Nvidia blows the roof off and tanks their stock price
Welcome to AI Collision 💥,
In today’s collision between AI and our world:
- What goes up makes the market go down
- Oprah’s AI party
- Nvidia is out, then who is in?
If that’s enough to get the investors flip flopping, read on…
AI Collision 💥
It only happens four times a year, but right now it’s most anticipated event for investors and the broader market…
What will Nvidia report with its next earnings?
Many consider Nvidia to be the yardstick now when it comes to AI and the wider adoption, and financial potential of AI in our world.
Except there’s only one problem. The market is insane.
You can now almost guarantee that Nvidia is going to beat earnings expectations. Wall St “analysts: always have their view of what Nvidia is going to report, and Nvidia always beat it.
That may not continue, but so far, so good. Also, it does indicate analysts are just having a bit of a guess.
What makes it hilarious though is that every time Nvidia beats earnings, its stock price drops like a stone.
Nvidia’s stock fell almost 7% in trading off the back of its record results.
You can see for yourself, in the one-month price graph above, the stock was clearly volatile with the 5 August mayhem but was quickly rebounding back to previous levels.
Then earnings dropped, and so did the stock price.
So, before I dive into the results, let’s be clear about something: Nvidia has the best AI GPUs on earth. No one else comes close to having the tech needed for AI. (Something it has achieved by relying on technology from this British company no less.)
Warren Buffett always talked about “moats”, meaning a company with a ring of protection around its products or service. Nvidia’s moat isn’t a moat at all. It’s an island, and it’s oceans that separate Nvidia from everyone else.
That might change down the track, but if it does, I expect that would take years for the rest to level up, let alone knock them off. They went all in on AI many years ago, and it’s paying off now.
So, when you see the stock price peel off 7% because Nvidia smashed earnings again just ask yourself, is this a problem with the company? No. Is it a problem with the technology? No. Is it a problem with the financials, the management, any kind of problem operationally that could warrant a response like that? No.
As a long-term investor, you see moves like this as opportunity. And here’s why…
Record Revenues: Nvidia reported a record quarterly revenue of $30.0 billion, up 122% year-over-year. This was driven predominantly by the Data Centre segment, which saw an increase of 154% to $26.3 billion. Record revenues. Just one more time… RECORD REVENUES.
Datacentre Growth: The datacentre segment’s revenue surge was due to exponential growth in AI compute, particularly for generative AI. Nvidia’s HGX systems, powered by Hopper architecture GPUs, became the go-to solution for cloud service providers globally, leading to a generational shift in datacentre infrastructure. In short, the cloud is becoming the AI cloud.
AI and Cloud Partnerships: Nvidia’s partnerships with major CSPs like Microsoft Azure, Google Cloud, and Oracle Cloud Infrastructure have been pivotal. Let’s not forget Microsoft and Google control about 36% of cloud infrastructure combined.
Gaming: Despite the hype around AI, don’t forget Nvidia’s bread and butter has always been gaming. That’s how I first got to know them in the 90s and 00s. It’s why they became important for bitcoin mining. It’s also the foundation of its AI development. Nvidia’s gaming segment also saw significant growth, with revenues up over 80% year-on-year, driven by demand for RTX technology in gaming laptops and desktops.
Automotive: Don’t forget that Nvidia has been pivotal in automotive too. In fact, there’s a good chance if you’ve got a car around ten years old or newer, it’s already packing Nvidia chips. When I rode in an Audi self-driving car about a decade ago, it was Nvidia’s DRIVE platform (quite literally) driving it. Nvidia’s DRIVE platform continues to grow, with new design wins for its DRIVE platform. This is indicating strong future revenue potential in autonomous driving technology.
AI, data centres, cloud, gaming, automotive – this is every aspect of our high-tech digital lives, with Nvidia at the core.
Add to this, the demand for its next-gen Blackwell AI chips is going to further boost the coffers.
As CFO Colette Kress said,
At Computex, NVIDIA, with the top computer manufacturers, unveiled an array of Blackwell architecture-powered systems and NVIDIA networking for building AI factories and data centres.
AI factories. Powered by Blackwell.
She also noted,
Blackwell production ramp is scheduled to begin in the fourth quarter and continue into fiscal year ’26. In Q4, we expect to get several billion dollars in Blackwell revenue.
Take all this on board, because I expect the next quarter will blow the roof off as well, particularly as the market gets a good look at the demand for Blackwell flowing through to tangible revenues. Expect it to be more than what Nvidia is alluding to as well.
Nvidia’s success is a mix of being at the right place at the right time, with the right tech (just like this), but also taking a very intentional aim at a future industry that was risky at the time, but clearly was immense foresight as to the direction of our digital world.
Leadership, technology excellence, incredible partners, a lot of things make Nvidia the AI boss. And if it keeps pumping out numbers like it is, which I can’t see slowing down any time soon, then when the market shows how insane it is and peels them off 7% from those results, well, I think it’s pretty clear that presents a great opportunity.
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AI gone wild 🤪
AI, it may fascinate you or…
That’s as far as I got into the trailer for Oprah Winfrey special, “AI and the Future of Us: An Oprah Winfrey Special – Thursday 12 September on ABC”.
You can see the trailer below.
I must admit, it’s a very interesting line-up of guests, including…
OpenAI CEO Sam Altman; former Microsoft CEO and Gates Foundation chair Bill Gates; content creator Marques Brownlee; Tristan Harris and Aza Raskin, co-founders of the Centre for Humane Technology; FBI Director Christopher Wray; and Pulitzer Prize-winning author Marilynne Robinson.
I think it will be worth watching. It’s supposed to be on Hulu, but I imagine it will find its way to YouTube as well.
But it is interesting to see AI really hit mainstream coverage in this way. I mean if Oprah is covering it, that’s going to reach a lot of eyeballs both in the US and internationally.
Surely that’s a good thing.
Boomers & Busters 💰
AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).
Boom 📈
- Bigtincan Holdings (ASX:BTH) up 17%
- Gorilla Technology (NASDAQ:GRRR) up 14%
- AeroVironment (NASDAQ:AVAV) up 9%
Bust 📉
- Nvidia (NASDAQ:NVDA) down 9%
- Appen Ltd (ASX:APX) down 13%
- Symbotic (NASDAQ:SYM) down 18%
From the hive mind 🧠
- Selling Nvidia? Are you crazy? I guess profit taking is a thing still…unless there’s more profit to come. But if you’re selling Nvidia, then who are you buying? Here’s a theory as to where the money is rotating to.
- Who wants AI? You do? And you? And you over there? What about you, Apple? Nvidia? You’ve already got AI, you want more? Fine. You can all have a bit of AI just if you pump billions of dollars over here.
- And here I was thinking that my “brain clock” just went, wake up, eat, do stuff, eat, do more stuff, sleep. Apparently it’s a bit more complex than that, and AI is helping to figure it all out.
Artificial Polltelligence 🗳️
Well, the polls over the last week have been great, with immense feedback, and also it seems that on balance, readers of AI Collision couldn’t give two stuffs about Oasis.
The upside is the expectation that the band will create a mini economic boom for all the tourists planning on coming over, and the pubs that will get an absolute lashing around all the concerts they’re putting on.
Anyway, back to the AI questions at hand.
After considering Nvidia’s earnings and the market’s reaction to its record numbers…
As always, if you’d like to suggest anything else, leave a comment below…
Weirdest AI image of the day
I’ve got a boogie on my finger – r/weirddallee
ChatGPT’s random quote of the day
“Being the richest man in the cemetery doesn’t matter to me. Going to bed at night saying we’ve done something wonderful—that’s what matters to me.” — Steve Jobs, 1993
Thanks for reading, and don’t forget to leave comments and questions below,
Sam Volkering
Editor-in-Chief
AI Collision
Nvidia, Microsoft Accused in New Lawsuit of Infringing on Texas Startup’s DPU Patents .. is this having a big impact ie lack of confidence in Nvidia
Hi Sam, The information content of your output is splendid; this latest article about NVIDIA contains insight that is actually valuable. But why…o why do you insist on using that awful and old fashioned ‘Courier New’ as your chosen typeface? It looks as though you are writing your articles with a 1950s typewriter. A clean, non-serifed typeface like Arial or Helvetica with body text justified left would be so much nicer and easier to read. Hewlett Packard used to use Arial, a sans-serif typeface, for all their output documents; (they may still do).
In whatever typeface, I appreciate the insight and overview.