few years ago, relatively few people knew about Nvidia. The company specialized in computer hardware favored by video gamers.
However, recently, Nvidia has come into the public eye because it also sells chips specifically designed to run cloud-computing and AI applications. Companies such as Amazon and Google require thousands of Nvidia’s $20,000-plus chips for their AI and cloud operations.
In the last 12 months, Nvidia’s shares have soared by more than 220%. The company is one of the “Magnificent Seven” — the Big Tech stocks that investors have piled into since last year.
Nvidia’s runup also brought along Taiwan Semiconductor Manufacturing Co. (NYSE: TSM).
TSMC makes the chips for Nvidia — as well as for Apple.
Lyft Shares Took Off… By Mistake
Lyft (NSDQ: LYFT) reported quarterly earnings and a full-year forecast this week that sent shares skyrocketing by nearly 70%.
The rideshare company reported that, for 2024, it’s expecting a 500-basis-point, or 5%, increase in its adjusted earnings margin this year.
But that was a mistake.
The company’s actual forecast called for a 50 basis point, or 0.5%, improvement.
Whoopsie!
Still, Lyft’s earnings outperformed Wall Street’s expectations for the fourth quarter. The stock remained up by roughly 30% even after the correction announcement.
For the full-year 2023, Lyft reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $222.4 million. For 2022, the company had reported a $416.5 million loss.
Fourth-quarter revenue totaled $1.22 billion, in line with analyst expectations and a 4% year-over-year increase. Lyft also reported 17% year-over-year growth in gross bookings.
In addition, the company’s quarterly adjusted core earnings were $66.6 million — beating Wall Street estimates of $56.2 million.
“We’ve entered 2024 with a lot of momentum and a clear focus on operational excellence, which positions the company to drive meaningful margin expansion and our first full year of positive free cash flow,” Chief Financial Officer Erin Brewer said in a company statement.
Lyft also announced that its cash-burn problem is improving. For full-year 2023, the company reported a net loss of $340.3 million, which was much better than 2022’s net loss of $1.6 billion.
The company undertook an aggressive cost-cutting plan last year that included the layoffs of 1,200 workers.
“As we can drive our scale north and hold our costs flat, we’re going to drop more money to the bottom line,” CEO David Risher said.
Mortgage Rates Head Higher Again
Mortgage rates are back on the rise, after slacking off in December and January.
The average contract interest rate on a typical 30-year fixed-rate loan with conforming balances of $766,550 or less rose from 6.80% to 6.87% last week. That is the highest rate noted since last December, although it’s still below the October 2023 peak of 8%.
As can be expected, rising rates led to a drop-off in mortgage demand. According to the Mortgage Bankers Association (MBA), application volume tumbled by 2.3% last week from the previous week.
Breaking the report down, home loan refinance applications tumbled by 2% for the week. Still, refinance applications remain up 12% on a year-over-year basis, while rates are only a half-percentage point higher.
That’s because homeowners are still applying for refinance loans in the wake of last fall’s 20-year interest rate highs.
However, applications for home purchases dropped 3% from the previous week and 12% on a year-over-year basis.
“Purchase applications remained subdued as elevated rates continue to add to affordability challenges along with still-low existing housing inventory,” MBA economist Joel Kan said in a press release.
According to Redfin, there’s been a corresponding 8% year-over-year decline in the number of pending home sales recorded over the last four weeks.
“We’re seeing a bit of recovery with house hunters touring homes, but even demand at the earliest stages isn’t up as much as we would expect at this time of year,” Redfin economist Chen Zhao said.
“That’s because mortgage rates are climbing again and winter weather has been harsher than usual in much of the country, keeping some house hunters at home.”
This week, the hotter-than-expected Consumer Price Index (CPI) reading for January led mortgage rates to rise even more. According to Mortgage News Daily, the average rate on the 30-year fixed-rate mortgage topped 7.08%.
“The bond market (which underlies mortgage rates) reacted immediately and forcefully when the numbers came out,” Mortgage News Daily Chief Operating Officer Matthew Graham wrote.
“Bonds continued to worsen as [Tuesday] went on, leading many mortgage lenders to raise rates once or twice during the day.”
Digital Video Ads Eclipse Traditional Commercials
As streaming, smartphones, and social media apps have become the norm, advertising is moving away from traditional media such as TV.
According to data compiled by Statista Market Insights, spending on digital video advertising here in the U.S. should reach nearly $85 billion in 2024. That’s way more than the $59 billion advertisers are expected to spend on old-fashioned TV ads.
And as the years wear on, this gap is only expected to grow.
Take a look:
You will find more infographics at Statista
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