Market View: Nvidia on Sale? Novo vs Lilly, Microsoft’s Comeback and Tesla’s Semi Problem

Michelle Martin (0:01)

Best of Live Well with Michelle.

Good morning. It's Monday, September 28th. This is my final Market View with you today. For three months, I take off tomorrow for Oxford University, for my journalism fellowship at the Reuters Institute for the Study of Journalism, and I will be writing a paper that hopes to solve for a part of the puzzle of the future of news. I'll tell you all about it once I'm back in January 2027

But today, my focus is you and markets in a blitz. So, let's look at the obesity drug battle. It's entering its next phase. Perfect, because, you know, just an hour ago in Live Well with Michelle, we looked at glucose resistance, so you want to listen to that show as well. But, yes, the drug battle is entering its next phase. Novo Nordisk is looking for its next growth engine. Eli Lilly, piling on the pressure. We'll also look at a pharmaceutical stock that surged after striking and injectables deal with the maker of Wegovy. And then after the recent market shakeout, Bank of America says Nvidia and a number of other stocks are now effectively on sale. Where are the opportunities? I've got them in focus for you. And we'll start a new trading week this week. Wall Street has another problem to watch with the bond market. I'll take a look at why the bond market is warning signals and getting investors' attention, and what could move markets this week, including earnings from Carnival, Micron and Nike.

Let's begin with one of the biggest corporate battles in healthcare. For years, Novo Nordisk was almost synonymous with the GLP-1 boom. Ozempic became a cultural phenomenon, Wegovy transformed the treatment of obesity, and Novo briefly became one of Europe's most valuable companies. But the investment story has changed. Eli Lilly has become an increasingly formidable rival, and Novo is now under pressure to show investors what comes after the first generation of blockbuster semiglutide drugs. This is important because this is not just a race to sell more weight loss injections. The next battle is about better drugs, easier delivery and greater convenience. So can patients lose more weight? Can they take a pill rather than an injection? Can they inject themselves less frequently? And can these drugs eventually treat a much broader range of diseases? Novo is now talking about launching more than five potential multi-blockbuster medicines by 2030

But investors have a timing problem. These ambitions are years away for Novo Nordisk, while competition from Eli Lilly is happening right now. So Novo needs to demonstrate that it still has innovation beyond Ozempic and Wegovy. And that brings us neatly to our second pharma story, the small company that suddenly became very valuable. So Novo has struck a licensing deal with Swedish drug delivery specialist, Nenexa, and the potential value about 1.17 billion euros, that's about 1.3 billion US dollars, if development and commercial milestones are achieved. Nenexa has a technology called Pharma Shell, and the basic idea is fascinating. Instead of patients having to inject a medicine every week, the technology could potentially allow drugs to be released over a much longer period, perhaps making monthly or even quarterly injections possible. Novo can potentially use a technology across as many as five, obesity, diabetes, and cardio metabolic programs, and investors immediately understand the implications. Nenexa shares more than doubled following the announcement, and at one stage the surge was considerably larger. So think about what Novo is really buying here, not just another molecule, potentially buying convenience for consumers, because if two drugs can deliver similar results, but one drug needs to be injected every week and another once a month, the difference could commercially be very valuable. And this is a reminder that the next stage of the obesity drug war is not just about whose drug works best, it's whose drug needs less compliance, I think, makes it easier to live with, right?

All right, from weight loss drugs to another market heavyweight, let's look at Nvidia. Bank of America has been looking at stocks it believes investors should consider after recent market weakness and Nvidia is among the names on its radar, which raises an interesting question. What exactly constitutes a bargain when we talk about one of the biggest winners of the AI boom? Because Nvidia is not cheap in terms of commercial conventional value investing, we need to look at earnings. So if earnings and cash flows keep growing rapidly enough, a stock can become cheaper relative to its future earnings without looking inexpensive in terms of today's numbers. And there's evidence that investors are becoming much, much more discriminating about AI, right? We've heard so much about investors wanting to see AI revenue. So Nvidia sells the infrastructure that powers all the spending. The bull case, essentially, that demand for compute capacity remains enormous and that Nvidia continues converting that AI build out into actual revenue. Now, the risk is the bigger Nvidia becomes, the bigger the expectations embedded in the share price. So in Bank of America calls stocks like Nvidia attractive. After a pullback, the question for investors isn't simply as the share price fallen, it's have expectations fallen faster than the underlying business outlook. And this is what makes pullback an opportunity rather than simply a falling share price. Let's look at the week ahead and what could be the most important story for money and markets this week. And I am talking about the B word bonds. US Treasury yields have been climbing again, which explains why we've been doing so many shows about bonds. The 10-year Treasury yield has moved about 5 percent, while longer dated yields have also been elevated. Why should equity investors care? Because Treasury yields sit underneath the pricing of practically everything. They influence mortgages, corporate borrowing, government financing. And crucially for investors, they provide the so-called risk-free rate against which other assets are judged. If you can earn around 5 percent lending money to the US government, investors may demand a higher potential return before they take on additional risk of owning equities. And that can be particularly challenging for high growth companies whose valuations depend so heavily on profits expected years into the future. So this is a very interesting tension. We have excitement around AI. We have strong earnings expectations for some tech companies. We also have a bond market telling investors, hey, money is not cheap. That is the backdrop as we head towards another earnings week. Among the names reporting, Carnival, Micron and Nike. Micron is going to be particularly interesting given the enormous demand for memory associated with AI infrastructure. Nike gives us another window into the global consumer. Carnival offers a look at travel demand and discretionary spending. So this week, not just about whether earning beat expectations. We're going to be listening closely to what management teams say about cost demand and borrowing conditions because with yields this high, the hurdle for equities is getting much higher as well. Time for Up Or Down, folks. I'm going to start with Microsoft. Shares jumped about 3.7% on Friday to US$51617.