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Nvidia Stock’s Losing Streak Keeps Going. What Happened to Wall Street’s Darling?
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Tag: Graphics Processing Units
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Apple Stock Is Rising. Tech Names From Tesla to Nvidia Can Breathe a Sigh of Relief.
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The fortunes of
Apple
the world’s largest public company, have a tendency to lead around much of the rest of the stock market. After the tech giant’s woes contributed to widespread declines last week, investors can now breath…[ad_2]
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Before you short Nvidia after reading investment advice from ‘Twitter randos,’ read this
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Nvidia Corp.’s revenue doubled while its cost of goods barely crept up, so there must be something fishy, right? A company is using their Nvidia graphics processing chips as collateral for billions in loans — that doesn’t sound right, does it?
As Nvidia NVDA shares fell 3.1% to close at $470.61 on Wednesday, Bernstein analyst Stacy Rasgon must have been hearing from clients all day who were worried after reading the most recent conspiracy theory on why Nvidia’s 222% year-to-date stock gain must somehow be fixed.
“Recently…
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Arm Sets Target Valuation for IPO. It’s Likely to Be the Biggest of the Year.
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Arm Holdings is set for a blockbuster initial public offering which will test market appetite for an important technology company. However, its targeted valuation suggests it is accepting it won’t be the next
Nvidia
…[ad_2]
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Nvidia’s stock closes at record high, sending AI-chip maker to $1.2 trillion market cap
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Nvidia Corp. shares are back on track to try to turn in their best year ever after closing at a record high Tuesday, as the company reached a $1.2 trillion market capitalization for the first time.
Nvidia
NVDA,
+4.16%
shares rallied as much as 5% on Tuesday to an intraday high of $490.81, and closed up 4.2% at $487.84, while the S&P 500 index
SPX,
+1.45%
gained 1.5%. Last week, shares surpassed the $500 mark for the first time.After an initial show of strength, Nvidia walked back gains following its blowout earnings report last week, when the graphics-processing-units maker topped Wall Street’s data-center sales estimates by more than $2 billion for the quarter, and forecast revenue for the current quarter of more than $3 billion above expectations.
Nvidia also closed above a $1.2 trillion market cap for the first time Tuesday, according to Dow Jones Market data.
In a little more than a year, Nvidia’s market capitalization had increased by close to $1 trillion, adding $925 billion in market cap since 2022’s stock price low, hit on Oct. 14, when shares closed below $113 for the first time since August 2020, according to Dow Jones data.
Last fall, Nvidia’s stock was melting down because it had to replace some $400 million in expected data-center sales to China with equipment that would clear a U.S. ban on AI tech as well as deal with inventory write-downs.
FactSet
Read from Sept. 2022: Nvidia’s ‘China Syndrome’: Is the stock melting down?
Nvidia shares are up 234% year to date, compared with a 17% gain by the S&P 500, and already ahead of their strong 2016 gain of 224%, and back in the running to overcome their best one-year gain of 308% set back in 2001, according to FactSet data.
Nvidia shares were also the second-most active on the S&P 500 on Tuesday, with more than 69 million shares exchanged, second only to Tesla Inc.’s
TSLA,
+7.69%
more than 132 million shares exchanged by the close.For their part, Tesla shares posted a 7.8% gain Tuesday, their biggest one-day jump in five months, following a report that Tesla was launching a $300 million AI computing cluster using thousands of Nvidia GPUs.
Also on Tuesday, Nvidia and Alphabet Inc.
GOOG,
+2.81% GOOGL,
+2.72%
announced that the chip maker’s cutting-edge data-center chips are powering Google Cloud Platform and its PaxML large language model.[ad_2]
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Nvidia Plans to Buy Back Billions in Stock. Other Companies Could Join in Soon.
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Nvidia Plans to Buy Back Billions in Stock. Other Companies Could Join in Soon.
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Nasdaq futures jump after Nvidia results impress, while Dow futures flatline
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U.S. stock futures jump early Thursday as sparking Nvidia results boost risk appetite.
How are stock-index futures trading
-
S&P 500 futures
ES00,
+0.52%
rose 29 points, or 0.6%, to 4476 -
Dow Jones Industrial Average futures
YM00,
-0.11%
dipped 6 points, or 0.0%, to 34516 -
Nasdaq 100 futures
NQ00,
+1.15%
added 210 points, or 1.4%, to 15405
On Wednesday, the Dow Jones Industrial Average
DJIA
rose 184 points, or 0.54%, to 34473, the S&P 500
SPX
increased 48 points, or 1.1%, to 4436, and the Nasdaq Composite
COMP
gained 215 points, or 1.59%, to 13721.What’s driving markets
Well-received earnings from AI chipmaker Nvidia
NVDA,
+3.17%
has triggered a bout of risk-on activity across markets. Futures indicate the tech-heavy Nasdaq 100 will open up 1.4% as Nvidia’s stock jumps 8% in premarket action.“The market expectations were sky-high, the results went to the moon,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “The Nvidia news has [had] a boosting effect on technology stocks…by confirming that all the talk around the AI-craze was not empty, after all.”
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, agreed: “Nvidia smashing the forecast ceiling has also lifted the mood elsewhere.”
Shares of Palantir Technologies
PLTR,
+4.29% ,
Advanced Micro Devices
AMD,
+3.57%
and OpenAI investor Microsoft
MSFT,
+1.41%
rose in premarket action.Dow Jones Industrial Average futures underperformed as shares in Boeing
BA,
-0.65%
fell nearly 2% on news of a defect identified on the 737 Max aircraft.Falling implied borrowing costs were also helping the mood Thursday. The benchmark 10-year U.S. Treasury yield, which earlier this week hit a near 16-year peak of 4.36% has pulled back to 4.178% after survey’s of economic activity in Europe and the U.S., released Wednesday, suggested a deteriorating global economy.
“The rally in U.S. stocks and the retreat of Treasury yields followed underwhelming economic reports as the market fell back into the ‘bad news is a good’ mode,” said Stephen Innes, managing partner at SPI Asset Management.
“But encouragingly for equity investors, the weaker U.S. data lens more weight to the argument for the Federal Reserve to pause its interest rate hikes,” Innes added.
With that in mind traders will have an eye on the Jackson Hole economic policy symposium, which begins Thursday, and which on Friday is expected to deliver a speech by Fed Chair Jerome Powell.
U.S. economic updates set for release on Thursday include the weekly initial jobless claims and durable goods orders for July, both due at 8;30 a.m. Eastern.
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S&P 500 futures
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Nvidia’s stock soars after AI boom pushes chip giant to record earnings and blowout forecast
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Nvidia Corp. shares rallied in the extended session Wednesday after the maker of graphics processing units that is leading the AI-hardware charge reported a 141% surge in data-center sales and record results.
Nvidia
NVDA,
+3.17%
shares rallied 9% after hours, following a 3.2% rise in the regular session to close at $471.16, less than 1% below the stock’s record closing high of $474.94, set on July 18, according to FactSet data. A close at such levels on Thursday would mean a new record high for the stock.The Santa Clara, Calif.-based company reported second-quarter net income of $6.19 billion, or $2.48 a share, compared with $656 million, or 26 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $2.70 a share, compared with 51 cents a share in the year-ago period.
Revenue surged to a record $13.51 billion from $6.7 billion in the year-ago quarter, driven by a 141% leap in data-center revenue to $10.32 billion.
Analysts surveyed by FactSet had forecast earnings of $2.08 a share on revenue of $11.19 billion, and data-center sales of $8.03 billion.
Nvidia forecast third-quarter revenue of $15.68 billion to $16.32 billion.
Analysts had estimated third-quarter earnings of $2.40 a share on revenue of $12.59 billion, with $9.15 billion of that from data-center sales. For the year, Wall Street, on average, expects earnings of $8.29 a share on $44.54 billion in revenue, a 71% increase from fiscal 2023’s $26.97 billion, with $32.41 billion of that in data-center sales.
“Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI,” said Jensen Huang, founder and chief executive of Nvidia, in a statement. “Leading enterprise IT system and software providers announced partnerships to bring Nvidia AI to every industry. The race is on to adopt generative AI.”
Right after the report, Lopez Research analyst Maribel Lopez told MarketWatch that Nvidia’s “numbers prove just how much money there is in the AI hardware opportunity.”
“While cloud companies are selling AI services, Nvidia is walking away with a bulk of the revenue and profits,” Lopez said. “Nvidia’s minting cash with no apparent slowdown in sight.”
Nvidia shares are up more than 222% on a year-to-date basis, compared with a 42% surge in the PHLX Semiconductor Index
SOX,
a 15.5% rise by the S&P 500
SPX
and a 31% gain by the tech-heavy Nasdaq Composite
COMP
over the same span.Nvidia, which has stood as the largest publicly traded chip maker by market cap since February, having traded that title back and forth with Taiwan Semiconductor Manufacturing Co.
TSM,
+2.15%
since late 2020, closed above the $1 trillion mark officially for the first time on June 14. Nvidia ended Wednesday with a valuation of $1.164 trillion, and one analyst thinks it could be the most valuable U.S. company in a few years.Nvidia currently stands as the fifth-largest U.S. company by market cap behind Apple Inc.
AAPL,
+2.19% ,
Microsoft Corp.
MSFT,
+1.41% ,
Alphabet Inc.
GOOG,
+2.71% GOOGL,
+2.55%
and Amazon.com Inc.
AMZN,
+0.95% .
While all have a big stake in the future of AI, the latter three companies are scrambling to outfit their cloud-service provider data centers with new AI gear amid tight supply.While Nvidia is considered the overwhelming leader in the AI chip market, Advanced Micro Devices Inc.
AMD,
+3.57%
is considered a distant second. AMD’s data-center numbers declined in the company’s recent earnings report, although the company didn’t have comparable AI chip sales in its results.Shares of AMD and TSMC were both up more than 3% after hours Wednesday.
See also: Nvidia ‘should have at least 90%’ of AI chip market with AMD on its heels
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How Nvidia’s Jensen Huang may be driving Fed rate-hike expectations
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“‘You could ask who is really running the show? Jerome Powell or Jensen Huang? Amazingly, it may not be Powell, but Jensen Huang who is driving Fed expectations.’”
Those are the words of Ben Emons, a senior portfolio manager and the head of fixed income at NewEdge Wealth in New York, who identifies reasons why artificial-intelligence leader Nvidia Corp.
NVDA,
-2.77%
is demonstrating central-bank-like powers.It starts with the idea that the Santa Clara, California-based chip designer — which reports fiscal second-quarter earnings on Wednesday — acts as a bellwether for AI-capital expenditures that are likely to boost productivity across the U.S. economy. And in the bond market, a surge of AI-related expectations is translating into higher real yields, which reflect inflation-adjusted growth in gross domestic product and productivity, he said.
Read: Nvidia’s stock snaps losing streak and sits 1% below record close as earnings optimism builds
Higher real yields in the U.S. are a key reason why 10-
BX:TMUBMUSD10Y
and 30-year Treasury yields
BX:TMUBMUSD30Y
climbed to multi-year highs through Monday. Real yields, as measured by rates of Treasury inflation-protected securities, offer a glimpse of how the market expects the U.S. to perform when inflation isn’t a factor.Read: Rise in Treasury yields is almost entirely due to one factor, strategist says
“The bigger macro story behind Nvidia as the bellwether of artificial intelligence is the role it plays in the economy, which is proving to be stronger than anyone thought it would be,” Emons said via phone on Tuesday. “People connect AI to productivity and productivity leads to growth, and to some extent this is impacting interest-rate expectations today.”
Amid growing anticipation over Nvidia’s upcoming earnings announcement and Friday’s speech by Federal Reserve Chairman Jerome Powell in Jackson Hole, Wyo., “the probability of a rate hike is creeping higher,” the senior portfolio manager wrote in a note this week. “With each additional dollar increase of NVDA EPS estimates, the probability of a hike by November goes up. NVDA is gaining Fed-like power.”
Need to Know: Nvidia may be the AI stock for now, but here are the picks for later, says Goldman Sachs
A chart provided by Emons shows how the median estimate of analysts for Nvidia’s earnings-per-share in the fiscal second quarter has been rising alongside the market-implied probabilities of a November Fed rate hike.
Source: Bloomberg, Nvidia
In addition, the yield on one of Nvidia’s own corporate bonds, issued in 2020 and maturing in April 2040, has been rising in relation to the 10-year TIPS or real yield “because of the company’s broader effect on the economy,” Emons said.
Source: Nvidia, U.S. Treasury
As University of Pennsylvania Wharton School finance professor Jeremy Siegel explained in a separate interview with MarketWatch, real interest rates track real growth. Improving productivity and stronger growth “mean the Fed won’t be able to cut rates as much as it would otherwise be able to.”
On Tuesday, Treasury yields finished mixed, while Nvidia’s shares closed down by 2.8%, as traders and investors await the company’s earnings report on Wednesday followed two days later by Powell’s remarks.
Analysts expect Powell to address what’s known as the real neutral rate of interest — or the inflation-adjusted level which is likely to prevail when the economy is operating at full strength and price gains are stable — as a way of justifying the higher-for-longer theme in U.S. interest rates.
See also: How higher-for-longer rates are playing out as 10-year yield hits 15-year high
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Half-Life 2 Will Soon Have Ray-Tracing
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GPU manufacturer Nvidia announced its plans to remaster, with full ray-tracing, Valve’s 2004 first-person shooter Half-Life 2 on August 22. Development will be handled by myriad Half-Life 2 mod teams, including those that made Half-Life 2: VR, united under new studio Orbifold, and it’ll be released for free.
Half-Life 2 RTX, which “is early in development,” a blog Nvidia posted to its site says, does not yet have a release date, but it relies on the tech company’s also unreleased, free modding platform RTX Remix. Through its “latest version,” Nvidia says, Orbifold is “rebuilding materials with Physically Based Rendering (PBR) properties, adding extra geometric detail via Valve’s Hammer editor, and leveraging NVIDIA technologies including full ray-tracing, DLSS 3, Reflex, and RTX IO to deliver a fantastic experience for GeForce RTX gamers.”
A trailer showcasing stunning improvements to environments indicates as much. But before any diehard fans get giddy about their favorite game’s makeover, it seems likely that, when Half-Life 2 RTX releases, it’ll be hard to find a PC that can handle it.
Nvidia’s free-to-play modding project from earlier this summer, Portal: Prelude RTX, currently has a “mostly negative” review rating on Steam because of frequent crashes (and bad puzzles).
“I figured I would give this a shot,” says a top-voted review. “I have a 13900K, a 4090 [GPU], 64 gigs of RAM, and the most recent drivers and patches. Nope, the game lasted about 10 seconds before it froze with stuttering audio.”
But, you know, we’re talking about free mods. There are few meaningful setbacks to trying out Half-Life 2 RTX once it’s out, especially as its source material, as Riley MacLeod says with Delphic pronunciation in a 2016 Kotaku review, is “a place more than a game.”
“It creates a player who is in control,” he writes, “who can effortlessly navigate the game world to do what they want to do, who feels confident and empowered and all the words games trip over themselves to promise us now.”
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Ashley Bardhan
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Nvidia may be the AI stock for now, but here are the picks for later, says Goldman Sachs
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Wall Street looks ready to build on Monday’s gains, the first in five sessions for the S&P 500
SPX
and Nasdaq Composite
COMP.
That’s as expectations build around Nvidia, which has had a lackluster August, to knock it out of the park with earnings on Wednesday.Investors have had months to focus on AI darlings such as Nvidia. In our call of the day, Goldman Sachs takes a look at stocks to trade after the big AI trade. A team led by strategists Ryan Hammond and David Kostin complied a basket of companies with the biggest potential long-term earnings per share boost from the impact of AI adoption on labor productivity.
Their analysis indicates that following widespread AI adoption, EPS for the median stock in that basket could be 72% higher than the baseline, versus 19% for the median Russell 1000 stock.
“We estimate the potential productivity-related EPS boost from increased revenues or increased margins, using a combination of company-level estimates of the share of the wage bill exposed to AI automation and the labor cost to revenue ratio,” said the Goldman team.
Since early 2023, when AI emerged as a theme for investors, they note their long-term basket of stocks has outperformed the equal-weight S&P 500 by just 6 percentage points, far less than near-term beneficiaries such as Nvidia
NVDA,
-0.49% ,
Microsoft
MSFT,
+0.94%
or Meta
META,
+0.51% .
Goldman Sachs Investment Research
“The estimated AI-driven earnings boost is likely to occur over the next few years, but should be reflected in stock valuations sooner. However, the eventual share price impact will depend on the ability of companies to use AI to enhance earnings,” said Goldman.
While unable to pin it exactly, Goldman expects AI adoption will start to a have a “meaningful macro impact” between 2025 and 2030, with regulatory constraints and data privacy concerns likely to slow widespread adoption. Nearly 75% of CEOs see AI take-up impacting companies or cutting labor needs within the next five years, even if they don’t right now.
Firms with the biggest workforce exposure to AI and larger and more innovative ones, will likely adopt generative AI earlier than others, say the strategists. They say to “expect valuation multiples for these companies to increase first as the adoption timeline crystallizes, even if actual adoption and the associated EPS boost is occur later.”
Goldman’s estimates on the potential earnings boost for those long-term AI beneficiaries consist of several factors: the share of each company’s wage bill exposed to AI automation, how much of a company’s wage bill is exposed to AI automation and labor cost as a share of revenue.
“For the typical Russell 1000 stock, 33% of the wage bill is potentially exposed to AI automation and labor costs currently represent 14% of total sales. The potential boost from higher sales would increase earnings by 11% and reduced labor costs would increase earnings by 26%, all else equal,” say the strategists.
Here is a taster of their long-term AI beneficiaries basket:
Goldman Sachs
And a few more:
Goldman Sachs
Read: U.S. stocks may bounce this week, but summer selloff is only halfway done, analysts warn
The markets
U.S. stocks
SPXCOMP
are trading mixed. The yield on the 10-year Treasury
BX:TMUBMUSD10Y
is steady at 4.33%.For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.
The buzz
Microsoft
MSFT,
+0.94%
has proposed a Ubisoft license to win U.K. regulatory approval for its Activision Blizzard
ATVI,
+1.09%
buyout. Activision shares and Ubisoft
UBI,
+9.93%
surged in Paris.On the heels of a 7% surge, EV-maker Tesla
TSLA,
+2.77%
is up 1.8%.Opinion: SoftBank’s Arm is going public, but it faces a rapidly growing threat
Lowe’s shares
LOW,
+3.34%
are up after the DIY retailer’s earnings topped expectations, though it notes lower discretionary demand.Among Monday’s late earnings news: Fabrinet
FN,
+27.25%
is up 18% after the high-tech manufacturing services company upbeat forecast, with new AI products helping drive results. Videoconferencing group Zoom Video Communications
ZM,
-4.15%
is up 4% after reporting an earnings jump and guidance.Read: Why Amazon is this analyst’s top internet stock pick
The world’s biggest miner BHP
BHP,
-0.98%
reported a 58% slump in annual profit amid tumbling commodity prices in part due to China’s economic troubles. U.S.-listed shares are up 4%.Arm Holdings filed its long-awaited IPO, which could be the year’s biggest. The chip designer aims to raise up to $10 billion with a valuation of $60 billion to $70 billion.
Existing home sales for July are due at 10 a.m., with several Fed speakers throughout the day: Richmond Fed President Tom Barkin at 7:30 a.m. and Chicago Fed President Austan Goolsbee and Fed. Gov. Michelle Bowman both at 2:30 p.m.
Best of the web
New video shows the day police raided 98-year old Kansas newspaper owner’s home.
Hitler’s birth house in Austria will be turned into a police station with a human rights training center.
The tickers
These were the top tickers on MarketWatch as of 6 a.m.:
Ticker Security name TSLA,
+2.77% Tesla NVDA,
-0.49% Nvidia AMC,
-17.31% AMC Entertainment NIO,
-1.87% Nio APE,
-11.32% AMC Entertainment Holdings preferred shares TTOO,
-6.13% T2 Biosystems GME,
-3.63% GameStop AAPL,
+0.63% Apple MULN,
-19.19% Mullen Automotive AMZN,
+0.15% Amazon.com The chart
Is tech dancing to the beat of its own drum? The Chart Report flagged this one from Scott Brown, founder of Brown Technical Insights, showing performance of the Technology Select Sector SPDR ETF
XLK
:
@scottcharts
“It’s only been a week, but consensus and conventional wisdom suggest higher yields are bad for Growth/Tech stocks. Meanwhile, Tech is acting like it never got the memo. It’s still too early to tell if Tech is trying to tell us something, but Scott points out that the sector is facing a crucial test this week at the March 2022 highs (around $163). $XLK is solidly above $163 after today’s bounce, but where it ends the week will likely hinge on $NVDA, as the company releases earnings on Wednesday evening,” says Patrick Dunuwila, editor and co-founder of The Chart Report.
Random reads
“We are the champions.” Spain erupted in celebrations to welcome its Women’s World Cup victors. And England’s Lionesses got a 1,000 soccer-ball tribute.
No, Tropical Storm Hilary didn’t flood Dodger Stadium.
These thirsty beer-drinking thieves are raccoons.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton.
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Chip designer Arm files for long-awaited IPO, as smaller transistors send costs skyrocketing
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Arm Holdings Ltd. filed its long-awaited initial public offering late Monday, following last year’s failed bid by Nvidia Corp. to acquire the U.K.-based chip architecture company.
Arm has reportedly been seeking to raise $8 billion to $10 billion at a valuation of $60 billion to $70 billion, making its IPO the biggest of the year so far, and a number of large tech companies, including Amazon.com Inc.
AMZN,
+1.10% ,
Intel Corp.
INTC,
+1.19%
and Nvidia
NVDA,
+8.47% ,
are reportedly in the mix to be anchor investors.In a late Monday filing with the Securities and Exchange Commission, Arm said it was offering to list its U.S. traded shares on the Nasdaq under the ticker symbol “ARM.”
Arm, which is owned by Japan’s SoftBank Group Corp.
9984,
+1.16% ,
was the target of an unsuccessful $40 billion acquisition by Nvidia last year. After Nvidia scrubbed the deal and paid a $1.36 billion breakup charge following the U.S. Federal Trade Commission’s unanimous decision to block it, Nvidia disclosed it paid Arm $750 million for a 20-year license to its technology.At the time of the breakup, chips sales had hit record highs in 2021, surging 26.2% to a record $555.9 billion, fueled by pandemic-triggered shortages. But the chip industry has since swung to a glut.
Arm listed Barclays, Goldman Sachs, JP Morgan, Mizuho, BofA Securities, Citigroup, and Deutsche Bank Securities among the IPO’s underwriters.
Recent reports said SoftBank was in discussions to purchase the 25% stake in Arm that it does not outright own, which is held by its Vision Fund 1, ahead of the IPO.
Read from Feb. 2022: Wall Street’s reaction to death of Nvidia-Arm deal: No duh
Arm reported net income of $524 million, or 51 cents a share, on revenue of $2.68 billion for fiscal 2023, which ended March 31, compared with net income of $549 million, or 54 cents a share, on revenue of $2.7 billion, in fiscal 2022, and $388 million, or 38 cents a share, on revenue of $2.03 billion in fiscal 2021.
Arm uses an architecture that is different from the once-standard x86 one built by Intel in the early days of computing.
The company said it has shipped more than 250 billion Arm-based chips since its started in 1990 as a joint venture between Acorn Computers, Apple
AAPL,
+0.77%
and VLSI Technology. In fiscal 2023, Arm said it shipped 30.6 billion chips.The company said it is going public as the “resources required to develop leading-edge products are significant and continue to increase exponentially as manufacturing process nodes shrink.” Transistors are expressed in scales of nanometers, with design costs running about $249 million for a 7-nanometer chip and about $725 million for a 2-nm chip.
“As the world moves increasingly towards AI- and [machine language]-enabled computing, Arm will be central to this transition,” the company said in the filing. “Arm CPUs already run AI and ML workloads in billions of devices, including smartphones, cameras, digital TVs, cars and cloud data centers.”
Arm said it is working with Alphabet Inc.
GOOG,
+0.64% GOOGL,
+0.71% ,
GM’s
GM,
+0.45%
Cruise, Mercedes-Benz
MBG,
+0.78% ,
Meta Platforms Inc.
META,
+2.35% ,
and Nvidia “to deploy Arm technology to run AI workloads.”[ad_2]
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Nvidia’s stock looks to snap losing streak as earnings optimism builds
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Nvidia Corp.’s earnings are drawing nearer, and yet another analyst is feeling upbeat heading into the upcoming report.
KeyBanc analyst John Vinh hiked his price target on Nvidia’s stock
NVDA,
+7.31%
to $620 from $550 Sunday, writing that despite tight supply, Nvidia could see strong AI demand and incremental capacity drive upside. Nvidia is scheduled to report fiscal second-quarter earnings after the close of markets on Wednesday.“Given the pushout of [Advanced Micro Devices Inc’s]
AMD,
+2.31%
MI300X, we believe Nvidia has been able to source increased [chip on wafer on substrate] capacity at Taiwan Semiconductor Manufacturing Co.
TSM,
+1.44% ,
” Vinh said.Read: Nvidia earnings to offer first true glimpse of the AI windfall
Shares of Nvidia rallied more than 5% to an intraday high of $456.56 in Monday trading, after having logged declines in each of the prior three sessions for a total loss of 1.5%. The shares are up more than 210% on a year-to-date basis, compared with a 39% gain in the PHLX Semiconductor Index
SOX,
a 14% rise in the S&P 500
SPX
and a 28% surge in the tech-heavy Nasdaq Composite
COMP
over the same span.In addition, Nvidia plans a fall launch of its L40S GPU for small to medium-sized model training and inferencing with competitive performance versus its A100. That debut will be significant given tech restrictions related to China.
“Given L40S meets the performance threshold of export restriction and doesn’t require CoWoS packaging, combined with favorable pricing (est. $7K-$8K/GPU), we expect this lineup can incrementally fulfill some of the pent-up GPU demand in the near term, particularly in China,” said Vinh, who has an overweight rating on the stock.
Read: ‘Magnificent Seven’ stocks are losing some of their shine, but their bonds are doing fine
Vinh raised his fiscal second-quarter revenue forecast to $12.7 billion and upped his earnings outlook to $2.49 a share. His prior expectations were for $11.1 billion and $2.05, respectively.
He also now forecasts fiscal third-quarter revenue of $14.8 billion and earnings per share of $3, up from prior projections of $12.4 billion and $2.34, respectively.
Read: Nvidia gets more good news from Big Tech, even as AI spending ‘may not lift all boats’
Of the 50 analysts who cover Nvidia, 43 had buy-grade ratings, six had hold ratings and one had a sell rating, along with an average price target of $432.99.
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Expectations for Nvidia’s earnings are massive. Will they even matter?
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When Nvidia Corp. last reported quarterly results, the chip maker forecast record revenue that was far above anything it had put up before. In response, investors sent the stock into orbit. On Wednesday, the latest round of earnings for the company will be a test of Nvidia’s status as the darling of the AI investment boom, and a test of whether it can deliver on its own lofty expectations.
The results will also be an update of tech demand overall, after businesses tightened their IT budgets following worries about an economic slowdown. But even with Nvidia’s
NVDA,
-0.10%
stock up more than 200% so far this year and expectations rising just as much, some analysts still say there’s room for shares to go higher, despite supply-side logjams.Barclays said that Nvidia, whose chips analysts say will help power AI technology in the days to come, has “monopolized the economics of the AI boom, with no clear competitor close behind.” They added that “cloud capex budgets are being funneled towards AI.”
Signs that Nvidia might be falling behind on meeting chip demand have started to emerge. But as businesses rush to mark their territory, or potential territory, in the world of AI, Wedbush analysts have asked whether Nvidia’s results and forecast would even matter, as today’s production constraints turn into tomorrow’s sales.
“We don’t think NVDA results/guidance need to hit the high end of expectations,” Wedbush analyst Matt Bryson said in a research note on Friday.
“With demand for AI training having lifted substantially in the past quarter and with no other silicon supplier now capable of providing part volumes within an order of magnitude of NVDA’s output, we believe any unfilled demand will just be pushed into forward quarters fueling future sales and (earnings per share),” he continued.
Synovus analyst Daniel Morgan was also bullish on Nvidia’s business targeted toward data centers, as those facilities try to integrate generative AI and large language models. And within Nvidia’s gaming segment, he said the company’s new Ada Lovelace graphics-processing unit ecosystem “appears to be seeing a high level of success in retail.”
Still, the longer a stock runs higher, the harder it can fall. And Nvidia’s $1 trillion valuation, Morgan said, “is not for the faint-hearted.”
This week in earnings
Along with Nvidia, China search giant Baidu Inc.
BIDU,
-3.63%
reports, as the nation’s economic rebound sputters. And if more businesses are still cautious about cloud spending, or shifting spending to AI, the mood could filter through to results from Splunk Inc.
SPLK,
+0.35%
and Snowflake Inc.
SNOW,
+0.47% .
Peloton Interactive Inc.
PTON,
+1.59% ,
Workday Inc.
WDAY,
+0.16%
and Marvell Technology Inc.
MRVL,
+0.05%
also report.The call to put on your calendar
Zoom and offices: If even Zoom is calling some of its workers back to the office, what could that possibly mean for its results on Monday and the business of videoconferencing? Zoom Video Communications Inc.
ZM,
+1.42%
hasn’t been spared from the wave of tech-industry layoffs, and the company is trying to branch out from its pandemic-mainstay video-call platform, and harnessing its technology to handle phone calls and customer contact centers. Benchmark Research analyst Matthew Harrigan, in a note last week, said he still liked Zoom’s prospects, even though he wasn’t expecting “much instant gratification.” “We do expect AI to crystallize as a significant positive for Zoom even as it navigates through customer pushback on using customer data to train AI models off privacy concerns,” he said.The numbers to watch
Sales, forecasts and inventories from retailers: Last week, Target Corp.
TGT,
+0.85%
reported what one analyst called “the definition of mixed results,” while another said the results amounted to “Recessionary trends without the recession.” Sales of essentials like groceries, as they have over the past year, helped Walmart Inc.’s
WMT,
+1.44%
results, but management said that consumers were still feeling the pain from inflation, which for some shoppers over the past year has left little room for much beyond the basics.In the week ahead, we’ll get results whole bunch of retailers that don’t sell basics — like department stores Macy’s Inc.
M,
+0.53%
and Kohl’s Corp.
KSS,
+3.53%
; clothing chains Nordstrom Inc.
JWN,
+0.47% ,
Gap Inc.
GPS,
+2.17% ,
Urban Outfitters Inc.
URBN,
+2.00%
; shoe retailer Foot Locker Inc.
FL,
+0.60%
and beauty-products chain Ulta Beauty Inc.
ULTA,
+1.40% .
Those retailers will report as prices for some things start to come down, or at least not rise as fast, and as some economists overcome their recession fears. But remarks from executives could offer some sense of the impact from higher borrowing costs and the return of student loan payments, and how much they’ll be able to bank on the back-to-school season and wealthier — and more carefree — consumers.Dollar-store Dollar Tree Inc.
DLTR,
+0.44%
will also report results, as low-income consumers suffer more under inflation and deal with the end of pandemic-era supplemental food assistance. Off-price retailer Burlington Stores Inc.
BURL,
+1.43%
reports as well, after Ross Stores Inc.
ROST,
+5.01%
Chief Executive Barbara Rentler said that while its low- and moderate-income shoppers were still hurting, shoppers overall “responded well to our improved value offerings throughout our stores.”[ad_2]
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Nvidia, Lowe’s, Dollar Tree, and More to Watch
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The majority of second-quarter earnings season is over, with a handful of major technology and retail names left to report this week. Economists will be focused on any news from an annual gathering of monetary policy thinkers and practitioners in Jackson Hole, Wyoming.
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‘Magnificent Seven’ stocks are losing some of their shine, but their bonds are doing fine
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The so-called Magnificent Seven grouping of technology stocks lost some of its luster this week after four of the seven moved into correction territory, meaning their stocks have fallen at least 10% from their recent peaks.
The corporate-bond market, in contrast, seems to like all seven names.
The group is made up of Facebook parent Meta Platforms Inc.
META,
-0.65% ,
Apple Inc.
AAPL,
+0.28% ,
Microsoft Corp.
MSFT,
-0.13% ,
Nvidia Corp.
NVDA,
-0.10% ,
Amazon. com Inc.
AMZN,
-0.57% ,
Google parent Alphabet Inc.
GOOGL,
-1.89% GOOG,
-1.80%
and Tesla Inc.
TSLA,
-1.70% .One caveat: Tesla has no outstanding bonds. In the past, the electric-car maker issued convertible bonds, but they have all been converted into equity.
The group is credited with helping drive the stock market’s gains in the first half of the year, driven by excitement about artificial intelligence. But the rally has stalled in recent weeks as investors have fretted over the potential for U.S. interest-rate increases, surging Treasury yields and China worries, with property developer Evergrande filing for U.S. bankruptcy protection late Thursday.
On Thursday, Meta followed Apple, Microsoft and Nvidia into correction territory, as MarketWatch’s Emily Bary reported. Tesla, meanwhile, is in a bear market, meaning it’s down more than 20% from its recent peak.
Read: Have AI stocks like Nvidia reached bubble territory? Here’s what history can tell us.
The following series of charts from data-solutions provider BondCliQ Media Services show how many bonds each company has issued by maturity and how they have traded as the stocks have pulled back.
The first chart shows that Microsoft has by far the most bonds, mostly in the 30-year bucket. The software and cloud giant has more than $50 billion in long-term debt, according to its 2023 10-K filing with the Securities and Exchange Commission.
Outstanding Magnificent Seven debt by maturity bucket.
Source: BondCliQ Media Services
This chart shows trading volumes over the last 10 days, divided by trade type. The green shows customer buying, while the red is customer selling. The blue shows dealer-to-dealer flows. Microsoft, for example, has seen almost $1.3 billion in customer buying from dealers in the last 10 days and $960 million in customer sales to dealers.
Magnificent Seven debt trading volumes (last 10 days).
Source: BondCliQ Media Services
This chart shows that every name in the group has enjoyed better net buying in the last 10 days, with Microsoft leading the way.
Net customer flow of Magnificent Seven debt (last 10 days).
Source: BondCliQ Media Services
This chart shows spread performance over the last 50 days for an intermediate-term bond from each of the seven issuers. Most have tightened or remained steady over the period.
Historical spread performance of Magnificent Seven debt.
Source: BondCliQ Media Services
Read also: Red flags waving for tech stocks as AI bounce fades, China fears escalate
Apple’s stock entered correction Wednesday upon falling more than 10% from its July 31 peak of $196.45. The company sells mainly discretionary products, and right now “consumers are still being pinched” and thinking more carefully about where they spend their money, according to Matt Stucky, senior portfolio manager for equities at Northwestern Mutual Wealth Management.
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Nvidia’s stock drops below key uptrend tracker, snapping longest streak above it in 6 years
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Nvidia Corp.’s stock chart now shows that the stunning uptrend investors in the semiconductor maker have enjoyed this year amid all the artificial-intelligence hype may have ended.
But as history suggests, after a long uptrend, rather than a new downtrend, investors may have to endure some whipsaw action within a relatively static trading range over the next several months before the uptrend resumes.
The stock
NVDA,
-0.72%
slumped 4.7% on Wednesday to close at $425.54, which was 10.4% below the July 18 record close of $474.94, following a downbeat earnings report from Super Micro Computer Inc.
SMCI,
+3.47% ,
which counts Nvidia as a key supplier.Many on Wall Street believe a correction is defined by a decline of at least 10% to up to 20% from a significant recent peak. A drop of 20% or more is thought of as a bear market.
But perhaps more important for chart followers, the stock closed below the widely followed 50-day moving average for the first time since Jan. 6, 2023. The 50-DMA had extended to $429.03 on Wednesday.
FactSet, MarketWatch
On Thursday, the stock bounced 0.5% in morning trading but held below the 50-DMA, which extended to $429.68, according to FactSet. Despite the recent correction, the stock was still up 192.6% year to date, while the PHLX Semiconductor Index
SOX
has climbed 43.7% and the S&P 500
SPX
has advanced 17.2%.Read: Nvidia is ‘domination’ and could unlock $300 billion in AI revenue by 2027, analyst says.
The 50-DMA is used by many chart watchers as a short-term trend tracker. If the stock is above that line, it is viewed as being in an uptrend. The most time spent above that line, the stronger the uptrend.
Until Wednesday, Nvidia’s stock closed above the 50-DMA for 146 consecutive trading sessions, according to FactSet data, which is the second-longest stretch since it went public in January 1999.
The record stretch above the 50-DMA was 255 sessions, a streak that ended on Feb. 23, 2017, while the second-longest stretch of 143 sessions ended on Oct. 28, 2020.
After the stock snapped the super-50-DMA streak in 2020, it waffled around the line and was little changed for the next several months before resuming the uptrend with a big spike.
As an uptrend takes a several-month pause after the 50-DMA breaks, the 200-DMA becomes strong support.
FactSet, MarketWatch
As the chart above shows, after the 50-DMA broke, investors set their sights on the 200-DMA, which many view as a dividing line between longer-term uptrends and downtrends. In this case, despite a one-day dip below the 200-DMA in mid-March 2021, the line acted as strong support.
And after the record super-50-DMA streak, the stock seesawed around the line, while having a slightly negative bias for the next few months, before the uptrend resumed in force.
After the 50-DMA break, the 200-DMA was never threatened.
FactSet, MarketWatch
This time, the stock never really threatened the 200-DMA.
In the current technical situation, one of the downside levels to keep an eye on is the bear-market threshold of 20% below the July closing high, which comes in at $379.95. Another level to watch is the 200-DMA, which currently extends to $269.63 and has been rising by $1.65 a day over the past 10 days.
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How to Turn Tesla Into a Dividend-Paying Stock
