To The Moon

Summary

• Nvidia reports earnings tomorrow, May 22, after the close. It doesn’t take a genius to figure out that May 23 will see huge swings in the stock market, but the question is: Which way?
• If China ever opens up for advanced Nvidia products, the present surge in sales may continue for quite a while.
• The stock is not expensive, based on 2025 EPS, and many commentators have noted that as the stock surges it gets cheaper, as EPS advances faster than the stock price.

BING-JHEN HONG

Nvidia (NASDAQ:NVDA) reports earnings tomorrow, May 22, after the close. It doesn’t take a genius to figure out that May 23 will see huge swings in the stock market, but the question is: Which way? Other than the “black and white” answer that “weak or in-line” earnings may generate a stock market selloff – as we have been up sharply so far in the month of May, “great earnings” may not deliver a surge in the tech sector, either.

Consider last summer, when Nvidia blew out earnings, but the stock market went down the day after the report, as it had run up into the event, and there are some similarities then with the present situation.

I don’t know which way things will go ahead of time – nor does anybody else – but a weakish or flat market before the report, like we had three months ago, would suggest a large move to the upside on good earnings, while a further surge in the broad market into the report makes any market move more suspect.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

It is a good position for a company to be in if the product it makes goes out the door as fast as the company can make it. Demand is so high Nvidia customers are on allocation. As fast as the chips are made, they are sold, and that is the case with banned sales of advanced ships to China, which the Chinese government laments.

If China ever opens up for advanced Nvidia products, the present surge in sales may continue for quite a while. The stock is not expensive, based on 2025 EPS, and many commentators have noted that as the stock surges it gets cheaper, as EPS advances faster than the stock price.

Still, it is clear that we have a case of “great expectations” for NVDA this week.

I Hope You Didn’t “Sell in May and Go Away”

The old saw says, “Sell in May and Go Away,” at least until the fall. That clearly didn’t work last year. Last year, the market surged in January, wobbled in February, bottomed in March, chopped sideways in April until late May, and then it took off until late July. This year it was strong January through March, had a sharp selloff in April and did very well in May. So far in May, the indexes are up over 5%.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

While long-term seasonality patterns are a good guide, they are no guarantee. They are long-term averages and they can deviate quite substantially in any given year.

One of the worst deviations from seasonality patterns was the 2018 October-December period, when the S&P 500 saw extreme volatility as the Federal Reserve over-tightened its QT, but the market immediately rebounded shortly thereafter.

I think market strength this summer is contingent mainly on geopolitics, interest rates and the strength of economic releases. I think geopolitics will get worse in both Ukraine and Gaza, I think long-term interest rates have a legitimate chance to drift lower and as far as economic releases I see some weakening, and I hope it remains mild.

If so, it will be a positive driver for the stock market as it can push the Fed to finally cut the Fed funds rate sooner rather than later, which should be cheered by the stock market.

Navellier & Associates owns Nvidia Corp. (NVDA) in managed accounts. Ivan Martchev does not personally own Nvidia Corp. (NVDA).

All content above represents the opinion of Ivan Martchev of Navellier & Associates, Inc.

Disclaimer: Please click here for important disclosures located in the "About" section of the Navellier & Associates profile that accompany this article.

Disclosure: *Navellier may hold securities in one or more investment strategies offered to its clients.

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