Stock Market: Inflation & Nvidia This Week

Inflation

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AJ Bell's stock market analysts predict that the UK market will be influenced greatly by April's inflation figures this week. Meanwhile, Nvidia (NASDAQ: NVDA) will be reporting its numbers as the earnings season for mega-cap tech stocks comes to an end.

Inflation in the UK has been high for seven months compared to other G7 economies. The Office for National Statistics will release the CPI numbers for April on Wednesday.

As we head into summer, prices are expected to go up, but at a slower rate. This is because the cost of oil and gas has been dropping for a while now. However, they are still much higher than in previous years. This reduced cost will greatly benefit consumers who are struggling to manage their finances.

Cornwall Insights says bills will drop by £450 this July. The cost of food is also rising less. Food prices have been causing inflation to go up recently.

The market is hopeful that if inflation has peaked, interest rates will also have peaked. This is just a theory though.

I still think inflation is starting to take root in the economy.

Mervyn King, former BoE Governor, said Covid caused more demand for scarce goods and services. Interest rates going up last year made demand in all areas go down. However, what about shortages for essential things? Banks can make more money, but can't make energy.

After Covid, governments are using fiscal spending more. The Inflation Reduction Act 2022 in the US might spend $2trn over the next ten years.

As more money goes towards building infrastructure, the need for hydrocarbons will increase. However, this is happening while government policies, influenced by ESG goals, could cause a lack of supply. This might result in inflation returning.

Nvidia is a good indicator of the global economy's health. They make silicon chips found in many devices.

Last year, it fell a lot because the Fed raised interest rates. This happened to other big companies too. But this year, it's doing much better. It has doubled in value since it was at its lowest.

The company spent a lot of money lately. They bought Mellanox, which made them more competitive. But, they couldn't buy ARM because of the regulators. They're putting a lot of money into AI.

Even though, I have concerns. The recent numbers were not good. Sales dropped by 20% compared to last year and there are too many products in storage. In case the world economy worsens, the shares might decrease considerably.

Some people think big companies are safe during a recession, but I don't agree. Nvidia's worth too much, and other similar stocks aren't growing enough for their high prices. If inflation is worse than we think, then interest rates might go up and affect the market.

This week's stock market update is about inflation and Nvidia. It's from The Motley Fool UK website.

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Andrew Mackie doesn't own any of the shares mentioned. The Motley Fool UK suggests Nvidia. The writer's opinion on these companies may not match the recommendations made in our Share Advisor, Hidden Winners, and Pro subscription services. We think it's important to consider different opinions to improve as investors.

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