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Hey Money Maniacs,

Welcome back to another edition of 5 Fact Friday! Here are this week’s biggest stories in the world of money:

1. Nvidia surpasses Google and Amazon 🚀

In 2024 alone, Nvidia has added more than $700 billion to its market cap. Yes, that’s billion with a big ol’ capital B.

In other words, the company has grown by one Tesla, two Costcos, or three McDonalds over the past ~40 trading days. It is now the 3rd most valuable company on Earth, after passing Google and Amazon earlier this week.

The Money Maniac named it 2023’s stock of the year. Goldman Sachs, not to be outdone, called it “the most important stock on planet Earth.”

But what exactly does Nvidia do?

Nvidia designs and sells graphic processing units (GPUs). These high-powered chips are used for gaming, cryptocurrency mining, and most recently, AI models.

What’s all this hype about?

Since ChatGPT’s launch in November 2022, demand for Nvidia’s market-leading AI chips has gone parabolic. As a result, the company is experiencing incredible revenue and profit growth.

In Q4 2023, the company reported $22.1 billion in revenue, up 265% from a year earlier. Plus, their earnings skyrocketed to $4.93 per share, up 765% from a year earlier.

Is the stock price justified?

Now that’s a $2 trillion question.

Nvidia is not without rivals. Both Intel and AMD are in the race, and tech giants like Amazon and Google are beginning to craft their own chips. But for now, Nvidia holds a dominant market position with more than 70% of global AI chip sales.

The company’s price-to-earnings ratio sits at a lofty 65x — nearly three times the S&P 500’s ~23x.

But will Nvidia’s earnings continue to grow at more than three times the rate of the market’s? If so, this stock will be hard to bet against.

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2. ETH briefly crosses $3,000 📈

Bitcoin isn’t the only cryptocurrency benefitting from its recent ETF debut.

Ether (ETH) recently crossed the $3,000 mark for the first time in nearly two years. The native token of the Ethereum network is now up 30% year to date, outperforming Bitcoin's ~23% increase.

Traders seem to be betting that Ether could be next in line for a U.S.-approved ETF. An approval could boost ETH's appeal among more conservative, institutional investors, potentially unlocking billions in new demand.

Brokerage firm Bernstein estimates “a 50% chance of ETF approval by May and a near-certain probability within the next 12 months.”

This optimism is grounded in the belief that institutions like Fidelity and Blackrock now know how to navigate the SEC’s approval process, and that Ether is the only other “blue chip” digital asset.

While BTC is often likened to digital gold, serving primarily as a store of value, ETH is viewed as digital silver, with a wider range of transactional uses.

As Ether continues to flirt with the $3,000 threshold, the crypto community is watching closely.

The SEC has until May 23rd to respond to the first wave of applications. And in the 3 months leading up to Bitcoin’s approval, its price rallied 70%.

3. Jeff Bezos sells more Amazon stock 🤨

Jeff Bezos recently completed his 50 million share selling spree. The Amazon founder and former CEO cashed out a cool $8.5 billion over the past two weeks.

His trading plan was adopted in November 2023 and created a window for the stock sale through January 2025. However, it appears the billionaire didn’t wait long.

Bezos didn’t provide a reason for the sale, but it’s worth noting the timing of his last two major sell-offs.

February 2020

Just before the Covid-19 pandemic sent shockwaves through the global economy and stock markets plummeted, Bezos suddenly sold $3.4 billion worth of Amazon shares.

Although this sale only represented ~3% of his holdings, it amounted to more than he had sold in all of the previous year.

November 2021

In 2021, stock sales by executives and insiders increased by 30%. Bezos himself sold $10 billion worth of shares that year, with nearly $3.5 billion coming in mid-November.

Once again, the founder narrowly avoided a precipitous drop—with the stock market peaking just one month later. In 2022, Amazon’s share price dropped 50% and the S&P 500 fell 20%.

February 2024

The backdrop to Bezos' latest divestiture is last month’s dip in consumer spending, a critical engine of the U.S. economy.

This raises the question: Does Bezos know something we don’t? 🤔

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4. Capital One buys Discover 👀

Sometimes one plus one equals three, and that’s exactly what Capital One is hoping for as it acquires Discover.

The $35.3 billion all-stock deal offers Discover shareholders a ~26% premium on their holdings. If the deal closes, Capital One shareholders will own 60% and Discover shareholders will own 40% of the combined entity.

This deal would create the largest U.S. credit card giant, boasting over $257 billion in outstanding loans (well past J.P. Morgan's $211 billion).

But most importantly, the deal promises synergies—the real key to creating value. In this case, the synergies come in the form of cost savings.

There are only four major card networks in the United States: Visa, Mastercard, American Express, and Discover.

Upon closing, Capital One plans to immediately switch its debit cards and gradually switch its credit cards over to the Discover rails. This move will allow the company to sidestep the ~1% network fee currently collected by Visa and Mastercard, saving an estimated $1.5 billion per year by 2027.

There’s just one thing in the way: regulators.

The Department of Justice and Federal Trade Commission have hammers, and lately, all they see are nails.

Although Discover’s share price is up 10% since the announcement, the stock does not yet reflect the full value of the deal. This indicates some skepticism on Wall Street that the deal will close successfully.

5. Asset Classes: Volume 1 - Stocks

Big news, maniacs! Fact 5 is getting a facelift. For the next few weeks, this final segment is dedicated to teaching Finance Fundamentals.

We're kicking things off with a deep dive into asset classes. Buckle up, because our first stop is… stocks!

What is a stock?

A stock is a share of ownership in a company. When you purchase common stock on an exchange like the New York Stock Exchange or Nasdaq, you become a partial owner of that company which entitles you to certain voting and economic rights.

Generally, shareholder rights entitle you to:

• Dividend payments

• A vote at shareholder meetings

• Part of the company's success (through price appreciation)

Why invest in stocks?

The primary allure of stocks is the potential for sweet, sweet returns.

Over the long run, the S&P 500 has delivered an average annual return of around 10%, significantly outperforming inflation and other asset classes like bonds, cash, and real estate.

Why not invest in stocks?

Stocks can be quite volatile, and stock picking is exceptionally difficult. Luckily, these drawbacks can be managed if you have a long enough time horizon.

How to reduce your risk

To manage volatility, diversify your portfolio across a wide range of industries (i.e. not all tech stocks) and asset classes. The less correlated your investments are, the fewer wild swings your portfolio will have to endure.

To get past the challenge of stock picking, consider investing in low-cost ETFs. Individual stocks let you bet on the fortunes of a single company, while ETFs spread your risk across a basket of stocks.

For many investors, ETFs not only protect their downside but also give them the confidence to start investing.

What kinds of ETFs are there?

There are nearly 10,000 ETFs available in the United States. These funds offer exposure to:

• Indices like the S&P 500 or the Dow

• Sectors like tech, health care, energy, and financials

• International markets

• And much more

That’s a wrap on volume one! Who knows where we'll go next? (Spoiler alert: It's probably bonds.)

Thanks for tuning into this week's edition!

What did you think of the first Finance Fundamentals series? Tap a rating button below and let me hear it!

For more, check out my latest blog post titled: 9 Clever Investment Planning Tips To Maximize Your Wealth

Until next time,
Daniel

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.