Tiger Market Watch: Nvidia, Cisco

US mid-term elections ended with a better-than-expected win for the Democrats, which managed to retain control of the senate to prevent a “red-wave” and the Republicans taking control of the house by a slim margin as expected. With one episode of overhanging uncertainty behind markets, US equities saw firm footing over the month with $DJIA(.DJI)$ recovering by 9.9% and $S&P 500(.SPX)$  rising 6.1%. This also comes amid October inflation that finally saw some initial signs of slowdown on both CPI and PPI metrics despite the Fed’s continued hawkish tone.

UK inflation rose to the tune of 11.1% in October, a blistering 41-year high, adding to fears that the Bank of England may have to step in with harsher rate hikes than expected to quell rising prices and even potentially even more cuts to the budget.

China markets also saw renewed momentum with continued relaxation of Covid-19 testing restrictions in China. The G20 summit that was held during the week saw Joe Biden and Xi Jinping’s first physical meeting; this gave markets some glimmer of hope for the potential easing of geopolitical tensions.

$NVIDIA Corp(NVDA)$  reported third quarter results with revenue falling by -17%, however, they were above consensus estimates. However, next quarter revenue guidance came in at $6 billion, slightly below expectations. Overall results were being dragged sharply by the gaming segment that was down 52% yoy as inventory is still normalizing towards the first quarter of 2023. Of note, total inventory is almost double that of a year ago to $4.45 billion. Nvidia refreshed its product cycle for gaming and began seeing sellout demand in its Ada Lovelace RTX 4090 new line of GPU and will begin shipping RTX 4080. NVDA data center segment grew 31% yoy after it mitigated export restriction to China through substitution with its A800 products. It has also begun shipping the H100 systems, its new 9th generation data center GPU. NVDA’s revenue has been coming off the pandemic boom and has seen a challenging cryptocurrency winter. Post the drawdown in share price year to date, NVDA is trading at 47x/36x price to earnings for FY23/24, during which it will introduce new product refreshes for both gaming and data center segment in a more challenging market condition.

$Cisco(CSCO)$  reported solid 1Q23 results and guidance that were raised. Revenue for Cisco raised full year revenue growth momentum rising by 0.5ppts to 4.5%-6.5%. This has been attributed to better supply chain conditions compared to the prior year and price increases. However, we note that orders have declined -14% yoy across all segments during the quarter, meaning that the revenue trends were from fulfilling the backlogs of previous quarters. This is also in line with slowing IT capital expenditures from enterprise, public sector, commercial and service providers as with other technology companies. On the cost front, Cisco will also reorganize the company during the quarter which will see a 5% reduction in headcount. Cisco trades at 13x/12x price to earnings for FY23/24.