Finally the bears have got a foothold in Nvidia after its mixed earnings. But tapping the brakes on the chip maker's rally might be good for the stock and wider market.
Nvidia earnings were still super strong but a signaled decline in gross margin and slower year-over-year revenue growth raised some questions.
Markets have become accustomed to Nvidia delivering a "beat-and-raise" against revenue expectations to the order of $2 billion each quarter, and the January-quarter guidance fell short of that high bar. Its revenue forecast was ahead of consensus estimates by the smallest margin in seven quarters.
Bulls can point to the inevitable adjustment coming with the launch of Nvidia's Blackwell AI chips. Once the company can ramp up supply to meet demand, both sales and margins should benefit. However, analysts seeking reassurance were given short shrift. "We guide one quarter at a time," CEO Jensen Huang told them on a call.
That introduces at least a short-term window of uncertainty and a welcome reset of expectations. Nvidia investors need to get used to the idea that the planned release of a new AI chip generation each year will inevitably lead to some bumpiness in its results.
For the wider market, it's a reminder that investors can't keep piling into one stock forever, as they have with Nvidia. But it's no bad thing for traders to start looking elsewhere for returns, especially after increasing concentration in the so-called Magnificent Seven stocks for the past two years. Seeking out more diversity is surely healthy.
-- Adam Clark
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Chip Maker Cites 'Staggering' Demand as It Beats Expectations
Artificial intelligence chip maker Nvidia cleared Wall Street's high expectations. The world's most valuable company reported strong October-quarter earnings, offered a higher-than-expected revenue forecast for its January quarter, and said that even with next-generation Blackwell chip production at full capacity, it still won't meet all the demand.
-- Nvidia reported adjusted earnings of 81 cents a share and revenue of
$35.1 billion. Third quarter data center revenue more than doubled from
last year, to $30.8 billion. It is shipping its most important product:
an AI server with 72 Blackwell chips for AI model training and queries.
-- Dell, Oracle, and CoreWeave have all posted photos of the new system, and
Nvidia has shipped Blackwell to all major partners. But there are supply
constraints. CFO Colette Kress said Blackwell demand is staggering, and
is expected to exceed supply for several quarters in fiscal 2026.
-- Nvidia said large cloud computing providers accounted for about 50% of
its data center revenue in the third quarter. CEO Jensen Huang told
analysts that the company will deliver more Blackwell chips than it
previously estimated.
-- Wall Street is impatient for more. Though Nvidia beat expectations for
revenue guidance in the current quarter, that beat was by the smallest
margin in seven quarters. It sees revenue of $37.5 billion for the
January quarter at the midpoint, about $400 million above the FactSet
consensus.
What's Next: Huang also said that Blackwell revenue for the current quarter would exceed the company's prior guidance of "several billion dollars" of revenue. Other companies driving demand for data center services are consumer internet and enterprise companies, it said.
-- Tae Kim and Janet H. Cho
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Bitcoin's Smashing Records. It's Taking MicroStrategy With It, Too.
The gains keep coming for Bitcoin -- and its surge is also lifting MicroStrategy, the onetime software company that has made loading up on the world's largest cryptocurrency its main business strategy.
-- Bitcoin has set a record high for four straight trading sessions on the
expectation that the Trump administration will ease crypto regulation, as
well as institutional investors snapping up shares in exchange-traded
funds that track the token's price. The digital asset climbed above
$98,000 early Thursday.
-- MicroStrategy is also driving the digital currency higher. It's plowed
equity sales of $6.6 billion since Oct. 31. into Bitcoin purchases, and
said on Wednesday it had priced $2.6 billion of convertible debt that
will be used to buy even more.
-- The company's own shares have also surged off the back of the crypto
rally: MicroStrategy stock has climbed sixfold this year. It appears to
be trading as a Bitcoin proxy, considering the extent of its purchases.
-- But shares could still be vulnerable to a pullback, especially if Bitcoin
retreats. As of Nov. 17, MicroStrategy was trading at a record premium to
the value of its holdings of the cryptocurrency, which could be a sign
its stock is in a bubble.
What's Next: One reason cryptocurrencies appeal to investors is that they trade 24/7, and the same could soon be true for stocks. The idea of all-hours exchanges is gaining traction, especially given President-elect Donald Trump is likely to appoint a Securities and Exchange Commission chair far friendlier to Wall Street than current chief Gary Gensler.
-- Andrew Bary, Callum Keown, George Glover, and Paul R. La Monica
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Indian Billionaire Adani, Others Face U.S. Fraud Charges
Indian billionaire Gautam Adani faces federal charges of bribery, fraud, and deceiving U.S. investors to raise funds, according to an indictment in Brooklyn federal court released on Wednesday. Prosecutors also accused several current and former executives of two of Adani Group's energy companies.
-- Prosecutors say Adani was involved in a scheme that paid more than $250
million to bribe Indian government officials to secure contracts worth
billions of dollars, the indictment said. The group then lied about the
bribery scheme as they sought to raise capital from investors,
prosecutors said.
-- Adani Group in India couldn't be reached for comment. The company owns
India's biggest private port and is among the world's largest coal
traders. Gautam Adani has a net worth of $85.5 billion, according to
Bloomberg, and is one of the world's richest men, with a rags to riches
story.
-- Adani Group's flagship Adani Enterprises lost more than half its stock
value after the short selling firm Hindenburg published a report in
January 2023 accusing it of inflating its revenue and stock price. The
stock recovered all of its losses by the summer 2024.
-- Separately, Archegos Capital founder Bill Hwang was sentenced to 18 years
in prison for manipulating stocks and defrauding banks before his firm's
2021 collapse sent shock waves across Wall Street. The investing firm's
collapse led to billions of dollars in collective losses for Morgan
Stanley, UBS, Credit Suisse, and Nomura.
What's Next: The Securities and Exchange Commission filed a civil case against Gautam Adani and others for conduct arising out of the alleged bribery scheme. The SEC said Adani Green Energy raised more than $175 million from U.S. investors during the scheme and Azure Power Global's stock traded on the NYSE.
-- Karishma Vanjani and Liz Moyer
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Ford Cutting Jobs as EV Business Continues to Challenge
Ford Motor is still struggling with electric vehicle sales, unveiling plans to slash 14% of its European workforce, or about 4,000 jobs primarily in Germany and the U.K., by the end of 2027. Ford said the move was critical to ensuring its future competitiveness in Europe.
-- Ford cited concerns about its passenger vehicle business in Europe, where
it has incurred significant losses amid the industry's shift to EVs, more
competition from Chinese EV makers, and regulatory and economic
challenges. CFO John Lawler urged Germany to encourage EV buying through
incentives.
-- Ford plans to cut production of its Explorer and Capri electric SUVs, and
shorten workdays at its Cologne, Germany, manufacturing facility in the
first quarter of 2025. Last month, Ford halted production of its F-150
Lightning EV pickup trucks in Michigan and furloughed around 730 hourly
workers.
-- At Boeing, which has also cut thousands of jobs as it struggles to
recover from production constraints, CEO Kelly Ortberg told employees the
company has serious culture issues and can't afford another mistake. He
also said Boeing won't turn cash-flow positive until its 737 production
achieves the 38-planes-a-month target.
-- The labor market has been on the minds of Federal Reserve officials as
they decide the next move on interest rates. But Fed Gov. Lisa Cook said
she is less concerned about further weakening in the labor market than a
few months ago, with unemployment remaining low.
What's Next: Cook is a voting member of the Federal Open Market Committee, which meets next on Dec. 17-18. Interest-rate futures markets are currently reflecting a 55% probability of another quarter-point reduction in rates, with 45% odds of no cut, according to CME's FedWatch tool.
-- Janet H. Cho and Mackenzie Tatananni
***
The World's Richest People Are Getting Even Richer
(MORE TO FOLLOW) Dow Jones Newswires
November 21, 2024 07:01 ET (12:01 GMT)
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