NVIDIA's earnings report and commentary appeared overwhelmingly positive by all measures. However, as noted by Goldman Sachs' top trader Ryan Sharkey, when genuinely good news fails to receive proportional market rewards, it often signals underlying trouble.
On Thursday, NVIDIA shares initially surged 5% to $196 at open, only to reverse sharply and close down nearly 3% at $180.98 - marking a 7% intraday swing to its lowest close since October 22. This dramatic reversal directly contributed to the S&P 500's 3% plunge.
Goldman VP Ryan Sharkey observed in an intraday report: "While U.S. stocks face multiple catalysts for digestion, the S&P 500's 3% reversal was clearly driven by NVIDIA's 7% swing, significantly dampening year-end rally sentiment."
Market data revealed: - Best-performing stocks (12-month) fell 4.4% - Retail investor favorites dropped 3.6% - High-valuation software stocks declined 2.3%
Meanwhile, "Big Short" investor Michael Burry launched a series of social media critiques following the earnings, questioning NVIDIA's chip longevity, stock dilution, and what he called "circular financing" among AI companies. He characterized actual AI demand as "laughably small," alleging most clients rely on vendor financing.
Strong Earnings Fail to Shift Sentiment NVIDIA reported Q3 adjusted EPS of $1.30 (vs $1.26 expected) with revenue reaching $57 billion, up 62% YoY and beating $54.9 billion estimates. The company guided Q4 revenue midpoint at $65 billion (above $62.2 billion consensus), implying 65% growth acceleration.
CEO Jensen Huang noted "exceptional demand" for new Blackwell hardware, while CFO Colette Kress revealed six-year-old chips remain fully utilized. Yet these strong results couldn't dispel fundamental AI bubble concerns.
22V Research noted: "Even NVIDIA's optimistic earnings couldn't reverse recent market headwinds. Risk aversion has dominated for two weeks, with low-volatility stocks leading across market caps."
This trend continued Thursday as risk assets suffered - S&P 500 down 1.6%, Nasdaq off 2.2% - while defensive stocks gained on Walmart's strong report.
Technical and Liquidity Pressures Goldman's technical analysis highlighted multiple warning signs: - Systematic trend-following strategies remain net short equities - S&P 500's critical mid-term support at 6,457 warrants monitoring
Market liquidity deteriorated significantly, with average S&P 500 bid-ask spreads shrinking to $6 million - worse than 80% of the past year, indicating fragile market depth where small trades trigger outsized moves.
Additionally, Goldman forecasts Friday's options expiration will be November's largest ever, with $3.1 trillion in notional exposure expiring - including $1.7 trillion in S&P 500 options and $725 billion in single-stock contracts.
Burry's Post-Earnings Critique Following NVIDIA's report, Burry unleashed multiple critiques via social media: - Challenged Kress's chip utilization claims: "Physical use ≠ value creation. Just because something's used doesn't make it profitable," comparing old chips to airlines' low-margin holiday aircraft - Highlighted older chips' inferior energy efficiency, forcing clients to absorb higher electricity costs - Questioned NVIDIA's "circular financing" with AI firms like OpenAI, Microsoft and Oracle: "Real end demand is laughably small - nearly all clients rely on vendor financing" - Noted NVIDIA's $113 billion buybacks since 2018 were offset by 47 million new shares from compensation, effectively cutting owner returns by 50%
Burry has repeatedly warned of AI parallels to the dot-com bubble. Regulatory filings show his Scion Asset Management held put options on 1 million NVIDIA shares ($187 million notional) and 5 million Palantir shares ($912 million notional) as of September 30. Scion recently transitioned to a family office, no longer accepting external clients.
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