The time has finally come! The most pivotal earnings report for the entire stock market, the emotional leader of all investments, and the vanguard of the AI revolution… NVIDIA’s (NVDA) quarterly report on Wednesday evening served as the unofficial end of earnings season. And the whole world was watching, even sometimes from absurd “watch parties” in bars, with people cheering for CEO Jensen Huang like he’s Michael Jordan trying to win the US a gold medal.
But the craziest thing of all happened… it was a non-event.
NVIDIA beat the earnings estimates, by a little bit, and offered up a forecast of upcoming revenue and earnings that was about what everyone expected. That wasn’t terrible enough to cause a panic, as some had feared when rumors leaked about the Blackwell chips having some manufacturing challenges… but it wasn’t exciting enough to get investors revved up about a stock that already trades at a nosebleed valuation, either… and there were enough warning signs in there about margins getting a little worse, and growth slowing down a bit, that there was a little bit of after-hours selling.
In the end, we’re still right about where we were for most of June and July — NVIDIA is right around $120 a share, it’s trading at what is arguably a justifiable forward PE ratio given their growth (as long as you use adjusted earnings, it’s at a forward PE of about 36, which can often look like a bargain and work out well if you’re growing earnings at 30-50% per year, as folks expect from NVIDIA in the future)… but it’s also still one of the biggest companies in the world, experiencing a one-time surge in wild demand for the world’s hottest product, and we should all be a little bit nervous about how the stock might react when that begins to normalize, as it almost certainly will someday. If demand for Hopper and Blackwell GPUs begins to slow enough that NVIDIA and Taiwan Semiconductor can meet that demand as they increase the supply, or competing products ever begin to take some share, then eventually the pricing will moderate, which will have a meaningful impact on margins.
Still a great company, and I’m holding my remaining position because it is gradually growing into its valuation with each strong quarter, and it is entirely possible that this fantastic market environment for NVIDIA stays ...