Here’s what to take away from today’s Morning Brief, which you can register to receive every morning in your mailbox accompanied by:
Try to knock this king off the throne.
In the days following Nvidia’s (NVDA) big quarter and outlook Wednesday evening, two leads emerged.
Track One is owned and operated by Wall Street, and it believes Nvidia will continue to hit new profit highs this year and next. Consensus estimates (which can be tracked on Yahoo Finance here) are (once again) on the rise, and the Street remains true to its appetite for higher price targets.
The other track is media owned and operated, and it is increasingly looking to pierce Nvidia’s investment thesis. Hey, I understand; it’s our job to be skeptical of numbers, mainstream narratives, and leaders.
But saying that Nvidia’s stock is in a bubble because it has grown a lot, or that its finances may be in a bubble because of eye-popping growth rates, seems completely off base to me.
Let me offer this up front: I don’t have a car in this race – I don’t own Nvidia stock and never have.
All I’m saying is that an asset bubble has a few simple characteristics.
First: the asset that appreciates in value generally does not have the necessary fundamentals to justify this appreciation. Second: People blindly buy the asset without understanding it – mainly because everyone is getting into it.
I don’t see any of these things for Nvidia.
Investors seem very knowledgeable about Nvidia’s business and are buying for the right reasons.
Next, Nvidia’s growth rates justify a higher valuation. This is a company that just increased its profits by 461% in the first quarter! Sales exploded by 262%!
For what? Because we’re seeing a seismic shift in tech stacks thanks to generative AI, powered by models backed by Nvidia chips. No one is close to this company’s technology. It’s interesting to discuss concerns about Amazon (AMZN) and Apple (AAPL) building their own AI chips, but Nvidia is doing it at scale and is 27 miles ahead of those companies.
“People want to deploy these data centers right now,” Nvidia CEO Jensen Huang told Yahoo Finance’s Julie Hyman and Dan Howley in an exclusive interview right after the results (video above). “They want to put our [graphics processing units] work now and start earning and saving money. And so this demand is so strong. »
Will Nvidia continue to grow its revenue and earnings by triple digits? No, but the growth rates will remain more than impressive and faster than those of competitors.
Bubble? Let’s be real, friends!
Amazon AWS has begun manufacturing AI chips to better control a supply chain hungry for these powerful technologies. AWS CEO Adam Selipsky discusses strategy in a new episode of the Opening Bid podcast. Listen below.
Brian Sozzi is the editor-in-chief of Yahoo Finance. He is also the host of the show “Opening offer” Podcast. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Advice on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to participate in Yahoo Finance Live? Email Brian Sozzi.
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