We all know that in a gold rush, you want to be selling shovels. But while one shovel brand is usually as good as another, this is not the case with computer chips. One report estimates that because Nvidia’s chips are so well suited to AI, it has managed to corner 95% of the market in high-end machine learning. Basically, Nvidia is selling shovels while everyone else is selling spoons.

The lowdown

• 🤑 Nvidia reports revenue of $13.5 billion in Q2 on the back of soaring demand for AI chips.

• 🏡 Sales of existing US homes fall to a six-month low as the cost of mortgage increases.

• 🧐 PE firm Apollo sued over $570 million payment made to founders ousted due to Epstein ties.

Flex your finance muscle 💪

Balance sheet recession

No, it’s not a recession caused by this newsletter – our signature emoji only goes up.

A "balance sheet recession" arises after a major debt-driven asset bubble bursts. The theory is that when asset values plummet but debt remains, households and businesses prioritize paying down debt over new spending. This widespread deleveraging depresses economic activity because, when everyone reduces their debt at once, they are not spending and so it suppresses overall demand.

The creator of the theory, economist Richard Koo, explains the theory here, and why he thinks China is now suffering from a balance sheet recession.

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Sports stores are not doing so well

Foot Locker's shares dropped by 28% after it announced that sales declined by 9.9% during the Q2 due to "consumer softness." The share price has now fallen 56% for the year.

The company reported a quarterly loss of $5 million compared to a profit of $94 million in the same period the previous year. Foot Locker's inventory rose by 11% year over year to $1.8 billion.

Things are no better over at Dick’s Sporting Goods. But rather than consumer softness, Dick’s is blaming increasing theft, identifying "shrink" (an industry term that represents theft, damaged inventory, and other losses) as the main cause of its poor earnings.

Profit fell 23%, even though sales increased by 3.6% during the same period, with shares plummeting by almost 24%. The good news for Dick’s is that it may not have the same inventory woes as Foot Locker given most of it was stolen.

The content we're consuming today

• Acquired podcast: Costco.

• Bloomberg: Cow-Free Dairy Wants to Beat the Fake Foods Curse, But First … Those Prices ($).

• Robin Wigglesworth: Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever ($).

Off-balance sheet items

• You may already feel a little inadequate about your Excel skills, and the bad news is that you now know even less about the program than you thought. Excel has just incorporated Python into the already complex program. Nervous breathing.

The bottom line