We have Nvidia earnings tomorrow. This will be a huge event for markets - even more important than Friday's Fed event (the St. Louis Fed's annual economic symposium at Jackson Hole).Â
Remember, it was Nvidia's earnings report in late May that swung the pendulum on the economic outlook, from despair to enthusiasm. And that's not an exaggeration;
Heading into that May earnings call, the big tech stocks had bounced aggressively from the selloff of the prior year, but the broader market was not participating (the equal weighted S&P 500 was flat on the year).
Consumer sentiment (the University of Michigan survey) in May was plunging back to levels of the Global Financial Crisis, and the 2011 debt ceiling standoff (which was also accompanied by a sovereign debt crisis in Europe).
Short sellers were going after regional bank stocks, expecting a "next shoe to drop" in commercial real estate (CRE). The regional bank ETF (KRE) had plunged to levels below where the Fed had intervened to stabilize the banks, following the Silicon Valley Bank blowup.
The recession calls were loud, to such an extent that the bond market was pricing in rate cuts by year end.
Then, the switch was flipped. Jensen Huang, the CEO of the world's dominant AI-chip maker declared a technology revolution to be underway.
He equated the launch of ChatGPT (which came just six months earlier) to the launch of the iPhone. Related to this ChatGPT "moment," he revealed that a trillion-dollar retooling of computing technology was/is in the early stages - a move from "general purpose computing" (powered by CPUs) to "accelerated computing" (powered by GPUs).
He had the numbers to back it up. Nvidia reported a huge earnings and revenue beat in Q1 with an even (shockingly) bigger upgrade in guidance. They told us the second half would be "substantially" better than the first.
So, just as the world was pondering recession, if not depression (and deflationary bust), this earnings call was a defining moment - the moment that reset the perspective on the next decade, perhaps a productivity and economic boom period.
With all of the above in mind, on Wednesday Nvidia clearly needs to deliver on what was a huge promise made in the Q1 earnings event. They set expectations for an $11 billion revenue quarter for Q2 - a 52% increase from the prior quarter.
GRYNING | AI members were alerted to an edge with upside potential regarding NVDA 0.00%↑ on 07 Aug’23. I show below the trade sheet, and whilst the price has tracked the expected pathway (green shaded area), the setup has a further 28.32% potential upside from here.
