Dear Fellow Investor,
Good morning. Happy Sunday!
I hope you’re enjoying the weekend.
But first, let’s talk about two stocks that went in completely opposite directions this week.
On Thursday, Nike fell to a 13-year low.
On Friday, Nvidia hit an all-time high.
Same week.
Same stock market.
Same American economy.
If you’re like most people, you’re probably wondering how both of those things can be true at once.
Fair question. Let’s dig in.
What Happened to Nike
Nike reported earnings on Thursday after the close.
Revenue came in at $11.2 billion, down 4% from a year ago.
Sales in China fell 26%.
The company announced layoffs.
And the stock dropped to its lowest level since 2013.
That came just ten days after Nike was removed from the S&P 100 — after 18 years in the index.
Think about that.
Nike is one of the greatest brands ever built.
It still is.
Everybody on earth knows the swoosh.
But a famous brand and a great stock are two very different things.
Nike sells sneakers and shirts.
Those are things people buy when they feel good about their money.
When they don’t, they wait.
They wear last year’s sneakers for another season.
And in China, more and more shoppers are buying local brands instead.
Nike has to win every customer, every season, all over again.
What Happened to Nvidia
Now look at the other side of the week.
On Monday, Nvidia announced a record $150 billion share buyback.
Morgan Stanley named it its top pick.
And by Friday, the stock had hit an all-time high, within about $300 billion of a $6 trillion market value.
Its latest quarter brought in $96.2 billion in revenue.
$89 billion of that came from data centers alone.
Yes, Michael Burry — who I wrote about yesterday — owns puts betting Nvidia falls.
He may be right someday.
But as I keep saying, being right and being right on time are two different things.
The Difference Is the Rent
Here’s how I’d think about it.
Nike is a store.
Nvidia is closer to a landlord.
Every company racing to build AI has to go through Nvidia’s chips.
They don’t get to shop around very much.
That’s what pricing power looks like.
I’ve been doing this almost 35 years, and I’ve watched this movie too many times.
The money doesn’t follow the most famous name.
It follows whoever collects the rent.
And when times get tight — like they are for a lot of Americans right now — the store feels it first.
The landlord feels it last.
Where Is the Next Landlord?
Now, I’m not telling you to run out and buy Nvidia at a record high.
By the time a company is worth nearly $6 trillion, everybody knows the story.
The big money has already been made.
The question I always ask is a different one.
Where is the next landlord — before everybody knows its name?
Right now, I think one of the most interesting answers is about 250 miles above our heads.
The International Space Station is being retired.
NASA is paying SpaceX up to $843 million to bring it down.
But SpaceX isn’t being paid to build the replacement.
And NASA won’t own the next station.
Why retire it at all?
The station was designed to last fifteen years.
It’s been up there for twenty-five.
NASA now calls the air leaks in its hull the number one safety risk on the entire station.
And it can’t just leave the sky empty.
China already has its own station, Tiangong, circling overhead right now.
If America doesn’t replace the ISS, China becomes the only nation on earth with a station in orbit.
No president of either party wants that on his watch.
So a replacement is coming.
Here’s the part that caught my eye.
A private company will build it and run it.
NASA becomes the tenant.
And NASA has told Congress it plans to spend roughly $1 billion a year on that service.
The company I’ve found is already building one.
It’s valued at about $2.5 billion.
That’s less than half a percent the size of SpaceX.
A potential landlord to the U.S. government that most investors have never heard of.
That’s exactly the kind of setup I look for.
I’ve put together the full story on who this company is and how the deal works.
Enjoy the rest of your weekend.
I’ll see you Tuesday when I return.
“The Buck Stops Here,”
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Written by Dylan Jovine