Nvidia Q2 2018 Profits Up 40% But Competitors Crank up the Heat with Custom Silicon

Stellar Performance

Nvidia announced Q2 revenues of $3.12 billion a rise of 40% from 2017. Performance gains came from the gaming segment comprising graphics chips bundled with personal computers. Data center business grew 83% with demand from Google and Amazon for running computations in the cloud. Disappointing was the fall in demand for digital currency chips, leading to revenue decline of 54% from last year.

Competition from "Custom Silicon"

Competition may come from a number of areas. Google and Baidu are investing in custom silicon, with Google's hardware projects run by former Motorola president, Rick Osterloh. For machine learning specifically, Google has a Tensor Processing Unit (TPU) to run neural networks at scale. In the automotive client space, Nvidia's autonomous driving chipset, Xavier, is under threat as Tesla aims to adopt its own machine learning silicon.

Traditional Competitors

Advanced Micro Devices is planning to release graphics chips for machine learning based on 7nm technology next year. Intel is also wanting to up its game, hiring AMD chief architect, Raja Koduri, to head up its graphics card business set to deliver product in two years.  Nvidia will likely respond by upping the stakes in research and development. Expenses could run to $870m in Q3.

Keeping it Real

Nvidia's Jensen Huang presents at the SIGGRAPH Graphics Technology Conference (GTC). This builds real-time awareness of the company's latest product innovations and drives fan following.

Capacity Constraints in MLCC Market poised to Grow by $2bn over Next Five Years

The $5.5bn market for MLCCs (multi-layer ceramic capacitors) is poised to grow to $7.4bn over the next five years, but capacity shortages prevail amongst the top three manufacturers who supply 60% of the market. Samsung Electro-Mechanics has said it will halt new orders and Murata is expanding manufacturing by 10%. The third major player is Taiyo Yuden. Customers are considering alternatives such as tantalum-based polymer electrolytic capacitors (KO-CAPS).

SoftBank Profits from Flipkart

SoftBank's sale of its 20% stake in Flipkart to Walmart has boosted profits by $2.2bn, for the quarter ended June 30, 2018. This is a feather in the cap of SoftBank's $100bn Vision Fund. SoftBank expects to pay a deferred tax of $645K on the gain.

The Cobalt Rush

Mining companies (such as Canadian FirstCobalt)  are looking at sites in Idaho, Montana and Alaska in search of cobalt, a key component of lithium ion batteries used in electronic devices and electric cars (consumption of which is expected to rise 8%-10% per year). 

The DRC (capital city Kinshasa) is currently the largest producer of cobalt. Australia is the other big producer.

Having new sources of the mineral will diversify cobalt consumers' geopolitical risk. There is currently research (e.g. at UCB) into batteries that do not require large amounts of cobalt (Materials Science and Engineering). 

The Cobalt Institute exists to promote sustainable and responsible use of cobalt.

BP Buys $10.5bn US Shale Assets

Bob Dudley, CEO of BP, called the deal a "transformational acquisition" for its "Lower 48" business and is the largest investment BP has made since the Deepwater Horizon incident, where it was lumbered with a $65bn clean up bill (shares fell 1.7% on the announcement). BP is buying the assets from Australian BHP Billiton (who in turn acquired the assets from its acquisition of Petrohawk Energy Corporation in 2011, initially known as Beta Oil and Gas).

"US Consumer" credited for JP's 8.3bn USD Q2 2018 Profits

This is an 18% increase from 2017 and just shy of its record $8.7bn profit in Q1. Dimon said "consumer and business sentiment is high" in the US. There are concerns about "flattening of the yield curve", with the Fed raising short-term rates, but keeping long-term rates more or less stable, which could be a precursor to economic slowdown. Citi also posted strong results but Wells Fargo came in below expectations.

Chevron to Follow Shell, BP and ConocoPhillips in putting North Sea assets up for sale

Chevron's various platforms including Alba and Britannia are included in the plans. Chevron was one of the first companies to drill in the North Sea in 1964, however they have been lately turning more towards shale extraction, including exploitation of Texas' Permian basin. Mike Wirth leads the company as CEO, having joined Chevron as a design engineer.