Generate's Investment Specialist Greg Smith was on ZB with Mike Hosking this morning, discussing the latest developments in the technology investment merry-go-round with Nvidia investing US$1 billion into Nokia and Microsoft being gifted” a big stake in OpenAI. He also digests deal making activity across the Tasman with a purported bid for Domino’s and a confirmed one for insurance broker network AUB. Elsewhere, he looks at why HSBC is still suffering the impacts of Bernie Madoff’s infamous Ponzi scheme.
Listen here or read the transcript below:
From Generate, Greg Smith, good morning.
Good morning Mike.
It’s hard to keep up with all this, isn't it? With Microsoft and Open AI and NVIDIA and Nokia and billions flying here, there and everywhere.
Absolutely. It's absolute merry go round, isn't it? So the first deal, the daddy of them all, NVIDIA, that's taking a billion dollar stake in Nokia. So yeah, I guess we all have those clamshell phones at one point probably, but they sold that mobile division years ago. So they've been focusing the infrastructure for telcos. It looks like NVIDIA sees the opportunity to make sure its chips power the next generation of AI driven networks.
So 1st 5G and then eventually 6G. Nokia investors, they certainly liked what they heard. Shares in the US soared 25% and NVIDIA, of course, no stranger to taking deals and other tech partners, they committed 5 billion to rival Intel and they've also investing 100 billion open AI. So not to be outdone, another tech titan is getting in on the Act.
So Open AI is giving Microsoft a 27% stake and it's worth around about 135 billion and it's part of restructuring. This deal evidently took a year to negotiate. It cements Microsoft's role as Open AI’s biggest backer, gives access to the ChatGPT owner’s tech until 2032 and it's all about AGI, which is artificial general intelligence. Now that's that doesn't exist yet, but it's a more powerful form of AI. So stay tuned for that.
Microsoft, they're getting 20% of Open AI’s revenue. The new structure is a nonprofit arm. That's quite nice. Regulars have signed off the move and Microsoft shares up 2% on the news. Investors seeing it as a major win and the global AI rights. So pace is heating up, Mike.
OK, back on the ground in the real man's land. This Domino's thing is what's going on across the Tasman. Is that real or not?
Well, it's no, it doesn't seem to be real this this point.
It was speculated in the media that Bain Capital, so privatre equity company, they were the ones that successfully returned Virgin Australia to the ASX of a after a 5-year absence, see another high-profile turnaround target. So Domino's, they've got the franchise for Australia, New Zealand, Japan, a few countries in Europe. They've actually denied it. But certainly as a turnaround story Mike when we're in all in lockdown during the pandemic. They're flying high. They've since lost 90% of their value since 2021.
So pizza, it's become commoditised. Competition’s literally been heating up, cost of living pressures and the pricing strategies haven't worked. So and then also I suppose, bitten off more than they could chew in their expansion in Japan and Europe. First annual loss in August in two decades. Speculation Bain wants your Australian New Zealand operations, but they'd have to take the whole lot. Shares are up as much as 25% before the company said no, we're not actually doing that so we'll see if there's any bid and whether there's any sort of I suppose you know fire with the smoke if you like. So it would need the sign off from Domino's mothership in the US.
And one deal that’s definitely going here at AUB, one of Australia's largest insurance broker networks. They've got operations over here as well. They popped 6% so they've received the bid from EQT. Remember they actually bought out MetLife here in 2020 that actually bought lots of stuff in in in Australia. The petcare, gyms and HR software companies. Haven't really had a successful play for financial services company as yet, but this may well be it. They specialise in bringing in tech and modernising stuff and generating efficiency. So perhaps they see the same thing again. AUB She is up nearly 6%.
Right. What about HSBC?
So they came out with a bit of a mixed result I suppose if you look at it 14% fourth and third quarter profits, 7.3 billion, operating expenses up 24%. Main reason here, Mike, Bernie Madoff is still causing problems, I suppose for lots of companies, you know he’s gone. 1.1 billion costs here.
They lost an appeal as part of his Ponzi scheme, which they weren't actually investing directly, but they're one of a number of banks that served as custodian and they’re said to have ignored red flags and basically have to return the securities that were actually fake but were supposedly held for investors.
So better news outside of that, net interest income for the quarter rose 15 percent, 8.8 billion, 30% jump in income from wealth division. So that was pretty good and they reckon full-year net interest in income is going to hit 43 billion. Doing really well in Hong Kong. They want to take one of these subsidiaries their private billing at 37 billion. They've raised their profit outlook for 2025 for double-digit average annual growth. The stock rose nearly 5%. London up over 30% this year. So doing pretty well against the FTSE 100 which is up 18%.
OK, what are the other numbers?
So we have got more records today. We've got the Dow up .8 percent, 47918, but the S&P up .3%. We've got the NASDAQ up .6%. 23787. They’re all records. FTSE 100 also record, up .4 percent, 9696.
Nikkei down .6%, ASX 200 down half a percent. NZX 50 we're up .1 percent 13462. Commodities - gold down $25, coming back from record highs, 3957. Oil down $1.16. 50.15. Currency markets Kiwi higher against the US 57.9; lower against the A dollar 87.9. British pound with 43.6. That was up .7% there. Japanese yen, we're down a touch 88.1.
All right, mate, go well. Catch up tomorrow. Appreciate it. Greg Smith out of Generate Wealth and KiwiSaver specialists.