FTSE 100 slides as debt ceiling concerns remain, Nvidia is a big AI winner and Pets at Home outlines new growth plan

“The FTSE 100 continued to lose ground on Thursday as the US debt ceiling crisis remained unresolved with the beginning of June deadline rapidly approaching,” says AJ Bell Investment Director Russ Mould.

“Asian markets hit two-month lows as investors looked for safe haven assets in an attempt to build some insurance into their portfolios. This is aimed at protecting against the still unlikely risk that the US defaults on its debt.

“While the chances of such an event remain slim the consequences could be cataclysmic so it is not a risk markets can afford to ignore.

“A reduction in the Ofgem price cap offered a modicum of relief to UK households, but bills remain some way above the level they were at before the energy crisis and consumers face increasing pressure on their budgets elsewhere from surging food and borrowing costs.”

Nvidia

“The AI revolution may be making a lot of noise but results from microchip firm Nvidia hint at some substance behind the hype.

“The company is one of the key businesses behind the infrastructure which is powering AI and its blockbuster earnings helped power the shares to a record high after the bell on Wall Street last night.

“It is striking just how strong demand is and Nvidia is having to really strain to keep up. Little wonder revenue in the current quarter is as much as 50% above analysts’ forecasts.

“These supply constraints allied to a customer base with deep pockets and big ambitions in the AI space is likely to convey considerable pricing power on Nvidia, notwithstanding competition from rivals like Micron and Intel.

“Nvidia is finding a bit of an edge thanks to its ability to build world-leading AI supercomputing systems rather than just chips. It’s increasingly clear that in the AI arms race Nvidia has a key part to play.”

Pets At Home

“Pet retailers are in a tricky situation. There is growing demand for such products and services as more people bring animals into their lives, yet cost-of-living pressures raise the risk that customers only buy what they really need and at the lowest price point possible.

“In the US, Petco has just confirmed the worst by saying its customers were focused on essentials rather than nice-to-haves. Understandably its share price sank on the news.

“That made investors nervous about what Pets at Home would report – but judging by its latest set of results, they needn’t have worried.

“The company continues to do incredibly well, with revenue and underlying profit up, a decent hike in the dividend, plans for a new share buyback, increased market share and more people becoming active VIP scheme members.

“Customers spend £160 on average a year with Pets at Home, but the most engaged spend £900 which implies it has significant scope to upsell products and services through greater interaction.

“A medium-term growth plan looks sensible and shows how Pets at Home is not simply about shifting a few tins of dog food or selling a family a fish tank. By offering the complete pet care package, from booking vet appointments to ordering prescriptions and arranging for animal grooming sessions, Pets at Home hopes to become the go-to place for any animal lover.

“A lot of its future success will be down to clever marketing, convincing people they need the full package and that Pets at Home is the right place to serve them. That explains why it is putting so much focus on data analysis, so it can better understand who actually shops with the business.”

These articles are for information purposes only and are not a personal recommendation or advice.