Nvidia Delivers Record Revenue as AI Demand Accelerates

Market Commentary

South African Market Summary

The JSE ended little changed, with the All Share slipping 0.01% to 116,813.45 points and the Top 40 easing 0.04% to 109,487.56. Domestic data showed some improvement in household finances, as real net salaries increased in July for the first time in nine months amid softer inflation, although rising fuel and living costs could limit the relief. South African mining companies continued to accelerate renewable-energy investment to reduce costs, diversify electricity supply and meet decarbonisation targets, while retaining Eskom baseload power. Agriculture provided a firmer signal, with the Crop Estimates Committee forecasting a 17.4 million-tonne maize harvest for 2025/2026, up 4.5% from 16.65 million tonnes previously and slightly above the July estimate. Overall, local market direction remained subdued despite supportive domestic developments.

European Market Summary

European equities finished broadly flat as investors weighed developments around the Strait of Hormuz and slightly firmer expectations for a September U.S. rate increase. The STOXX 600 slipped 0.01% to 656.41 points, while London’s FTSE 100 fell 0.07% to 10,878.12 after six consecutive gains, with healthcare and energy shares weighing on sentiment. UK retail conditions remained weak, with the CBI sales volume balance falling to -48 in August from -26 in July, although retailers expect some recovery in September. British vehicle production also declined 11.6% year on year in July as weaker exports and earlier maintenance shutdowns constrained output. Separately, Europe’s key Tesla safety regulator said there is currently no recall over concerns surrounding emergency door-release mechanisms, although the issue continues to be monitored.

US Market Summary

Wall Street ended slightly lower as hotter-than-expected U.S. inflation reinforced uncertainty around the Federal Reserve’s policy outlook and kept investors cautious ahead of Nvidia’s earnings. Headline PCE inflation held at 3.7% year on year in July, above the 3.6% consensus, while the monthly increase of 0.2% also exceeded expectations. Core PCE remained at 3.3% annually, suggesting underlying price pressures remain persistent. Separate data showed the U.S. economy expanded 1.5% in the second quarter, while consumer spending slowed modestly and real spending was broadly flat. The inflation surprise lifted the implied probability of a September Fed rate increase to around 40% from 36% beforehand. Attention now turns to Federal Reserve Chair Kevin Warsh’s Jackson Hole speech on Friday for guidance on the policy path.

Asian Market Summary

Asia-Pacific equities advanced as Nvidia’s stronger-than-expected earnings revived confidence in technology shares despite persistent U.S. inflation concerns. In China, industrial profit growth slowed to 11.2% year on year in July from 15.1% in June, while growth for the first seven months moderated to 17.6%, highlighting continued pressure from weak domestic demand despite strength in export-oriented AI-related sectors. The Bank of Korea raised its benchmark rate by 25 basis points to 3.00%, its second consecutive increase, as inflation and financial-stability risks remained elevated. In Australia, second-quarter private capital expenditure fell 3.6% to A$50.95 billion, missing expectations for a 0.5% rise. However, household spending increased for a third month in July, reinforcing expectations that the Reserve Bank of Australia may tighten policy again.

Commodity Market Summary

Gold prices edged higher as concerns over currency debasement persisted, with investors awaiting remarks from Federal Reserve Chair Kevin Warsh. Oil prices extended recent losses as expectations grew that diplomatic efforts involving Iran, Qatar and Oman could ease disruptions around the Strait of Hormuz. The waterway carried oil and gas equivalent to roughly one-fifth of global consumption before the Middle East conflict, but flows have since fallen to about a quarter of pre-war levels. Qatar’s prime minister is due in Iran to revive negotiations, while the U.S. has paused attacks for about a month and increased economic pressure. Supply risks remain elevated, however, with Iran maintaining conditions for reopening the strait. U.S. distillate inventories also fell by 2.2 million barrels to 103.4 million, a record seasonal low.

Currency Market Summary

The rand weakened around 0.19% against the U.S. dollar, while sterling also eased against both the dollar and euro as broader risk sentiment dominated currency markets. The dollar index held near 99.12 ahead of the Jackson Hole symposium after retreating from an eight-day high, with investors assessing persistent U.S. inflation. July PCE inflation rose 3.7% year on year, unchanged from June but above the 3.6% consensus, while monthly prices increased 0.2% versus expectations of 0.1%. The yen remained broadly steady at 159.29 per dollar after Bank of Japan Deputy Governor Ryozo Himino said timely rate increases could help prevent sharper tightening later. Markets are pricing an 86% probability of a BOJ rate increase in September, although Himino stopped short of explicitly signalling an imminent move.

Domestic Company News 

Santam (SNT) +3.53%
Santam reported a solid first-half performance, with key financial metrics meeting or exceeding long-term targets despite market volatility and elevated claims. Conventional insurance gross written premium increased 10%, supported by double-digit growth at MiWay, Santam Direct, Santam Re and Santam Partner Solutions. The underwriting margin remained above the midpoint of the 5%–10% target range despite R1.5 billion in weather-related catastrophe and other large claims, versus R144 million previously, and a R230 million maiden underwriting loss from Syndicate 1918. This was partly offset by a R325 million benefit from a lower reserving confidence level. Alternative Risk Transfer delivered double-digit earnings growth, while shareholder investment returns improved significantly. A R590 million revaluation of Shriram General Insurance also supported higher attributable earnings. Interim results are expected on 3 September 2026.

Discovery (DSY) +4.71%
Discovery delivered robust results for the year ended 30 June 2026, with normalised profit from operations expected to rise 15%–20%. Discovery South Africa is forecast to grow 13%–18%, while the Vitality composite is expected to increase 18%–23%. Normalised headline earnings should advance 18%–23%, supported by lower finance costs as financial leverage declines in line with the Group’s plans. Headline earnings are expected to rise 31%–36%, benefiting from the gain on termination of the lease following the acquisition of 1 Discovery Place. Basic EPS is forecast to increase 35%–40% to 1,893.0–1,963.1 cents, while HEPS is expected to rise 31%–36% to 1,895.6–1,967.9 cents. Normalised HEPS is projected to increase 18%–23% to 1,735.1–1,808.6 cents, reinforcing the Group’s strong earnings momentum. Full-year results are expected on 3 September 2026.

Sanlam (SLM) -2.00%
Sanlam expects mixed first-half earnings for the six months ended 30 June 2026. Basic EPS is forecast to increase 24%–34% to 607–656 cents, mainly reflecting one-off gains from the disposal of the Sanlam Investments active asset manager and dilution of its Shriram Finance holding following Mitsubishi UFJ Financial Group’s capital injection. HEPS, however, is expected to decline 10%–20% to 372–418 cents as shareholder investment returns weakened across the portfolio. This included negative fair-value movements in Sanlam’s listed Ninety One exposure and softer market conditions in Morocco and India. Operationally, the Group reported strong business volumes and positive net client cash flows, although elevated weather-related and large claims weighed on general insurance earnings in South Africa and Pan Africa. Sanlam’s diversified portfolio and capital position continued to support cash generation.

Transpaco (TPC) +0.65%
Transpaco reported resilient full-year results for the 12 months ended 30 June 2026 despite weak domestic economic conditions. Revenue increased 0.7% to R2.404 billion, while operating profit rose 3.1% to R214.1 million as expense control and improved gross profit contribution supported margins. The operating margin strengthened to 8.9% from 8.7%. HEPS increased 6.8% to 551.3 cents, assisted by the March 2025 share buy-back, while EPS rose 4.7% to 541.6 cents. Net asset value per share advanced 8.9% to 3,815 cents and the Group ended the period in a net cash-positive position. Plastics revenue grew 4.0%, while Paper revenue declined 2.8%. The board declared a final dividend of 180 cents per share, taking the full-year dividend to 250 cents, up 6.4%.

Global Company News

Nvidia Corporation (NVDA) -1.59%
Nvidia delivered another strong quarter as AI infrastructure demand continued to accelerate, with second-quarter revenue more than doubling to $96.22 billion, ahead of the $92.17 billion expected. Data centre revenue reached $89 billion, also beating forecasts, while adjusted earnings of $2.22 per share exceeded expectations. Nvidia expects third-quarter revenue of $108 billion, above the $104.19 billion consensus, and unusually projected 70% revenue growth for the fiscal year ending January 2028, well ahead of analysts’ 44% estimate. Growth is expected to be supported by Vera Rubin processors, AI laboratories and expanded cloud deployments, including an additional two million GPUs with Amazon Web Services. However, memory shortages and rising component costs are expected to pressure margins, while China data centre revenue remains excluded from guidance.

CrowdStrike Holdings Inc. (CRWD) +2.05%
CrowdStrike delivered stronger-than-expected second-quarter results and raised its full-year revenue outlook as demand for its cloud-based cybersecurity platform continued to expand. Revenue reached $1.47 billion, ahead of the $1.44 billion consensus estimate, while adjusted earnings of $0.31 per share exceeded expectations of $0.29. Annual recurring revenue increased 25% year on year to $5.84 billion, highlighting continued subscription momentum. The company lifted its full-year revenue forecast to between $5.991 billion and $6.01 billion from its previous range of $5.91 billion to $5.96 billion. Management sees artificial intelligence as an increasingly important growth opportunity as enterprises deploy more AI systems and require stronger protection against emerging cybersecurity risks. Recent disclosures regarding AI models exploiting system vulnerabilities have further highlighted the growing importance of advanced cybersecurity infrastructure.

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