NVIDIA's stellar earnings undermined by subtle guidance shift

A tale of Two Cities –

Fox Business News Runs with: “NVIDIA Earnings BEAT Wall Street Expectations Again Amid Strong AI Demand”

Bloomberg runs with: “NVIDIA Tumbles After Disappointing Forecast, Blackwell Snags.”

While the WSJ runs with:

“NVIDIA Delivers Strong Results, Outlook – Chipmakers more than doubled in qtr., shares decline in after-hours.”

In any event – It’s done!

Sales and Earnings MORE than doubled, momentum is NOT slowing. They announced a $50 billion share buyback, Revenue up 122% - marking the 4th straight qtr. of triple digit growth and they offered ‘market- beating’ forward guidance for the 3rd qtr. of $32.5 billion – which is (and here it comes) an 80% y/y increase – get ready – BUT A SLOWDOWN FROM THE JUNE QTR. And that is all the nah-sayers had to hear…. They needed to hear something that they could say was a ‘negative’…. Ok – great….

Jensen telling us that gross margins would be in the mid 70% range for the full year….(mid – he did not define it – but we could take that to mean (74% – 76%) all while analysts were expecting full year margins to be 76.4% (very specific) and so THAT is what gave them permission to HIT the SELL button….

Now remember what I said yesterday –

“I am willing to bet that not only will JH meet the estimates, but he will beat them and then offer robust guidance as well. – which does NOT mean that investors, traders and algos’ WON’T hit the sell button…. I suspect many will – just to lock in the profits – they have made big bets and today after the bell, is the ‘payday’.  And again – UNLESS the thesis changes, UNLESS JH says something that is completely negative (not happening) – I am not wavering….”

And there it is – I am not wavering – there was nothing in that report that changed my mind….…..…Now the stock was down 2.1% during the day and then after the announcement – they pushed it down another 6% at one point ($117 ish)….for a total of 8.1% - recall the options market was pricing in a 10% move (in either direction) – but overnight the trader and algo types got to reconsider and longer term investors did as well……this morning in the pre-mkt NVDA is trading at $123.50 or down 1.7%....The panic that many were worried about or even suggesting would happen – did NOT happen….Capisce? 

In fact – all the nervousness that all these nah-sayers were worried about – a broader market reaction – is NOT happening either….US futures are higher…Dow futures + 200, S&P’s up 10, Nasdaq + 30 and the Russell is up 10. 

And Europe is higher as well…. mkts across the region all up between 0.5% - 1%.

Now the other two news items after the bell - ….CRWD beat the estimates but lower full year guidance and CRM beat their number as well while announcing that CFO Amy Weaver is leaving the company….CRWD was down 2% during the day and is down another 2.3% in the pre-mkt….CRM was down 2% during the day, but is up 5.4% in the pre-mkt….

Now the day was full of nervousness and angst as we waited so as expected at the end of the day the Dow lost 160 pts, the S&P down 34 pts, the Nasdaq lost 200 pts, the Russell gave up 15 pts, the Transports UP 35 pts while the Equal Weighted S&P lost 20 pts. ….But let’s be honest…. The meltdown (potentially caused by what Jensen was going to say) that so many were worried about is not happening today…so rest easy…. and again, it is the end of summer – the long weekend is just ahead of us…. Take the day off!

Treasury yields rose marginally – nothing to worry about.

Oil fell again….and this morning it is trading at $74.35…. inching closer to that $72 range where we hope it finds support.   

Gold fell by $14 yesterday but is up $18 today….and it remains in the mid-century – trading at $2556.   

Eco data today includes the first revision to 2 qtr. GDP – no change is expected at 2.8%, Personal Consumption of 2.2%, Retail Inventories of +0.5% and Pending Home Sales of 0.2% m/m but down 2% y/y.  Tomorrow brings us the PCE report – which is expected to be up 0.1% over last month’s readings…. +0.2% vs. the +0.1% m/m and +2.6% vs. +2.5% y/y.  I do not expect much of a reaction at all, since the majority of the players will not be at their computers as they prepare for the end of summer long weekend. 

The S&P closed at 5592 – down 34 pts….   I do not expect much action today or tomorrow….and since the NVDA trade is not creating all kinds of terror across the broader market – I’m going to the beach…. We will have to wait until next week – after Labor Day to get more of a sense of how investors are shaping up going into the next FED meeting and the Presidential election…. And while that is all important, the sense is that the mkt is already expecting that 25 bps cut in September and then again in November and December.

The Presidential election – well that’s another story…. Kammy and Timmy (also known as the Dynamic Duo amongst the Democratic party) appearing on a pre-taped, scripted and edited CNN interview tonight……so that’s a complete waste of time…. not authentic at all.  But that’s what she wants, so that’s what she gets.

In the end - it is important to always take a ‘balanced’ approach to long term investing…Give me a call to discuss.

Sliced sirloin with peppers, onions and mushrooms

This is a simple dish that works for your long weekend BBQ –

For this you need:  A nice big sirloin steak, s&p, garlic, olive oil, red, green and yellow bell peppers, 2 large yellow onions, 1 package of sliced mushrooms.

Start by rinsing the steak and then patting it dry.  Massage it with Olive Oil and then season with s&p and fresh grated garlic.  Set aside.

In a large sauté pan – heat up some olive oil – just enough to cover the bottom of the pan…. now add in some more sliced garlic and brown.  Next – add in the sliced peppers, onions and mushrooms. – Season with s&p and then sauté until cooked down - 15 – 20 mins.

Now light the grill – get it nice and hot.  Place the sirloin on the grille and cook until you have a nice medium center.  Remove – cover with foil and let sit for 4 mins. 

Now slice at an angle and fan it out on a large platter.  Add the Peppers, onions and mushrooms and serve.  A large mixed salad is the only other thing you need.