Below is a recap of analyst @Tiger_James Ooi ‘s webinar, “Could Nvidia and Broadcom sustain their stunning bull run?”
Please click here to watch the full webinar replay on Tiger Brokers App.
• $NVIDIA Corp(NVDA)$ is one of my favorite AI stocks.
• The company is expected to report its earnings on August 28, after the market closes.
• $NVIDIA Corp(NVDA)$ ’s total short interest is worth $32 billion dollars
• Some short sellers likely closed some of their short positions when the share price dropped from $140 to $90, but I think they are ready to build up their short positions again.
• From the recent 13F filings, we learned that some fund managers such as Stanley Druckenmiller, David Tepper, and Robert Miller have been cutting their Nvidia stakes, which might provide confidence for Nvidia bears to continue shorting.
• However, I will only start worrying about Nvidia once they miss one or two quarterly earnings expectations
• Nvidia has been beating Wall Street expectations and its own estimates in terms of revenue, gross profit margin, and EPS in the last six earnings calls.
• I reckon the key reason for consistently beating earnings expectations is simply because Wall Street's estimates have been quite conservative.
• Nvidia is likely to beat earnings expectations. However, if Nvidia provides worse-than-expected guidance, investors may still push the stock lower.
• Generally, Wall Street is expecting a strong earnings result in this end July quarter.
• Wall Street is expecting the year-over-year Revenue growth to be 112% in the latest quarter, while Operating Income year-over-year growth is expected to be 176%.
• The main reason I don’t think the AI bull run is running out of steam yet is that revenue and operating income are still expected to show quarter-on-quarter (QoQ) growth for the next two quarters.
• Nvidia has one of the highest profit margins among all technology companies.
• Data Center is currently the largest segment, accounting for 87% of total revenue. It's expected to grow at a CAGR of 56% over the next two years.
• Data Center revenue has seen year-over-year growth exceeding 400% for the
• Networking, which contributes to Data Center revenue, is a crucial part of Nvidia’s AI story. Networking revenue is projected to grow at a CAGR of 48% over the next two years.
• One of the hottest news topics in recent weeks is the potential delay of the Blackwell B200 GPU due to design and compatibility issues.
• The delay is expected to last three months or more, though some analysts predict a shorter delay of just four to six weeks.
• Nonetheless, Nvidia previously announced plans to release a new AI chip every year, instead of every other year. If Blackwell is delayed into 2025, it could push back other product rollout dates as well. This delay could also give competitors like AMD an opportunity to launch a superior AI GPU in the market first.
• However, I believe that Nvidia's GPU challenges are related to supply, not demand.
• Therefore, a delay in the GPU should be viewed as a temporary setback rather than a long-term issue for Nvidia.
• One of the best indicators of $NVIDIA Corp(NVDA)$ ’s AI GPU growth will be CapEx spending from big tech companies especially hyperscalers.
• The good news is that most of the big tech companies, like Microsoft, Meta, and Amazon, are committed to increasing their CapEx spending this year and next year.
• Most of them are increasing their CapEx by 40% or more this year.
• Thus, you should only start worrying if you hear about some cutbacks in CapEx spending.
• $NVIDIA Corp(NVDA)$ has also the second-highest P/E ratio at 74x among the Magnificent Seven. But I believe Nvidia is still one of the best companies among the Magnificent Seven.
• It is mainly because Nvidia has the highest revenue and earnings growth, unmatched by other Magnificent Seven stocks.
• Suffice it to say, if you are a growth investor, you should like Nvidia because of its growth opportunities
• $NVIDIA Corp(NVDA)$ 's AI bull run is similar to Cisco's stock movement during the dot-com bubble.
• During the dot-com bubble, Cisco was the leader in providing the infrastructure equipment used to power the internet boom through its network routers. Similarly, Nvidia is powering AI development through its GPUs.
• During the dot-com bubble, Cisco's revenue increased by 14 times, while its operating income increased by 8.4 times. For Nvidia, revenue has increased by 3.8 times when comparing the latest quarter to the quarter when they first announced ChatGPT. Operating income, on the other hand, increased by 4.5 times on a trailing twelve months basis.
• If you believe that AI bull run is similar to the dot-com bubble, there could be massive room for earnings improvement.
• During the dot-com bubble, the max return for Cisco stock is over 4000%. Since the launch of ChatGPT, Nvidia’s stock is up 722%, suggesting there’s still room for Nvidia’s stock price to grow if this bull run is as big as the dotcom bubble.
• The current Bloomberg Analysts' Consensus 12-month Target Price for Nvidia is $142.11, representing an upside potential of 10.6% relative to the August 22nd closing price.
• In conclusion, I reckon $NVIDIA Corp(NVDA)$ has one of the best AI stories. Nvidia will continue to capture the majority of wallet share in AI spending on servers.
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