Market Highlights: AI stocks on fire as Nvidia hits $1 trillion market cap; oil and coal prices tumble

Local shares are set to open higher on Tuesday, after Nasdaq climbed
AI stocks have once again fuelled the rally
Oil and coal prices have tumbled

Aussie shares are set to open lower after a mixed session in New York. At 9am AEST, the ASX 200 index futures was pointing down by -0.5%.

Overnight, Wall Street returned from a long weekend as the S&P 500 index closed flat and Nasdaq rose +0.32%.

Chipmaker Nvidia was up another 3% and briefly crossed the US$1 trillion market cap, before pulling back slightly.

Nvidia is benefiting from an AI frenzy that has taken hold since ChatGPT came to the scene. UBS estimated that developing ChatGPT took 10,000 Nvidia chips.

Other stocks related to AI also rose, including Palantir which gained 8%, and C3.ai Inc which surged more than 33%.

Separately, US consumer confidence slipped in May to a six-month low, while US home prices increased month over month.

Investors are now closely watching for the debt ceiling deal to get over its next hurdle, which is an approval by Congress.

The risk for the market is that Congress could bring us more drama and take us to the very end of the 11th hour.

“The passage could be delayed until right before Treasury Secretary Yellen’s current X-date of June 5th,” said Oanda analyst, Edward Moya.

How to diversify your dividends base

The drop in local dividends has the potential to become more acutely felt as Australian investors become ‘over-exposed’ to a smaller number of sectors.

That’s the view from Tim Richardson, investment specialist at fund manager Pengana Capital Group.

The ‘hot’ sectors for dividends on the ASX are now cooling, while overseas dividends delivered record highs for the first quarter of 2023.

Richardson said 80% of Aussie dividends come from just four sectors – materials, financials, energy, and property.

“This concentration needs to be factored into diversification and performance analysis,” he said.

Richardson said Aussie investors are reluctant to buy into global equities because those stocks do not generally pay attractive dividend yields, nor do they generate Australian franking credits.

He offered one alternative.

“Aussie investors can diversify into global dividends with franking credits if they go through an LIC, which pays taxable income in Australia.”

One ASX-listed LIC (listed investment company) is Pengana International Securities (ASX:PIA).

“As an Australian company, PIA pays tax on its taxable income, thereby generating franking credits, which can then be passed on to investors when PIA pays its quarterly dividends,” he said.

In other markets…

Crude prices slumped by -4% overnight, with WTI now trading at below US$70 at US$69.65 a barrel.

Oil is on the ropes as this week will likely contain further confirmations that China’s recovery is struggling, and the Fed to deliver more tightening.

Benchmark Newcastle coal futures also plunged 12% on Tuesday on softening demand from key markets like China, India and North Asia.

Gold jumped 1% to US$1,959.11 an ounce.

“If the economy proves to be too resilient and the risk of two hikes grows, that could limit gold’s gains,” said Moya.

Bitcoin was up +0.5% in the last 24 hours to US$27,733.

5 ASX small caps to watch today

Good Drinks Australia (ASX:GDA)
GDA announced it has sold 15 gaming licences, raising $4.9m in cash. The gaming licences were part of the $5.3m acquisition of “Joe’s Waterhole” in November 2021, and as the licences are no longer required, the sale will now fund the majority of the current redevelopment into Matso’s Sunshine Coast, with a targeted opening date of October. GDA also gave a trading an update, and said that sales continued to outperform the broader beer market to record 5.2% growth (total beer market down 7.9%, craft beer category steady).

Betmakers Technology (ASX:BET)
After four months of cost cuts, Betmakers said staff and operating overheads are expected to reduce from $91.5m (H1 FY23) to approximately $70m. Total number of employees is projected to be approximately 440 in Q1 FY24, compared with 568 as at 31 December 2022. The reduction in cost is primarily driven by restructuring of global operations and technology.

Legacy Iron Ore (ASX:LCY)
LCY said it has been granted a mining licence by the WA government for the Mount Celia Gold project, which will be key to ongoing steps towards production. Located 95km south of Laverton, the Mt Celia project comprises the Kangaroo Bore and Blue Peter deposits. The granting of the Mining Lease follows the signing of a Native Title Agreement with the Nyalpa Pirniku people, the traditional owners of the land.

Dynamic Metals (ASX:DYM)
Three exploration licences have been granted within the Widgiemooltha Project, providing an additional 220km2 of highly prospective land for lithium, nickel and gold exploration. The licence adds 20km of prospective strike adjacent to Essential Metals’ (ASX: ESS) Dome North lithium project that hosts a Mineral Resource of 11.2Mt @ 1.2% Li2O2. Dynamic says it is fully funded for exploration across its critical minerals portfolio with $5.62m cash.

SRJ Technologies (ASX:SRJ)
YTD revenues so far in CY23 total £1m ($1.8m), which has exceeded full year revenue in FY22 of £932k ($1.7m), with seven months still to run. SRJ has secured its strongest ever sales for a reporting period, with a month to go, with orders for Q2 CY23 currently worth $1.3m.

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