The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Bloom off?
NVDA announced last night, they beat, their stock climbed in after-hours trading. S&P futures traded slightly lower overnight and in the early morning. Global news and macro data was uneventful. The S&P 500 opened flat and fell quickly. This coincided with NVDA opening slightly lower and falling quickly as well. Did NVDA lead the broader market or vice versa? Regardless, the S&P was off 86 points (1.2%) at the intraday lows. Dip-buyers repaired half the damage right away, failed during lunch, and then re-repaired half the damage in the afternoon. No such dip-buying occurred for NVDA. Yields fell a few bips across the curve and capital flow was a bit heavy at 119%.
Nvidia’s results were good/great. They beat expectations, their revenue growth for the quarter was 73%. Their guidance suggests 77% growth in the next quarter. Morgan Stanley’s analyst said this:
“Largest, cleanest beat and raise in the history of the semis industry — surpassing the second best, which was Nvidia 3 months ago”
And yet the stock sank. It wasn’t a devastating drop but if fell materially. The hype associated with the stock is just too great. Even though fundamental growth is eye-popping and the outlook is eye-popping, investors are not thrilled about the situation. Why?
There’s no clear answer but perhaps the market realizes that the largest and fastest returns in the AI trade are behind us? Perhaps the bloom is off the rose? Maybe AI will deliver good returns going forward but not obscene ones? It looks to me like there’s a sentiment shift occurring. The market is going from wild optimism to realism. That change in attitude will leave a mark on stock prices.
Maybe hype shows up again, at some point, and speculative upside shocks and awes too, but for the moment it seems like the market agrees that *that* era has ended.
If true, that’s a healthy development for the longevity of the bull market. We’ll just have to see whether today’s attitude shift is a sign of pragmatism or not.
See you tomorrow.
-Mike
Visdom Market Commentary
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