TOP STORY
⭐️ Nvidia Holds Steady With Another Impressive Earnings Beat

🐝 Now, I know the Weekly Buzz is supposed to be ‘Weekly,’ but Nvidia’s ($NVDA) earnings came out last night, and since it’s been called the ‘sink-or-swim moment for the bull market,’ I figured you guys would want the rundown 🫡

🚨 Even if you’re an index investor who only holds the S&P 500, the ‘Mag-7’ now accounts for 32% of the total index - nearly double 5 years ago - and Nvidia alone is over 7% of the index. AI mania has dominated the market and propped up big tech to lofty valuations.

🤞 So needless to say, fingers were crossed last night as Nvidia reported Q3 earnings, and to sum things up - they did not disappoint. Let’s dive into the numbers. 🤿

✨ The Highlights

• 💰 Revenue jumped to $35B, up 94% from last year, beating analyst expectations by 5.7%

• 🤖 AI-Driven Data Center revenue soared 112% since last year, accounting for 88% of total revenue compared to <50% in 2022, when Gaming revenue still drove the majority of Nvidia’s business

• 🤑 Earnings per share rose to $0.81, beating expectations by nearly 10%

• 💸 Net income rose to $19.3B, up 109% from last year

• 🎯 Revenue is expected to hit $37.5B in revenue for Q4, ahead of analyst expectations of $37.1B

• 🏃‍♂️ Nvidia has now shipped 13,000 samples of its new Blackwell chip (which is set to replace the Hopper) to its key customers and claims “each customer is racing to be the first to market.” Shipments are expected to ramp up significantly next year, and Nvidia says demand strongly exceeds supply.

🔍 To put the revenue growth into perspective:

⭐️ Overall, the earnings were stellar, exceeding even the very optimistic analyst expectations, with CEO Jensen Huang summing things up with a bold statement:

📈 On the back of these stellar earnings, the stock is up another 1.4% today, adding to its wild 207% year-to-date gains, but the picture wasn’t completely perfect.

😰 The initial reaction to the earnings were actually mixed, with the stock falling 2% last night in after-market trading, leading to many articles pointing to a few concerns analysts have about Nvidia going forward…

🤔 So, What Are Analysts Concerned About?

It seems to be a common theme with Nvidia that the earnings seem spectacular, and then the stock drops or hardly moves, so what are investors taking issue with?

😅 Nvidia’s Forecast Beat Expectations, but not the ‘Secret’ Expectations

Ok, this one’s a bit funny if you ask me. While the ‘consensus view’ of Q4 revenue was $37.1B, the ‘whisper numbers on the buy side’ were in the $39B to $40B range 🤣

For the past 5 quarters, Nvidia’s revenue forecasts exceeded estimates by over $1B, so the +$0.4B is a bit small in comparison. It seems Nvidia isn’t just ‘priced for perfection’, it’s being priced for perfection + a little extra 😅

😰 Gross Margins Falling

📉 Another area of concern was Nvidia’s gross margins, which fell again for the second quarter in a row and will likely fall again next quarter.

🚨 Falling gross margins are generally a sign of cooling demand or pushback on price, but more likely for Nvidia, this decline is due to the company ramping up production of its new Blackwell chip, which will increase costs in the short term.

✅ Nvidia says it expects margins to rebound as the Blackwell chip production and sales ramp up.

🚧 Uncertainty about Trump’s Tariffs

A final concern discussed in the earnings call was the swirling uncertainty around Trump’s promises to impose tariffs on foreign goods.

If Trump imposes Tariffs on Taiwan-made chips, this would increase Nvidia’s costs, potentially hurting margins even more.

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TOP STORY CONTINUED
🏭 The Next Industrial Revolution? Or the next Dot-Com Bubble?

🤷‍♂️ Overall, all the ‘reasons for the drop’ explaining the after-market dip last night seem to me to be a classic case of analyst nitpicking and media overexplaining a barely noticeable blip in Nvidia’s stock price - made even more evident by the fact the stock actually rose on market open this morning 😅

📸 In my opinion, the bigger picture comes down to two questions I’ve discussed before: 

• 💰 Will the ROI on the massive AI investments from Big Tech (largely in Nvidia chips) catch up fast enough to the spending?

• 🤑 If not, how long will Wall Street continue to reward heavy AI spending without results?

You can easily find headlines saying time is running out (see the Bloomberg headlines above), but the reality is when the market is riding high on hype, trying to determine when or if that hype will die is next to impossible (see my post here on trying to time the market) - perhaps the more interesting question for the long-term investor is, will reality catch up with the hype?

🏭 The Next Industrial Revolution

In his closing remarks, the CEO of Nvidia (biased as he may be) insisted that this is the beginning of a new industrial revolution, pointing to two trends:

1. 🧑‍💻 The overall computing shift from CPU-backed coding to GPU-backed machine learning

2. 🤖 The development of an entirely new industry around AI

💰 Huang emphasized that this means trillions of dollars of infrastructure will need to be updated and that Nvidia is able to “serve the entire suite of AI and robotics opportunities ahead, amounting to multiple trillions of dollars.”

⭐️ Despite some of the minor worries discussed before, Wall Street seems largely bought in with this vision - with Nvidia still being rated a Strong Buy by analysts with not a single Sell rating, according to TipRanks. And if AI truly is the Next Industrial Revolution, it does seem like Nvidia is the best positioned to reap the rewards…

🤔 What do you think? Join the discussion on Blossom on some of the awesome Nvidia threads below 👇

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🙏 Thanks for reading to the end! No giveaway this week, but appreciate you nonetheless 💖

Happy investing,

Max, CEO of Blossom (@maxstocks)