📊 Starbucks Is A Bank

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Happy Sunday!

This upcoming week is going to be massive. The key event?

Nvidia’s earnings report on Wednesday.

Investors will be watching closely to gauge any recent changes in AI demand and to hear any insights on the broader tech sector’s outlook.

If you're on X, make sure to follow my page to get the earnings news the moment it drops and stay in the loop with every update!

Some key data bites from this week that you should know:

• Only 1 in 5 members of GenZ contribute to a retirement account.

• Nearly 1 in 10 homes are worth $1M or more.

• 56% of Fortune 500 companies listed AI as a risk factor in recent annual reports.

• Carl Icahn has agreed to a $2M settlement with the SEC.

• Alex Cooper signed a $120M multi-year deal with SiriusXM $SIRI.

• Netflix $NFLX saw a +150% increase in upfront ad sales commitments over 2023.

• AMD $AMD is set to buy server maker ZT Systems for $4.9B.

• Toronto-Dominion $TD is allocating $2.6B to cover fines related to money-laundering.

• Canadian National Railway $CN and Canadian Pacific Kansas City $CPKC have locked out 9,000 rail union workers due to a labor dispute.

• U.S. jobs growth was overestimated by 30% in revised data.

• A gold bar now worth more than $1M.

• Kamala Harris has proposed raising the corporate tax rate to 28%.

• Walmart $WMT raised $3.6B selling its stake in JD $JD.

• Cava $CAVA saw net sales jump 35.4% in Q2 2024.

In today’s newsletter:

• 💰 Companies With The Most Cash

• 🔥 Is Inflation Finally Under Control?

• ☕️ Starbucks Is A Bank

• 🦾 Big Tech’s AI Spending War

• 🕵️ Who Really Owns Nvidia?

In the stock market, there’s always something to worry about.

Because of that, it doesn’t hurt when companies have a little bit of cash on hand.

Why? A solid cash reserve gives companies the flexibility to pay off debt, pursue acquisitions, distribute special dividends, buy back undervalued shares, and more.

Warren Buffett famously said, “Only when the tide goes out do you learn who has been swimming naked.”

Recently, Buffett has been practicing what he preaches. 

Berkshire Hathaway tops this list of companies with the most cash and short-term investments, holding a staggering $277B.

Big Tech dominates the rest of the top 10, but it’s worth noting that Chinese e-commerce giants Alibaba and Pinduoduo (owner of Temu) also make the cut.

This list focuses on companies with their primary listings on the NYSE or Nasdaq and excludes banks, insurance companies, and other financial institutions, as their cash is often tied to operations or required by regulations.

It is fair to question why Berkshire Hathaway should be included on this list, given that it maintains a large cash pile primarily to cover potential insurance claims, a necessity due to its significant insurance operations.

However, unlike typical financial institutions, Berkshire's cash isn't just a reserve—it's a strategic asset used to invest in a wide range of other non-financial businesses, from railroads to energy.

This diversified approach allows Berkshire to leverage its cash pile for broader opportunities, setting it apart from other financials.

This common misconception trips up many people.

You might hear on the news that inflation is going down, but then notice prices still rising month after month.

This can definitely be confusing. The term for this phenomenon is disinflation. 

It’s what’s happening now, where the CPI is increasing, but at a slower rate.

In July, Core CPI came in at +3.2%, its lowest level in 39 months and right in line with analyst estimates.

Core CPI excludes food and energy, which are often more volatile and unpredictable in the short term.

This measure is preferred by both economists and the Fed when assessing inflation trends.

There’s no denying that prices have surged overall compared to five years ago, but recent data is promising, and shows that inflation is now increasing at a much slower pace.

At the annual Economic Policy Symposium in Jackson Hole on Friday, Jerome Powell said, 'The time has come for policy to adjust,' hinting that the first rate hike could happen as early as September

Starbucks has been all over the news after poaching Chipotle’s CEO Brian Niccol, offering him a $113M pay deal and a remote office in Newport Beach.

Following this announcement, Starbucks added over $20B to its market capitalization.

But here’s something more interesting aside from leadership changes.

For those of you that don’t know, Starbucks effectively operates like a bank by receiving interest-free loans from customers when they purchase gift cards or deposit money into their Starbucks accounts.

The funds loaded onto these cards are recorded as deferred revenue, recognized as income only when customers redeem their cards.

This deferred revenue primarily comes from unredeemed gift cards, along with up-front prepaid royalties from Nestlé.

Over time, a portion of these cards is never redeemed, allowing Starbucks to recognize the “breakage” as additional revenue.

Ultimately, this setup gives Starbucks access to interest-free cash flow while generating extra revenue thanks to its loyal customer base.

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There’s one thing you should know about AI.

It’s not cheap.

But don’t just take my word for it—listen to the CEOs of the biggest tech companies in the world.

In their most recent earnings calls:

Microsoft CEO Satya Nadella stated, “To meet the growing demand signal for our AI and cloud products, we will scale our infrastructure investments with FY25 CapEx expected to be higher than FY24.”

Similarly, Mark Zuckerberg of Meta remarked, “…we currently expect significant CapEx growth in 2025 as we invest to support our AI research and our product development efforts.”

But perhaps the most telling quote came from Sundar Pichai, Alphabet’s CEO, who said, “When we go through a curve like this, the risk of under-investing is dramatically greater than the risk of over-investing for us here, even in scenarios where it turns out that we are over-investing.”

The numbers back up these statements. 

Big tech’s CapEx spending has skyrocketed from $18B in 2015 to $118B in 2024 as companies pour resources into data centers, cloud infrastructure, AI hardware, and more to fuel the AI revolution.

With these massive investments come concerns from investors. 

There’s ongoing debate about whether the CapEx required for Generative AI will ultimately lead to substantial returns.

Only time will tell if this spending will pay off.

Who has benefited the most from Nvidia’s meteoric rise?

Unsurprisingly, none other than its CEO and cofounder Jensen Huang.

According to Fortune, just five years ago, Jensen was worth around $4B. 

Now, thanks to Nvidia's stock surge, his net worth has skyrocketed to roughly $92B.

Recently, some investors have been growing concerned as they've noticed Jensen selling around $14M worth of shares nearly every day this summer. 

In July alone, he offloaded $323M worth of stock.

Given that Nvidia has delivered a staggering 3,000% return over the past five years, it’s no surprise he’s cashing in on some gains. 

To add on, Jensen’s sales are also under the Rule 10b5-1 agreement, which follows a predetermined schedule.

And lastly, despite these sales, he remains a top 5 owner of Nvidia, with a 3.5% stake in the company.

Notable Companies Reporting Earnings This Week:

• Monday (8/26):

  • PDD Holdings $PDD, Trip.com $TCOM

• Tuesday (8/27):

  • Bank of Montreal $BMO, SentinelOne $S

• Wednesday (8/28):

  • Nvidia $NVDA, Salesforce $CRM, CrowdStrike $CRWD

• Thursday (8/29):

  • Dell Technologies $DELL, Marvell Technology $MRVL, Autodesk $ADSK, Lululemon $LULU, Dollar General $DG, Ulta Beauty $ULTA

• Thursday (8/30):

  • Frontline $FRO

All of the companies that are reporting earnings next week can be viewed here.

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Buys

• Kathy Manning (D)

  • Company: Garmin ($GRMN)

    • Amount Purchased: $52K - $130K

• Scott Franklin (R)

  • Company: Accenture ($ACN)

    • Amount Purchased: $51K - $115K

  • Company: Chubb ($CB)

    • Amount Purchased: $51K - $115K

Sells

• Scott Franklin (R)

  • Company: Invesco QQQ ($QQQ)

    • Amount Sold: $115K - $300K

  • Company: Starbucks ($SBUX)

    • Amount Sold: $103K - $295K

  • Company: NextEra Energy ($NEE)

    • Amount Sold: $51K - $115K

Buys

• Nerdy Inc ($NRDY)

  • Insider: Charles Cohn (CEO)

    • # of Shares Purchased: 2,170,291

    • $ Amount: $2,235,400

    • SEC Forms: [1]

Sells

• Palo Alto Networks ($PANW)

  • Insider: Nikesh Arora (CEO)

    • # of Shares Sold: 161,174

    • $ Amount: $59,943,428

    • SEC Forms: [1]

• Palantir ($PLTR)

  • Insider: Alexander Karp (CEO)

    • # of Shares Sold: 974,998

    • $ Amount: $31,429,111

    • SEC Forms: [1]

🤝 Review of the Week