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From the beginning of June to late July, NVIDIA (NASDAQ:NVDA) was on the comeback trail. Nvidia stock went from $134 to $179 during this period.Source: Shutterstock Yet lately things have come undone. Of course, the overall market has been bearish and the situation with U.S.-China relations have deteriorated quickly. So yes, the Nvidia stock price has come under lots of pressure.In fact, for the past 12 months, the return is an awful -39%. This is certainly in stark contrast to the prior years when Nvidia could do no wrong.InvestorPlace - Stock Market News, Stock Advice & Trading TipsSo what now? Perhaps NVDA is an opportunity here? Well, on Thursday the company will report its results for the second quarter after the market closes, and this will certainly be an important one. * 15 Growth Stocks to Buy for the Long Haul Here's what the Street is looking for: * Revenues are forecasted to drop by 18% to $2.55 billion (keep in mind that the company's own estimate is for a range of $2.5 billion to $2.6 billion). * Earnings are expected to come to $1.14 per share.Even with the estimated decline on the top-line, NVDA still may have a challenge in beating the forecast. The data center business appears to still be languishing, especially given the impact from rival Advanced Micro Devices (NASDAQ:AMD). The gaming business also continues to have problems.Here's what Instinet analyst David Wong wrote:"With data-center (GPU) sales growing just 4% QoQ in the October 2018 quarter, then falling 14% sequentially in the January 2019 quarter and a further 7% QoQ in the April 2019 quarter (April 2019 down 10% YoY), we expect another YoY decline in data-center segment revenues in the July 2019 quarter and possibly again in the October 2019 quarter." Nvidia Stock Quarterly HighlightsNVDA definitely had an active quarter. Here are some of the notable announcements: * The company said that partners like Dell Technologies (NYSE:DELL), HP (NYSE:HPQ), Lenovo and BOXX will release ten new NVIDIA RTX Studio laptops and professional-grade mobile workstations. They will highlight new capabilities like real-time ray tracing, advanced AI and ultra-high-resolution video editing. * At the SIGGRAPH conference, NVDA announced that top software developers, such as Adobe (NASDAQ:ADBE) and Autodesk (NASDAQ:ADSK), have created over 40 applications for the RTX technology. * NVDA launched various new GPUs, including GeForce RTX 2060 SUPER, GeForce RTX 2070 SUPER and GeForce RTX 2080 SUPER, allowing for next-generation games. What's more, this core RTX technology will be used in the eagerly awaited game, Cyberpunk 2077 (it won over 100 awards at E3 2019). * The company entered a strategic alliance with Volvo Group for the development of autonomous trucks. * NVDA announced a breakthrough in AI language understanding, which should make it easier for businesses to engage with customer conversations. The company's AI platform can train one of the most sophisticated models, called BERT, in less than an hour -- making inferences in just over 2 milliseconds. Bottom Line on Nvidia StockThere's no doubt that NVDA has been prescient in leveraging its GPU expertise into markets beyond gaming, such as the data center and AI. The result is that the company has become a mega powerhouse in the chip industry.But the problem is that the competition is starting to take a toll. For example, companies like Qualcomm (NASDAQ:QCOM), Intel (NASDAQ:INTC), Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) and Amazon.com (NASDAQ:AMZN) are creating their own AI chips. There are also a myriad of startups, like Graphcore, that are gunning for the opportunity.In the meantime, the situation with US-China relations appears to be far from resolved. This is particularly troublesome for NVDA because it has about 23% exposure to China.So in light of all this, it's probably best to hold off on the stock ahead of this week's earnings report.Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 15 Growth Stocks to Buy for the Long Haul * 5 More Cloud Stocks With Plenty of Potential * 5 Clean Energy ETFs to Buy for 2019 The post It Looks Like a Tough Quarter for Nvidia Stock Ahead of Earnings appeared first on InvestorPlace.
(Bloomberg Opinion) -- Standard & Poor’s(1), Moody’s and Fitch Ratings, the biggest credit-ratings companies, were major causative factors in the financial crisis. Even free-market acolyte Alan Greenspan admitted as much. Little has changed since then, other than that enough time has passed to allow investors to forget this fact.I have been following this issue since 2007, so here is a brief history.With the economy still sluggish after the dot-com crash and 9/11, the Federal Reserve slashed interest rates to 1%. Bond managers were under intense pressure to generate yield. This sent them on a mad scramble to find investment-grade debt with higher returns.This is where the credit raters come in. Moody’s and S&P (Fitch was a relatively small player) slapped investment grade ratings on securities backed by junk subprime loans because they were literally paid to do so by debt issuers. Issuers shopped for ratings -- if Moody’s refused to provide a desired grade, then S&P would (and vice versa). When it all went south, the debt raters made feeble attempts to claim their ratings were "opinions," or protected political speech under the First Amendment. These arguments failed, eventually leading to fines for their malfeasance. S&P paid $1.5 billion to settle with the U.S. and individual states; Moody’s paid a much smaller fine.In the aftermath of the financial crisis, regulators concluded that the way to fix the problem of the raters' conflict-riddled, issuer-pays model was to introduce more competition. But this market-based solution seems to be no better; because the newcomers are hungry for business, their ratings tend to be even laxer. If anything, the solution has only made the conflicts of interest more apparent. To fix this problem requires a radical rethink of the business model. Here are some things regulators should consider:• Sell ratings to bond buyers, not bond issuers: The ratings companies date back to the panic of 1837. The defaults and bank failures that followed led to creation of new businesses to help rate the debt of merchants. During the 19th century, investors in railroads paid for information on the quality of the bonds they were buying, which is how S&P and Moody's got their start. In the 1970s, the raters began the practice of charging issuers for their services, displacing the subscriber-pays model. That the investor-pays model once prevailed suggests that under the right conditions and with the right incentives it could work again.• Assign and rotate rating companies randomly: After the many accounting scandal of the early 2000s -- Cendant, Computer Associates, Enron, WorldCom, Tyco, Adelphia, AOL, Global Crossing, Halliburton and many more -- a number of reforms were made to the accounting industry. Included in the Sarbanes-Oxley Act was the establishment of the Public Company Accounting Oversight Board, or PCAOB. This established new standards for independence, created audit rules and mandated quality control. Perhaps most importantly, it required whoever the lead partner was on an audit to rotate off that project every five years, reducing the tendency of those who are supposed to work at arm's length from getting too cozy.(2) The incentive to cheat was replaced with a high probability of getting caught. The result has been a dearth of the kind of accounting frauds that were so common in the late 1990s and 2000s.• Eliminate the government stamp of approval: The credit raters were granted special government dispensations in 1975, setting them up as the official arbiters of corporate credit quality. This unique status created a moral hazard, with raters facing few consequences for their actions; it is also what enabled the structural problem in the first place. Compare this situation to the equity side: the dot-com implosion taught stock buyers not to rely on Wall Street analyst ratings, which exist (mostly) for the benefit of investment bankers, not investors.The financial crisis should have taught the same lesson to bond investors. But there's still the imprimatur of government credibility to fall back on. If we eliminate that special status, the structural problem should disappear. At the very least, there should be some form of legal liability for misleading ratings.• Create stronger capital reserve standards: This is a big part of the problem: Higher credit ratings give banks and other financial companies cover for holding less capital. If more specific capital requirements were mandated, the need for AAA ratings would change dramatically; ratings would be explicitly structured for the benefit of bond buyers, and not the needs of the borrowers. Today, the ratings serve as a way for issuers to engineer their way to lower borrowing costs.As the Financial Crisis Inquiry Commission concluded in its autopsy of the crisis: “The three credit-rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval.”The ratings companies were broken in 2008; they are still broken today because post-crisis reforms didn't address the root problems. Don’t be surprised if it turns out that the credit raters provided some of the kindling the next time the financial system goes up in flames.(1) Disclosure: The original publisher of my book on the financial crisis, "Bailout Nation," was McGraw-Hill, which also owns S&P. After an editorialdisagreement about thechapter on the credit raters, including S&P, I withdrew my manuscript. The book was later published by Wiley.(2) Auditor rotation was abandoned under intense pressure from the accounting industry.To contact the author of this story: Barry Ritholtz at firstname.lastname@example.orgTo contact the editor responsible for this story: James Greiff at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Barry Ritholtz is a Bloomberg Opinion columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He is the author of “Bailout Nation.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Oil prices saw a significant spike on Tuesday morning as Washington announced that it would delay the 10 percent it had planned to place on some Chinese products