Nvidia CEO Jensen Huang. The rise of Nvidia might highlight what one analyst is calling a 'two-tier market'. Photo / Eric Risberg, AP
Nvidia CEO Jensen Huang. The rise of Nvidia might highlight what one analyst is calling a 'two-tier market'. Photo / Eric Risberg, AP
The ease with which Infratil raised $1 billion to fund expansion of its data centres has served to highlight what increasingly is looking like a two-tier sharemarket.
The infrastructure investor managed to raise the desired amount - about $650 million of which will be earmarked to fund growthin Australasian data centre company CDC. It’s an investment that has been extremely successful for the company.
Infratil expects the upcoming equity injection into 48% owned CDC to be sufficient to comfortably take it to three times its current capacity over the next four to five years, with the majority of this to be commissioned within the next two years.
CDC is in “advanced negotiations” to contract the entire capacity expansion and expects the revenue ramp-up to be faster than prior expansions.
“The magnitude of the capacity additions is broadly in line with our prior estimates, but the announced contract negotiations and confirmation of the timeline de-risks the next few years meaningfully,” Forsyth Barr said in a research note.
Harbour Asset Management portfolio manager Shane Solly said the capital raise, and the rise of Nvidia in the United States, highlighted what he saw as a two-tier market, which he said may herald the start of merger and acquisitions among the stocks left behind.
“With interest rates being where they are, investors are certainly being more circumspect about where they put their money.”
He said the long-term super money is going into companies like CDC, which has 15 to 20-year contracts with strong counter-parties.
“Deals like CDC have seen a crowding in at the top-tier of the market.”
Solly said the “haves and have nots” theme plays out on the international stage as well, as index-based funds rush into likes of Nvidia.
“We are certainly seeing a lot of money flow through to those bigger companies, which is causing a vacuum at the other end.
“Higher interest rates are exposing some companies to the risk of being left behind,” he said.
The fact that some companies have access to unlimited capital and others do not is creating polar opposites.
Solly sees M&A activity potential for those left behind. An example is the proposed merger of Capitol Health and Integral Diagnostics in Australia which, if successful, will create a company worth over $1b.
“Is there potential for more of that to go on? Yes, I think it’s possible.
“We are seeing a very stratified capital market, so if you are in the larger market cap stocks, you are seeing lots of investment flows from passive index-based investing, whereas at the smaller end of town you are not seeing that capital,” Solly said.
Kiwis pile into Nvidia
Nvidia's Silicon Valley campus, in Santa Clara, California. Photo / AP
Kiwis are getting in on the Nvidia action.
About 6% of Sharesies’ 650,000 users or around 39,000 individuals own shares in the chip maker which this week became the most valuable company in the world following its explosive share price growth.
According to Sharesies, Nvidia has climbed to sixth place in its Sharesies Bundle - which includes the 50 most-owned instruments on Sharesies - up 20 places since the end of 2023.
“We’ve seen growth of over 90% in [the] number of customers invested in Nvidia in 2024 and 16% growth since the end of May alone.”
Holding value has also increased by over 360% in 2024 and over 38% growth since the end of May, while the buy-to-sell ratios have been over 1.5 (meaning for each dollar sold, 1.5 is bought) per week in June.
“This means we’ve seen growth in holdings driven by more than just the growth in share price, but also due to more investors investing, and those investors buying up more Nvidia shares.”
The New Zealand Super Fund has also cashed in on investing in the stock. As of December 31 last year, our Crown superannuation fund had 771,114 Nvidia shares, worth around US$605m ($991m), or roughly five times its value in the fund’s June 2021 disclosure.
By May this year, it had upped its stake slightly to 778,519, which became 7,785,190 after Nvidia’s 10:1 stock split this month.
Nvidia has leapfrogged Microsoft and Apple to become the most valuable publicly listed company in the world, driven by demand for its chips and an intense interest in artificial intelligence.
EBOS down and out of index
EBOS has come off the boil after the stock dropped out of the influential MSCI indices last month.
With companies like Nvidia continuing to grow, some companies have become too small to feature in the indices.
Last year, EBOS lost a significant $2b supply contract with Chemist Warehouse.
Meanwhile, Australia’s competition watchdog, the ACCC, has outlined preliminary competition concerns with Sigma Healthcare’s proposed acquisition of Chemist Warehouse.
“This is a major structural change for the pharmacy sector, involving the largest pharmacy chain by revenue merging with a key wholesaler to thousands of independent pharmacies that in turn compete against Chemist Warehouse,” the ACCC said.
EBOS now trades at about $32.27 - down from last November’s peak of $38.60.
Umbers’ big payout
Former Ryman group chief executive, Richard Umbers. Photo / supplied
Former Ryman Healthcare chief executive Richard Umbers received a $1.525m payout for his sudden exit from the top job at the retirement village operator, its annual report shows.
Umbers resigned on April 19 with his departure announced to the stock exchange on April 22. His exit pay included $650,000 in salary, a further $650,000 in severance pay, and a short-term incentive payment of $225,000.
But he also missed out on bonuses totalling $1.615m - including a further $465,000 short-term bonus and up to $1.15m in medium-term bonuses. He gave up all future rights on his resignation.
Dean Hamilton, who became executive chairman on April 22 until a permanent chief executive is found, will be paid $1.2m annually for taking over the management of the company with a third of his after tax remuneration used to buy Ryman shares.
Hamilton has come on board to fix the business after its rough ride in recent years. Already the company has replaced half its board, pulled the pin on the development of a handful of villages and suspended its dividend until the 2026 financial year.
Ryman’s directors were paid a total of $965,361 for the 2024 financial year out of a total pool of $1.5m. Hamilton received $218,333 in fees while he was chairman of the board, before stepping into the executive position as well.
NZGIF backs Sunergise
The solar company Sunergise has received a a $10m lending facility from New Zealand Green Investment Finance, to increase its rollout of solar photovoltaic (PV) generation assets for commercial properties across New Zealand.
Sunergise has installed solar systems on 80 commercial sites already, with 50 of these being structured using power purchase agreements (meaning no upfront costs to the user).
This $10m lending facility will allow about 40 new installations to occur on commercial properties, with a focus on Auckland, Tauranga, New Plymouth and Wellington in 2024-25.
Sunergise began operations with the introduction of the world’s largest solar installation for a marina at Port Denarau in Fiji.
“NZGIF’s flexible financing is particularly beneficial to the unique needs of solar power developers like us, enhancing our efforts to drive the adoption of clean energy at scale across the country,” Sunergise chief executive Paul Makumbe said.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
