Devon Funds Morning Note - 11 August 2025

Monday 11th August 2025

No problem in Houston

Global

The Nasdaq reached a fresh record high on Friday, gaining 1% to 21,450. The S&P 500 rallied 0.8% to close around all-time highs, and the Dow finished up 0.5% higher. For the week, the indices climbed 3.9%, 2.4%, and 1.4%, respectively. The big story was Apple, which rose another 4%, surging 13% for the week, its best since July 2020 after announcing plans to invest US$600 billion over four years in the US. The announcement gained a commendation from President Donald Trump, who added that chip firms were “coming home” in droves, and those that do not look to bring more manufacturing to US soil will face a tariff of 100%. As investors await clarity over what other sector tariffs (particularly pharmaceuticals) look like, there has been confusion over whether gold bars are exempt – the White House confirmed they are, but not before gold prices soared to record levels near US$3,500. As investors await the next move by the Fed, there will be plenty of economic data to consume this week, with prints on US inflation, retail sales, and consumer sentiment.

Last week’s move added over US$400 billion to Apple’s market cap, which now sits at US$3.4 trillion, making it the third most valuable company behind Microsoft and Nvidia. The company’s largest-ever spending commitment has pleased Trump. The iPhone maker will be building data centres across the US, but also making big investments in other areas, including recycling rare earths and building out semiconductor plants. Apple is joining others such as Nvidia, Microsoft, Intel, IBM, J&J, and Taiwan Semiconductor, who have made commitments “worth trillions” to invest in the US. There have, meanwhile, been unconfirmed reports that Nvidia and Advanced Micro Devices have agreed to pay 15% of their chip sale revenues from China back to the US government as part of a deal with the Trump administration to secure export licenses.

Apple is about to become an even bigger employer. The company employs around 80,000 people in the US, but supports 450,000 jobs through US-based suppliers and manufacturers. It also supports another 1.5 million jobs through the App Store ecosystem. The partnership with Corning at a factory in Kentucky will produce the glass for every iPhone sold globally. There is also to be a rare earth recycling plant in California, and Apple is building a new server manufacturing plant in Houston and building out data centres across the US. Apple had previously been threatened with tariffs of 25%, and it will be interesting to see what happens concerning India, where most of the iPhones sold in America are manufactured. While the country is also in Trump’s crosshairs, Apple may just have a free pass.

It was Apple and the semiconductor sector last week, but taking centre stage this week could well be geopolitical efforts. Trump is set to meet with Vladimir Putin in Alaska on Friday. Trump has expressed optimism about ending the three-and-a-half-year-old conflict, on some sort of “swapping of territories to the betterment of both”. It doesn’t really surprise that Volodymyr Zelensky has already publicly rejected any such notion.

Geopolitical concerns and a weakening US dollar have also propelled gold prices this year. Bullion prices soared to a record high on reports that the US had imposed new tariffs on imports of gold bars, making them subject to 39% tariffs. Later on Friday, the White House issued a statement calling the tariff reports “misinformation” and said an executive order would soon clarify that gold bars would not be subject to tariffs. Gold prices settled back to just under US$3400 an ounce.

Switzerland is the world’s largest gold refining hub, and the initial news had led some refiners to temporarily halt shipments to the U.S. Switzerland, of course, has been hit with one of the highest rates of any country. Switzerland is being penalised for running a US$38 billion bilateral trade surplus with the US last year (the 13th biggest for the world’s largest economy). Gold (which is not produced but refined in Switzerland) is driving the distorted trade balance. Gold exports to the US from the Alpine country were around US$15b last year (and nearly US$40b in the first quarter this year).

There have been calls for gold to be ignored in the trade surplus calculations. Although even then, Switzerland exports around US$10b in pharmaceuticals to the US (where a tariff decision is yet to be made). In any event, there have been calls from some centrist and leftwing politicians in Switzerland for the gold sector (which only employs a few thousand people) to be made to “pay” in some form for the fiasco. Stay tuned.

On the results reaction front, Expedia surged 4% after it raised its full-year sales target after reporting strong second-quarter bookings. Annual revenue is now expected to increase 3% to 5%, up from a previous guide of 2% to 4%. The US business (60% of revenues) is still tepid compared to the international unit, with sales up 3% and 13%, respectively. US travellers are still a bit cautious about their spending, it seems.

Americans are even more cautious in some areas of discretionary retail, it seems. Shares in Under Armour were punctured to the tune of 18% on Friday. The company said that sales were set to decline 6-7% in the current quarter, and earnings were expected to be cut in half due to tariffs - the company gets 30% of its overall merchandise volume from Vietnam and 15% from Indonesia.

Adding to the mixed messages on the consumer, Delivery firm Instacart posted its strongest order growth since 2022 for a second straight quarter and beat earnings estimates for the current period. Orders grew 17% to 82.7 million. The shares jumped 4%.

Some fast-food chains (eg McDonald’s) have been doing better than others amidst cost-of-living pressures and economic uncertainties. Wendy’s on Friday slashed its earnings forecast for the full year. The company also now expects its global systemwide sales to fall between 3% and 5% for the year, while its previous guidance had called for flat to a 2% decline. The shares ticked up 1% but are down nearly 40% year to date.

Elsewhere on the results front, visual discovery platform Pinterest fell 10% on missing earnings forecasts, while Block fell 4% on its weaker earnings. Marketing platform company AppLovin jumped 4% on its estimate-topping numbers.

Rocket Lab was higher on its release. The company reported a wider-than-expected second-half loss, but revenue jumped to US$144m. The company completed five Electron launches during the period, bringing its total to 69. The company is forecasting an EBITDA loss between US$21 million and US$23 million in the next quarter on record revenues. Rocket Lab is targeting growth in both the commercial and defence sectors. It has the upcoming Neutron medium-lift rocket, acquired satellite specialist Geost and has entered spacecraft production for the US Space Development Agency.

Rocket Lab has gained huge credibility through deals with national space agencies, and spending here has been ramping up. There has been a recent partnership agreement with the European Space Agency to launch satellites for constellation navigation before December. And there has been a string of successful launches. The upcoming bigger Neutron medium-lift rocket is another growth driver, and if successful, could unlock US$5.6 billion in National Security Space Launch contracts. The shares rose 1.1% and are up approximately 75% year to date, and over 700% in the past 12 months.

On the subject of space, there was a moment to mark over the weekend with the passing of Jim Lovell. The famous phrase “Houston we have a problem” was captured in the movie Apollo 13. Nitpickers might say that Lovell actually repeated and clarified what his module pilot said, in actually saying “Houston, we’ve had a problem.” In any event, the phrase is a classic and has become a staple of popular culture.

Across the Atlantic, the STOXX 50 rose 0.3%. Chipmakers rallied, including ASML and Infineon, which both jumped 3%. In the UK, the FTSE 100 closed down just 0.1%. GSK rose 1% after announcing it would receive a US$370m upfront payment in a settlement related to mRNA patents with Pfizer and BioNTech and 1% ongoing royalty revenue from future US sales of Pfizer/BioNTech’s mRNA-based COVID-19, influenza, and combination vaccines. This week, a print on UK GDP for the second quarter will be in focus.

In Asia, the Nikkei rallied 1.9%. The CSI 300 was 0.2% lower, and the Hang Seng fell 0.9%. China’s consumer prices held steady in July, with some follow-through from the government’s pledges to contain excessive competition. The consumer price index was unchanged from a year earlier, against estimates for a 0.1% decline. Factory deflation, though, persisted into a 34th month, with the producer price index falling 3.6%, matching June’s decline. However, on a month-on-month basis, PPI shrank 0.2%, improving from June’s 0.4% drop. The government has launched a campaign to curb cutthroat competition and “involution”, whilst also addressing overcapacity, revising price laws, with stronger enforcement of fair-trading practices. A positive start, it seems. This week, retail sales and industrial production numbers in China will be in focus, along with second-quarter GDP for Japan.

New Zealand

The Kiwi market was lower on Friday, with the NZX 50 closing down 0.3% at 12,844. Fisher & Paykel Healthcare fell 0.8%, while Summerset was 2.3% lower. Spark NZ gained 1.6%. For the week, the index was up 0.9%.

Infratil fell 1.6% on Friday. The company and NZ Super (which each own a 50% interest) have agreed to sell their stakes in RetireAustralia to Invesco Real Estate for A$845 million. The transaction is subject to conditions, including FIRB approval and is expected to be completed in the final quarter of the 2025 calendar year. At completion, Infratil expects to receive proceeds of approximately A$300 million.

Infratil noted that since an initial investment in 2014, RetireAustralia has undergone significant change, but that the sector has faced a number of challenges. As at 31 March 2025, the carrying value of Infratil’s investment in RetireAustralia was NZ$404 million, with the transaction expected to result in an accounting loss on sale of approximately NZ$80 million and an internal rate of return close to nil over the ~11-year holding period. The decision to sell is consistent with Infratil’s strategy outlined at the full-year result to divest businesses unlikely to scale under its ownership to increase balance sheet flexibility for reinvestment.

After a fairly quiet period, the earnings season gets underway with some entrees (before the main course) this week, coming from PGG Wrightson, Vital Healthcare, Ventia and Vista Group. Data-wise, there are card spending numbers, food inflation, visitor numbers and a manufacturing sector print.

This morning, Spark has confirmed that it is in the process of seeking a capital partner for its data centre business. The telco said that it will keep the market updated.

Australia

The Aussie market eased back from record highs made during the week, with the ASX 200 easing 0.3% on Friday to 8,807. Healthcare was 1.5% lower, while the tech sector declined 1%. Gold rallied 2.3%, and mining was generally strong. BHP gained 0.9% and Rio rose 1.1%. Lithium producer Pilbara rallied 9%. The banks were lower. Block soared 9% on its release, while AMP gained 7%. At the other end, Light & Wonder fell 11%, while QBE Insurance sank 9% on its results. For the week, the ASX 200 was 1.7% higher.

Iress soared 12% as the market data provider confirmed that it is in talks with private equity players Blackstone and Thoma Bravo on a possible takeover. The shares traded at A$9.40 against an offer of A$10.50. It will be interesting to see how this plays out. Back in 2021, Swedish private equity firm EQT made three offers, the highest at A$15.91 per share, before walking away.

Nick Scali soared nearly 7%. The furniture retailer delivered strong results with second-half sales growth of 7.3%. Interestingly, Australia is doing well, and so is New Zealand, and the underlying full-year net profit in the region was $73m. Progress is being made in the UK, where the company made a loss of $11m.

This morning, CAR Group has reported a 10% increase in reported net profit after tax to A$275 million in FY25 on an 8% rise in revenues to A$1.18 billion. The company operates carsales.com.au, the country’s largest online platform for buying and selling new and used vehicles. It has a growing presence in North America, Asia and Latin America. Management expects continued double-digit revenue and earnings growth in FY26 across all regions.

We have the RBA meeting tomorrow. Markets have fully priced in a 25-basis-point cut to 3.6%, with an outside chance of a “double” cut.

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