🚨 Nvidia Plummets ~15% Driving Record Losses for Tech

Plus Netflix to Stop Sharing Subscriber Numbers, and Blossom Sets Records...

April 21, 2024

TOP STORY
📉 Nvidia Drops 15%, Driving Worst Week Ever for ‘Magnificent 7’

$950 billion. That was the collective market value loss of the “Magnificent Seven” this week, marking the group’s worst-ever weekly loss of market value 😱

Stock performance of the ‘Magnificant 7’ this week and YTD.

Nvidia was the biggest loser of the group, falling a whopping $300 billion, or 14.53%, with a 10% loss on Friday alone.

While the stock is still up 58% YTD, many are wondering whether this is a sign of the ‘bubble popping’ or a reversal of the incredible run tech stocks have been having this year.

So let’s unpack the reasons for this rapid reversal and whether it’s a here to stay…

😰 Super Micro Computer Doesn’t Pre-Announce Earnings

Super Micro Computer fell 23% in a single day

One of the biggest drivers of the declines this week was Super Micro Computer ($SMCI), another chip manufacturer, which fell 23% after it didn’t preannounce earnings.

🚨 Companies often pre-announce when they’re doing well, as Super Micro did for its Q2 in January, so the decision to not preannounce this time was a negative signal.

Up until Friday, the stock had seen massive growth - up nearly 900% - as demand for its AI-equipped servers soared. Since Nvidia chips are installed in Super Micro’s servers, worries about the company’s upcoming earnings had ripple effects to Nvidia, the chip sector, and the rest of tech.

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There’s a lot of bullishness for AI. Even if you mentioned it in a call it would result in a stock rally. Now, people are bringing more scrutiny to the AI story. Is it as good and as lasting as everyone thought it would be?

Tom Giles, Bloomberg News

📊 Upcoming Big Tech Earnings Week

Another big factor at play is Big Tech earnings season, with 4 of the Magnificent 7 set to report earnings this week, likely causing many investors to reposition and re-evaluate:

  • 📆 Monday: Tesla

  • 📆 Wednesday: Microsoft & Meta

  • 📆 Thursday: Alphabet

  • 📆 April 30: Amazon

  • 📆 May 2: Apple

  • 📆 May 22: Nvidia

These companies will not only be compared to incredible Q4 performances, but any AI story will be under increasing scrutiny to determine whether it’s all hype or has real substance.

👀 Will We Bounce Back?

Whether this correction is here to stay or just temporary will depend heavily on the impact of earnings this week, but some bears are quick to draw comparisons to Cisco during the dot-com bubble, which famously fell 90% from its peak.

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"It's easy to compare Nvidia in 2024 and Cisco in 2000. They both sell the equipment needed by companies keen on breaking into a hot, new technology. In 2000, that new technology was the internet. Today, it's artificial intelligence.”

Economist Edward Yardeni

This is not a new comparison, and whether it is a fair one will depend heavily on whether demand for Nvidia’s chips is drying up, as it did with Cisco’s networking gear in the dot-com crash.

Eyes will also be on Advanced Micro Devices, another semiconductor player that reports earnings next Tuesday, which “has the potential to change sector sentiment quickly, perhaps more than any other semiconductor company” - according to analyst Jordan Klein.

🌼 Blossom Community Sentiment

Based on community buying/selling, the Blossom community is 📉 bearish on Nvidia, Tesla, and Amazon but 📈 bullish on Meta, Microsoft, Apple, and Alphabet.

💡 To get a pulse, I always look at the relative ranking of ‘most bought’ or ‘most sold’ on the stock pages. This gives a better picture than just looking at # of buys and # of sells, as the community generally does more buying than selling!

👇 There were tons of great posts on Blossom about the market turn, but one that caught my eye was Eloi post that the ‘market selloff’ is more of a sector rotation. Join the discussion by clicking on the post below!

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BIG TECH
📺️ Netflix Decides to Stop Sharing Subscriber Numbers

Netflix made an odd decision this week to stop reporting subscriber numbers and average revenue per user, leading to a 9% drop in its stock price (although some of the drop was also likely linked to the broader market selloff).

This was a surprising choice for the company as, historically, its performance has been closely linked to these metrics.

🤔 Behind the Decision

Netflix attributed the decision to ‘an evolution in its revenue model,’ saying that membership growth is no longer a good indicator of its success or failure.

Netflix Co-CEO Greg Peters explained that new initiatives such as an advertising tier and extra member fees are not directly linked to the member count, and the company will instead focus on reporting key financial metrics such as operating income, operating margins, net income, free cash flow, earnings per share, revenue and place a greater focus on engagement metrics.

🚨 Wall Street Takes it As a Bad Sign

Netflix likely wouldn’t stop reporting these numbers if it were optimistic about them, and Wall Street was quick to draw the worst conclusions from the decision.

Over the last year, Netflix pushed strong subscriber growth through a password crackdown, which drove many users who were getting a free ride from a friend’s account (including myself) to finally cough up and pay for their own account. However, Wall Street seems convinced the benefits of the crackdown are beginning to dwindle.

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“The move to no longer report subscribers implies that subscriber growth has indeed peaked and a deceleration may lie ahead”

Analyst Michael Nathanson

Netflix also reported earnings this week, summarized nicely by Jake on Blossom:

ANNOUNCEMENT
🏆 Blossom Community Sets Records for Most Successful Crowdfunding in Canadian History

On Monday, we opened up a community investment round, inviting you all to become part owners of Blossom. We had the goal to raise $500K over the next month and a half…

🤯 To our surprise, our community invested over $1M in 4 days - on top of $1M raised from institutional investors - in what sets a record as the most successful crowdfunding round in Canadian history.

❤️ I am honoured to welcome 800 of you as shareholders and deeply inspired by your vote of confidence in our team and vision.

Since we more than met our capital needs, we had to close up the round, but I know many more folks wanted to invest. If you missed out this time, join the waitlist here, and we’ll give you all first access next time around! (🇺🇸 including all our US friends who weren’t able to invest).

FROM THE BLOSSOM COMMUNITY
🎙️ Top Discussions this Week

👇 Click to see the full post!

🗞️ What else you might’ve missed: