SharespectiveWall street, before your first coffee

Wed 19 Aug 2026 Issue 230

Memory Loss Plus: Klarna beat on revenue and profit, and the shares fell 23% anyway.

Good morning, and welcome to the middle of the week. The best-performing corner of the US market this year had its worst day in weeks. A closely watched gauge of semiconductor stocks fell 5.5% on Tuesday, dragging the Nasdaq Composite down 1.33% and the S&P 500 down 0.69%. The Dow lost 0.22%, which tells you where the damage was.

The trigger wasn't American. Much of the nervousness traces back to a memory chipmaker that listed in Shanghai three weeks ago and is now worth roughly half of Micron. It has been a long time since Wall Street had to think about a Chinese chip company before breakfast.

Market snapshot

US levels are Tuesday's official 4​pm New York close. The NZX 50 and ASX 200 are Tuesday's local closes, taken before Wall Street opened; currencies late in Tuesday's trading.

The chip trade cracked, and memory chips took the worst of it

The Philadelphia Semiconductor Index fell 5.5% on Tuesday, its sharpest drop in weeks. Intel shed 6.6%, optical component maker Fabrinet fell 19.4%, and Nvidia — the reason the index has gone up all year — lost 2.3%. The memory names copped it hardest: Micron dropped more than 4%, SanDisk about 6%, and SK Hynix's US-listed shares more than 5%.

Where the nerves are coming from. Three things at once, and none of them is a bad set of results. Investors are uneasy about how the AI buildout is being paid for, with credit default swaps on big tech names — effectively the cost of insuring their debt — at record levels. Long-term borrowing costs stayed high, the 10-year Treasury yield near 4.7% and the 30-year brushing 5.33%, which makes expensive growth stocks harder to justify. And then there is China. Memory chipmaker CXMT rose 466% on its Shanghai debut in late July, raising US$8.6 billion in Asia's biggest listing of the year and ending up valued near US$488 billion — about half what Micron is worth.

That valuation is the part worth sitting with. Memory chips are near enough a commodity: they are made to a common standard, and buyers shop on price and availability rather than loyalty. A well-funded new supplier at national scale therefore matters far more here than at the design-heavy end of the business, where switching costs are real. Micron and SK Hynix have spent two years enjoying a shortage, and shortages are the thing capital goes looking for.

Klarna beat on revenue and profit, and lost nearly a quarter of its value

The Swedish buy-now-pay-later firm reported second-quarter revenue of US$1.04 billion, up 27% and ahead of the roughly US$996 million expected. It also turned a one-cent-per-share profit where the market had forecast a six-cent loss, its second straight quarter in the black. Gross merchandise volume — the total value of purchases running through its system — rose 18% to US$36.6 billion. The shares fell 22.8%.

The guidance did it. Klarna cut its full-year revenue outlook to between US$4.08 billion and US$4.16 billion, down from around US$4.3 billion, and trimmed expected merchandise volume to US$149–151 billion from more than US$155 billion. It blamed currency moves and a more measured view of volumes in Germany, its largest market. Investors did the obvious arithmetic: a company valued on how fast it grows had just told them it would grow less.

Sitting underneath that is the credit question. Klarna doesn't just process payments, it lends the money, so a slice of every quarter's revenue goes back out as bad debts. Analysts went into the result expecting a loss rate around 6.5% on the loans Klarna holds on its own books, worth roughly US$175 million for the quarter. A payments business earns a fee and moves on. A lender finds out how good its decisions were about a year later.

Home Depot posted its best comparable sales in four years, and housing had nothing to do with it

Second-quarter sales rose 5.7% to US$47.9 billion, past the US$47.3 billion analysts wanted. Comparable sales — which count only stores open at least a year, so new openings can't flatter the figure — rose 1.7% against expectations closer to 0.9%, the best Home Depot has managed since late 2022. Adjusted earnings came in at US$4.92 a share, up 5.1%.

Small jobs, not big ones. Thirteen of sixteen merchandising departments grew, and professional tradespeople outspent do-it-yourself customers. Finance chief Richard McPhail said demand was broad based, with customers continuing to take on smaller projects, and shoppers came in less often but spent more each visit. That is what a frozen housing market looks like from the inside: when moving is unaffordable, people stop buying houses and start fixing the one they already have.

The limits showed up elsewhere the same day. Furniture maker La-Z-Boy fell 17% after quarterly sales slipped 3% to US$475.6 million, short of the US$501.4 million expected, with management pointing to an uneven consumer environment. Replacing a tap is a few hundred dollars and a weekend. A new lounge suite is a considered purchase, and those are still being deferred.

Newsworthy numbers

Worth a read

Wrapping up

No central bank decisions this week, so the Fed's minutes from the 28–29 July meeting are the main event, at 2​pm Wednesday in New York — 6​am Thursday in New Zealand, 4​am in eastern Australia. Rates were held at 3.50%–3.75% with three officials dissenting in favour of a rise, and the interest is in how close that argument got. The Jackson Hole symposium then runs 27–29 August, with Kevin Warsh giving a first keynote there as chair on the Friday morning.

The American retailers keep talking. Target and Lowe's report Wednesday and Walmart Thursday, with comparable sales again the line to find rather than headline profit. Nvidia lands on 26 August after the close, where data centre revenue is the number under the microscope, against consensus of roughly US$93 to US$95 billion. Closer to home, Australia's June-quarter wage price index is out today at 11.30​am AEST, and July employment follows Thursday.

Both the kiwi and the Aussie gave ground against a firmer US dollar, USD/NZD rising to 1.7021 and USD/AUD to 1.4113, leaving the Australian dollar just under 71 US cents. Higher American long-term yields make holding US dollars more rewarding, and a session with a 5.5% fall in chip stocks is not one where investors reach for smaller commodity currencies.

That's your Wednesday. Back tomorrow.