Why Rivian’s Partnerships Make It a Strong Buy After the Recent Rally

Posted on by The INO.com Team

Federal Reserve Chair Jerome Powell recently signaled an imminent shift in policy, with the likelihood of interest rate cuts on the horizon, possibly as soon as September. This news was a breath of fresh air for electric vehicle (EV) stocks, which have been under pressure from rising rates.

Higher interest rates have made financing big-ticket purchases like EVs more expensive, squeezing consumer demand and forcing companies to cut prices, often at the expense of their margins. Additionally, like many in the EV sector, the increased cost of capital and reduced present value of future earnings have been significant headwinds for companies still in the growth phase.

As the prospect of lower interest rates lifts the EV sector, Rivian Automotive, Inc. (RIVN) is positioned to benefit significantly, thanks in part to its high-profile partnerships with Amazon.com, Inc. (AMZN) and Volkswagen AG (VWAPY). With its stock rallying nearly 9% last Friday, RIVN’s recent gains underscore investor optimism. But what exactly makes these partnerships pivotal to the company’s long-term success? Let’s explore.

Is Rivian’s Partnerships With Amazon and Volkswagen a Catalyst for Growth?

For Rivian, 2024 has been a challenging year, particularly as an unprofitable EV maker navigating a tough market. Despite a recovery from its April lows, RIVN remains down nearly 40% year-to-date. However, there’s optimism about its future, especially with its strategic partnerships.

In June, Rivian announced a joint venture with Volkswagen, starting with an initial $1 billion investment from the German auto giant and an additional $4 billion planned through 2026. This partnership is all about collaborating on software and electrical architecture, which is crucial for Rivian as it works on ramping up production for its upcoming R2 electric SUV and a new mid-size electric vehicle.

The $5 billion investment isn’t just cash in the bank; it’s a game-changer for the company’s capital structure, providing it with the resources to vertically integrate its software and electrical systems. CEO RJ Scaringe echoed this optimism, stating that the integration with Volkswagen is “moving along very well’ and should be finalized by the fourth quarter of this year, helping Rivian’s technology reach more global markets.

Meanwhile, as part of the Climate Pledge to achieve net-zero carbon by 2040, Amazon has partnered with Rivian to roll out 100,000 electric delivery vehicles (EDVs) by 2030. To date, 15,000 of these vehicles have been deployed across the U.S. since 2022. However, Rivian has temporarily halted production of these EDVs due to a parts shortage. While this has impacted the delivery vans, the electric vehicle maker has reassured investors that it won’t affect consumer models like the R1S and R1T. Despite this setback, Rivian expects to compensate for lost production and keep the partnership on track.

These high-profile partnerships are more than just business deals; they represent Rivian's strategy to leverage collaboration for accelerated growth, technological innovation, and global market penetration, particularly as the company navigates a shifting economic landscape.

Financial Performance: A Mixed Bag With Positive Outlook

On August 6, RIVN reported its second-quarter earnings, revealing a loss of $1.46 per share, which was worse than the $1.27 loss reported in the same period last year. This figure came in above analysts’ expectations, who had predicted a loss of $1.19 per share. However, its revenue for the quarter came in at $1.16 billion (up 3.3% year-over-year), slightly surpassing analyst expectations of $1.15 billion. The company also reported $17 million in revenue from regulatory credits.

Despite a weak bottom line, Rivian's financial position remains solid as it ended the quarter with $7.87 billion in cash and investments, including $1 billion from an unsecured convertible note issued to Volkswagen. Moreover, the company successfully completed a retooling upgrade at its Normal, Illinois plant, producing 9,612 vehicles and delivering 13,790 units.

For 2024, Rivian has set a production target of 57,000 vehicles, incorporating necessary downtime for further upgrades and cost reductions. It aims for a 30% improvement in production line rate and a 20% reduction in material costs compared to its previous platform, reflecting its efforts to enhance efficiency and reduce expenses.

Rivian has also revamped its R1 pickup and SUV models, increasing prices slightly while maintaining competitive starting points for the R1S and R1T. The updated models are expected to drive higher revenues and support Rivian's goal of achieving positive gross profit per vehicle by the fourth quarter. While Rivian continues to face challenges, the company’s strategic initiatives and strong cash position provide a foundation for potential future growth.

Is Rivian a Strong Buy?

Several analysts are bullish about RIVN’s prospects, pointing out that its strong financial backing makes it a solid long-term bet. Despite facing challenges in scaling up operations, the company’s substantial cash reserves and strategic investments in expanding production capacity, like the new Georgia facility set to produce 250,000 vehicles annually by 2025, make its future promising.

With over 90,000 pre-orders for its R1T and R1S models, we can see that the consumer demand remains strong. Plus, the upcoming R2 platform is set to attract even more customers. So, while there are short-term bumps in the road, Rivian’s strong financial position and strategic moves suggest it’s well-positioned for long-term success. For investors ready to look past the immediate challenges, RIVN could be a great addition to your portfolio.

Bitcoin Flirts with $65,000, Consider These Tech Giants with Crypto Exposure

Posted on by The INO.com Team

Bitcoin recently touched the $65,000 mark, its highest in almost three weeks, driven by a surge in demand for U.S. exchange-traded funds (ETFs) and growing speculation that the Federal Reserve might soon ease its monetary policy. The world’s largest cryptocurrency briefly touched $65,050 during Sunday’s trading session before pulling back to just below $64,000 on Monday. Bitcoin has risen over 10% since the past week, the largest increase since mid-July.

The crypto market took notice after Fed Chair Jerome Powell hinted at the possibility of lowering benchmark interest rates from their current two-decade highs. This signaled a potentially more favorable liquidity environment for global markets, sparking optimism among investors. Following Powell’s comments, Bitcoin prices soared, and ETFs saw a net inflow of $252 million, the largest in over a month.

Bitcoin’s market cap currently stands at $1.242 trillion, with the cryptocurrency maintaining a 56.3% dominance in the market. While the short-term outlook may seem uncertain, the long-term trend for Bitcoin and the broader crypto market remains positive.

With Bitcoin prices still hovering around $60,000, the broader crypto market remains hot, keeping investor interest high. Buying Bitcoin directly is one option for those looking to ride the crypto wave. But if you’re seeking more conventional routes to gain exposure, tech giants like Block, Inc. (SQ) and PayPal Holdings, Inc. (PYPL) offer intriguing opportunities to tap into the cryptocurrency boom without diving headfirst into the volatility of digital currencies.

PayPal’s Digital Wallet Gets a Crypto Upgrade

PayPal is widely recognized as a leader in digital payments, with over 400 million users globally. Whether you’ve used it to shop online or send money to a friend, PayPal has become a trusted name in secure digital transactions. Beyond its core offerings, the company owns Xoom, an international money transfer business, and Venmo, a peer-to-peer money app.

In 2020, PayPal entered the crypto space, allowing users to buy, sell, and hold crypto assets. Initially, customers couldn’t move their holdings off the platform, but that changed as the company evolved its crypto services. Today, users can seamlessly buy, transfer, and sell cryptocurrencies like Bitcoin, Ethereum, Litecoin, and Bitcoin Cash within and outside of PayPal’s ecosystem. This move has firmly positioned PYPL as a crypto adopter among fintech giants.

While PayPal’s earnings reports don’t always spotlight its crypto activities, the numbers tell an impressive story. In the second quarter, PYPL reported revenue of $7.89 billion, surpassing expectations and reflecting a 9% increase year-over-year. The company’s peer-to-peer payments grew for the first time in three years, with Venmo leading the charge with an 8% increase.

Although PayPal doesn’t disclose specific crypto holdings, its total payment volume grew 11% to $416.8 billion, with non-GAAP net income rising 28% from the prior-year quarter to $1.24 billion. Also, the company’s non-GAAP EPS stood at$1.19, up 36% year-over-year.

Moreover, PayPal’s stablecoin, PYUSD, has gained significant traction, reaching a market capitalization of over $1 billion just a year after its launch. This impressive growth explains why the company isn’t shouting about its crypto ventures from the rooftops; its success in the space speaks for itself.

For investors, there’s more good news. PYPL has increased its planned share buybacks from $5 billion to at least $6 billion this year, a move likely to boost the value of remaining shares. With its massive scale and strong user base, PayPal is well-positioned to bridge the gap between traditional finance and the rapidly evolving crypto ecosystem.

As the company continues to integrate crypto into its offerings, there’s potential for shares to soar even higher. If you’re bullish on the intersection of fintech and crypto, PayPal is definitely a stock to watch.

Block, Inc. (SQ) Shows High Crypto Ambitions

Block, formerly known as Square, has established itself in the fintech space, and its crypto ambitions are front and center. The company, which operates through its Square platform and the peer-to-peer app Cash App, has fully embraced the blockchain revolution.

Cash App is SQ’s direct competitor to Venmo, allowing its 50 million users to engage in various crypto transactions. But Block isn’t stopping there. It’s leveraging its Square platform to accept cryptocurrency payments, offering merchants a seamless way to integrate digital assets into their transactions.

On top of that, the company is driving innovation through its TBD and Spiral divisions, which are focused on creating open-source tools to accelerate blockchain adoption. Even its music streaming service, Tidal, is exploring blockchain for copyright management, potentially transforming how the industry handles royalties.

Despite a 16% decline in stock price year-to-date, driven by concerns over revenue growth and macroeconomic pressures, the company remains focused on long-term crypto initiatives. SQ’s second quarter results were a mix of ups and downs, with revenue of $6.16 billion falling short of the Street’s estimate of $6.30 billion but an adjusted EPS surge of over 132% year-over-year to $0.93, far exceeding analysts’ forecasts.

The company reported a net income of $189.87 million compared to a loss of $105.38 million in the previous year. Block has also been actively returning capital to shareholders, announcing a $3 billion share buyback program and repurchasing over $390 million in the second quarter alone.

While Block’s top line has been inconsistent, its strong financial footing and deep involvement in Bitcoin initiatives make it a compelling option for long-term investors. If you believe in the growth of crypto, Block offers a unique and multifaceted exposure that few other stocks can match.

Why DELL Could Be a Big Winner in the AI Cloud Spending Boom

Posted on by The INO.com Team

As the tech world grapples with the ebb and flow of generative AI hype, one thing remains clear: the major players are doubling down on their investments. Despite a nearly 15% drop in the Nasdaq since July’s highs and concerns about a potential repeat of the dot-com bubble, the tech giants aren’t flinching.

The second-quarter earnings season revealed that major technology companies like Amazon.com, Inc. (AMZN), Microsoft Corporation (MSFT), Alphabet Inc. (GOOGL), and Meta Platforms, Inc. (META) are more bullish than ever, continuing to fuel their AI ambitions with hefty investments. Together, these companies have poured around $40 billion into cloud computing, with a significant portion allocated for GPUs and other AI-related tech.

For example, the partnership between Microsoft and OpenAI has sparked a massive capital expenditure (CAPEX) buildout and triggered a surge in demand for GPUs. So far, enterprise adoption of generative AI has mostly involved exploratory projects within the public cloud.

Following the release of second-quarter results by these tech behemoths, Susquehanna analyst Mehdi Hosseini raised his 2024 global capital expenditure forecast for the top 12 cloud computing providers by 3%, bringing the total to $192 billion, up by 55% from last year. And if that wasn’t robust enough, Hosseini predicts spending will rise by another 40% to 42% in 2025.

Amid this surge in AI investment, Dell Technologies Inc. (DELL) is emerging as an unexpected contender. Traditionally recognized for its personal computing products, Dell is now aggressively expanding its footprint in AI and cloud computing. With the growing need for data centers and advanced cloud solutions, Dell’s strategic shift positions it well to benefit from this boom.

So, could DELL be a major winner in the AI revolution? Let’s find out.

Dell’s Strategic Position in the AI Server Market

Dell Technologies has evolved far beyond its origins as a producer of Windows-powered PCs. While high-end laptops and gaming stations remain significant, Dell’s focus has increasingly shifted toward becoming a leading player in the AI and cloud infrastructure space.

The company’s extensive portfolio includes everything from data centers to edge computing solutions, positioning it as a versatile player in the tech world. DELL’s infrastructure solutions are particularly noteworthy, as they cater to the growing demand for advanced AI computing power. The company has built a strong reputation for assembling efficient, high-performance data centers, a crucial asset as AI and machine learning drive demand for robust computing infrastructure.

Moreover, Dell’s partnerships with major cloud providers and tech giants like NVIDIA Corporation (NVDA) underscore its critical role in the AI ecosystem. NVDA’s endorsement of Dell as a premier solution for building data centers is a testament to its capabilities. The “AI Factory” initiative, highlighted by Nvidia CEO Jensen Huang, marks DELL as a leading player in the transition to AI-accelerated computing environments.

The company’s infrastructure solutions segment, which generated $4.3 billion in operating income last year, stands to benefit immensely from the accelerating demand for advanced AI computing systems. This growth potential is reinforced by the company’s strategic focus on high-performance servers and storage solutions tailored for AI applications.

In the first quarter ended May 3, 2024, DELL’s net revenue increased 6% year-over-year to $22.24 billion, exceeding the analysts’ expectations of $21.65 billion. Its Infrastructure Solutions Group’s (ISG) revenue stood at $9.23 billion, up 22% year-over-year. Thanks to strong demand across AI and traditional servers, the company’s servers and networking revenue grew 42% from the year-ago value to $5.47 billion.

On the bottom line, DELL’s net income and EPS came in at $955 million and $1.32, indicating an increase of 65% and 67% from the prior year. The company returned $1.10 billion to shareholders through share repurchases and dividends, ending the quarter with $7.30 billion in cash and investments.

Dell’s consistent ability to meet or exceed expectations, coupled with its aggressive cash returns to shareholders, has proven to be a winning strategy. This, along with its strong positioning in AI, has driven the stock price to more than double over the past twelve months. Shares of DELL have surged more than 45% year-to-date and nearly 95% over the past year.

As companies invest more in AI computing systems, the company’s infrastructure solutions are expected to see substantial growth. With tens of billions, potentially even hundreds of billions of dollars up for grabs, DELL is well-positioned to capture a significant share of this expanding market. If it continues to leverage its partnerships and infrastructure expertise, it could emerge as a major beneficiary of the AI boom, making it an intriguing stock for investors to consider.

Could Babcock & Wilcox (BWXT) Benefit from China's Nuclear Revolution?

Posted on by The INO.com Team

Thorium, a slightly radioactive, silvery metal, is found abundantly in nature: three to four times more than uranium. Despite its abundance, thorium has seen limited use in industry or power generation because it isn't directly a nuclear fuel. However, its potential to create fissile material makes it a promising candidate for long-term energy solutions.

Upon recognizing this potential, China has been quietly working on developing a molten salt nuclear power plant fueled by thorium. The project has been in the works for years, with a prototype reactor unveiled in 2021. Now, China aims to bring the world’s first thorium-fueled molten salt reactor online by 2025 in the Gobi Desert, promising a safer and greener alternative to traditional nuclear power. Experts estimate that China’s thorium reserves could power the nation for 20,000 years.

By 2029, China plans to make the Gobi Desert reactor fully operational, generating 60 megawatts of power, with commercial reactors potentially following by 2030. Moreover, the country aims to have 150 advanced reactors in operation by 2035, far outpacing the United States, which currently has 93 reactors. According to a study by the Information Technology & Innovation Foundation, the U.S. could lag China by up to 15 years in developing advanced nuclear technologies.

The global energy landscape is shifting as China races to establish itself as a leader in next-generation nuclear technology. One company well-positioned to benefit from this nuclear revolution is BWX Technologies, Inc. (BWXT).

With a history dating back to the 1850s and a legacy of innovation in the nuclear industry, BWXT is well-positioned to capitalize on the growing interest in thorium reactors. In 2015, BWXT sharpened its focus on government and nuclear operations by spinning off its power generation business, allowing it to zero in on opportunities like those emerging from China's ambitious plans.

BWXT’s Strategic Moves in the Nuclear Landscape

Over the past few months, Babcock & Wilcox has been actively capitalizing on the rising interest in nuclear technology, driven by global security needs, clean energy initiatives, and medical advancements.

The company's subsidiary, Nuclear Fuel Services, Inc., recently secured a contract with the National Nuclear Security Administration (NNSA) to conduct a yearlong engineering study to explore deploying a centrifuge pilot plant to establish a domestic uranium enrichment capability for national security purposes. Given BWXT's specialized infrastructure and expertise in handling uranium, this aligns perfectly with their strategic focus on strengthening the nuclear fuel cycle for defense purposes.

On the medical front, BWXT Medical Ltd., another subsidiary, has entered into a Master Services Agreement (MSA) with NorthStar Medical Radioisotopes, LLC. This partnership focuses on producing actinium-225 (Ac-225), a vital medical isotope in targeted cancer therapies. The collaboration underscores BWXT's commitment to advancing medical technologies, particularly cancer treatment and diagnostic imaging.

Moreover, on June 6, the company was awarded the second phase of a contract with the Wyoming Energy Authority to evaluate the feasibility of deploying small-scale nuclear reactors in Wyoming to bolster the state’s energy resilience. Further expanding its technological reach, BWXT, in collaboration with Rolls-Royce, secured funding from the UK Space Agency’s International Bilateral Fund (IBF). This $1.5 million award supports joint efforts to advance nuclear fission systems for space missions, a venture that could benefit both UK and U.S. space programs.

Earlier this year, Babcock & Wilcox made a significant investment in expanding its Cambridge manufacturing plant in Canada. The C$80 million ($59.28 million) expansion is expected to increase the facility’s footprint by 25%, enhancing its capacity to meet the growing demand for nuclear components, including those for Small Modular Reactors and advanced reactors.

Together, these developments demonstrate the increasing appetite for nuclear solutions across the global security, clean energy, and medical markets, ultimately driving growth opportunities for BWXT.

Bottom Line: Should You Invest in BWXT?

Financially, Babcock & Wilcox is on a solid footing. In the second quarter of 2024, the company reported a revenue of $681.50 million, up 11% year-over-year and above the analysts’ expectations of $639.19 million. On the bottom line, its non-GAAP attributable net income amounted to $75.40 million or $0.82 per share, indicating an increase of 26% from the prior year. It also surpassed the consensus EPS estimate of $0.74 per share, which is impressive.

Buoyed by this performance, BWXT raised its EPS guidance for 2024 from $3.05 - $3.20 to $3.10 - $3.20, signaling confidence in its trajectory. The company’s diverse footprint across nuclear technology sectors gives it a broad runway for growth. It is well-positioned to capitalize on major trends, such as extending reactor lifespans, securing nuclear fuel processing contracts, and leading clinical trials for cancer treatment radioisotopes.

Positioned as a leader in nuclear technology, BWXT benefits from trends in defense, energy, and medicine. Its strong presence in defense, particularly in submarine construction, aligns with the growing need for green energy and medical radioisotopes. Analysts remain optimistic about BWXT's long-term prospects, citing robust demand in naval shipbuilding, nuclear propulsion, and potential government contracts, supporting a Buy rating with price targets around $113-$115.

With BWXT outpacing the market with gains of over 32% so far this year and nearly 40% over the past 12 months, now could be an opportune time to consider adding this stock to your portfolio.

NVDA’ Blackwell Delay: Is It Time to Rotate Into AMD?

Posted on by The INO.com Team

NVIDIA Corporation (NVDA), the AI darling, recently hit a rough patch. A report from The Information revealed that Nvidia’s highly anticipated Blackwell series chips are delayed due to design flaws, causing a sharp 15% drop in the stock over the past week. Even with this dip, the stock is still up more than 170% over the past year, but as we know, past performance isn’t a guarantee of future returns.

So, what’s going on with Nvidia? And more importantly, is it time to consider alternatives?

Dark Clouds Are Looming Over the Future of Nvidia

Back in March, NVDA announced its Blackwell series, boasting capabilities that promised to build and operate real-time generative AI on trillion-parameter large language models at a fraction of the cost and energy consumption of its predecessor. But fast forward a few months, and the picture isn't as rosy.

According to the report, the company has informed major customers, including tech giants like Alphabet Inc. (GOOGL) and Microsoft Corporation (MSFT), that shipments of its Blackwell AI accelerator will be delayed by at least three months due to design flaws. It appears to involve Taiwan Semiconductor Manufacturing's new packaging technology, which NVDA is one of the first to use, and issues with the placement of bridge dies connecting two GPUs.

This isn’t just a minor hiccup. The delay could throw off the plans of customers such as Microsoft and Meta Platforms, Inc. (META), who have invested billions in Nvidia’s new GPUs to drive their AI services. The worry is that these delays might prevent these companies from deploying large clusters of the new chips in their data centers by the first quarter of 2025, as they had hoped.

Design flaws aren’t something that can be fixed overnight, which explains the significant delay. Nvidia, for its part, hasn’t outright confirmed or denied the delays but did say that “production is on track to ramp later in 2024.” However, with only a few months left in the year, this sounds more like an early 2025 release.

The delay has led tech companies to look for alternatives from NVDA’s competitors, such as Advanced Micro Devices, Inc. (AMD). MSFT and GOOGL, for example, are already working on next-generation products with AMD.

While Nvidia still dominates the data center GPU market, the Blackwell delay could weigh on its stock price and reputation. It’s arguably the most significant setback NVDA has faced since the AI boom began, and it might just be the moment for AMD to shine.

The Future of Advanced Micro Devices

With a market cap of $3.18 trillion, NVDA’s growth prospects seem more limited compared to AMD, which could see its valuation double from its current $250 billion as it gains momentum in the data center space.

In the second quarter, AMD’s data center revenue surged 115% year-over-year to $2.83 billion, accounting for nearly half of its total revenue. The Mi300 series brought in over $1 billion in quarterly revenue for the first time, with its customer base expanding as Microsoft became the first cloud provider to offer general availability for the Instinct Mi300X.

The significant increase in AMD’s data center sales, driven by AI applications, is expected to boost profits further, as this segment typically yields higher margins. Additionally, the company's recent acquisition of Silo AI, Europe's largest private AI lab, will enhance its capabilities in generative AI, including inference, training, and large language models.

Furthermore, Advanced Micro Devices’ client revenue rose 49% year-over-year to $1.49 billion, though with slimmer margins than its data center business. The recent drop in the gaming and embedded segments will likely bottom out soon, potentially lifting overall results. Even modest gains could significantly boost AMD's bottom line. The company reported net income of $265 million or $0.16 per share, up from $27 million or $0.20 per share recorded last year.

Investors are keen to see AMD challenge NVDA with its MI300X AI chip and demonstrate growth in its data center AI business. On the other hand, Street expects its revenue and EPS for the current year (ending December 2024) to increase 12.9% and 27.6% year-over-year to $25.62 billion and $3.38, respectively. If AMD can exceed expectations, the stock could experience significant gains in the coming months. Earlier this year, the company projected $4 billion in AI chip sales for 2024, representing about 15% of its expected revenue.

Is It Time to Ditch NVDA and Buy AMD?

Delays in Blackwell chip could impact NVDA’s market share and growth. If the delay is short, the stock might have minimal impact on its fiscal 2025 results. However, if it extends beyond three months, it could weigh heavily on the stock, especially as some analysts were anticipating a quicker resolution.

Additionally, concerns about whether the design flaw could lead to chip failures or affect production yields add to the uncertainty. Nvidia's decision to pause production and address the issue is a smart move, but it highlights the risks of its aggressive development timeline, which has been shortened from two years to one. While this strategy could pay off, it also increases the risk of errors or delays.

On the other hand, AMD is well-positioned to benefit from NVDA's ongoing headwinds. With its MI300X AI chip gaining traction and strong data center growth, Advanced Micro Devices could capture some market share from Nvidia. Given this backdrop, it might be the right time to consider rotating out of NVDA and into AMD, especially for investors looking to capitalize on the AI-driven growth in the semiconductor sector.