Breakfast News: The AI Stock NVDA Couldn't Ignore

Nebius (NBIS +2.70%) rose over 6% in pre-market trading after Nvidia (NVDA +0.23%) disclosed a 9.3% passive stake in the business, which partly includes the $2 billion investment Nvidia publicly announced in March. Nvidia moved around 1% higher as part of a tech rebound this morning, with Nasdaq futures up 1.3%.

• A strategic shift to ecosystem lock-in: The overall investment from Nvidia allows it to directly finance the expansion of its own order book, along with providing Nebius with the financial backing to take on larger peers.
• “Businesses and governments are demanding more AI compute than the industry can supply”: Fool analyst Tim Beyers explained in October last year that the Rule Breakers team were banking profit from the 2018 recommendation of Nebius, having outperformed the S&P 500 by 94%. However, he said “you may strongly consider merely holding your shares if you believe that the (AI compute) flywheel will keep spinning.”

2. Trump Slaps 50% Tariffs on Canadian Goods

President Trump has announced 50% tariffs on certain Canadian exports to the U.S. ranging from “wine to hockey sticks to cement,” in a response to what he believes is trade discrimination on U.S. goods.

• Tariffs set to take effect 30 days after Trump signs: The statement from the White House noted alleged unfair duties from Canada on autos, alcohol, and dairy products. The retaliatory actions will apply to Canadian goods regardless of whether it originates under the U.S.-Mexico-Canada Agreement (USMCA).
• Initial market reaction isn’t one of panic: S&P 500 futures rose around 0.5% following the news, potentially indicating the stance from the U.S. could be eased in the coming month if both sides come to the negotiating table.

3. Next Up: Stock Advisor Recs HAS, EQT, and IBKR Report

• Hasbro (HAS +0.05%) rose around 2% ahead of the market open as results showed solid growth, with full-year guidance upgraded as a result. Revenue rose by 16% versus the previous year with “broad-based strength across the business” noted for the longtime Team Rule Breakers rec in SA.
• EQT (EQT 1.03%) posts earnings following the closing bell, coming off the back of beating earnings expectations from the previous quarter. The Team Hidden Gems rec will be aiming to consolidate after the record production volumes from fiscal Q1.
• Interactive Brokers (IBKR +1.27%) is set to report after the market closes. The rec from Team HG is expected to deliver a 21.6% revenue increase versus the same period last year, driven by higher client activity, just like last quarter

5. Today’s Take: Growth vs. Scale

I generally think of growth versus scale in terms of margins. When a company is simply growing, its revenue goes up, but its costs go up just as fast (or even faster). On the other hand, when a company is scaling, revenue is growing faster than its underlying costs, and margins improve over time.— Matt Frankel Team Hidden Gems

Consider a meal-kit company that spends heavily on discounts and marketing to acquire customers. Signups climb quickly, but if those customers churn after a few boxes, the company has only bought growth at a high price. Acquisition costs outrun the revenue they generate.— Nick Sciple Team Rule Breakers

5. Your Take

Last week, Cathie Wood’s ARK Invest made SpaceX (SPCX 3.20%) its largest purchase by value, adding roughly $56.9 million to its stake, while its biggest sale was a $39.2 million trim of AMD (AMD +1.58%).

Have you ever bought or sold a stock partly because a famous investor did? How did it work out, and what did you learn from following someone else’s lead?

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