Is Nvidia's Beat-and-Raise Quarter Good Enough to Lift the Entire Market?
Will good guidance and 'off the charts' Blackwell sales be enough? The market has to prove itself at this point.
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Investors were in an optimistic mood to start the day on Wednesday, and a little FOMO kicked in, but it didn't last long. The Magnificent Seven (MAGS) names recovered after lagging on Tuesday, gaining 0.8%, but it was choppy action. Overall market breadth was poor, with only 41% of stocks in positive territory. That was mostly due to the Russell 2000 (IWM) , which was flat on the day.
There were 420 new 12-month lows with Bitcoin-related names lagging badly. Pockets of speculative momentum were narrow with no major themes developing. Most of the action was just positioning in anticipation of a reaction to the Nvidia (NVDA) earnings report.
Nvidia is reporting EPS of $1.30 vs. $1.26 FactSet consensus for the third quarter and revenues of $57.01 billion vs. $54.90 billion FactSet consensus. This is ahead of expectations, and the stock is up about 7% initially.
What is moving the stock is good guidance. Nvidia sees Q4 revenues of $63.70 billion-$66.30 billion vs. $62.17 billion FactSet consensus. CEO Jensen Huang said "Blackwell sales are off the charts, and cloud GPUs are sold out...Compute demand keeps accelerating and compounding across training and inference — each growing exponentially."
This is a solid report, but a solid report and strong guidance isn't that surprising. The issue now is whether investors will keep chasing the stock higher, or whether some folks will use this strength to exit and reposition. We will see Thursday, but I'm not interested in chasing, no matter how upbeat Nvidia may sound.
The other big question is whether Nvidia can boost the broader market. It is the largest stock in the market, so it will influence the indexes, but will the good vibes spill over into the AI sector in general? It is going to be tough to overcome some of the recent difficulties there. While Nvidia is the market's biggest beneficiary of AI, that doesn't mean that other companies are making similar levels of profits or growth.
I don't want to sound too negative here, but the market has to prove itself at this point. If it can't regain its footing after a solid Nvidia report, then we have to be ready for further choppy action.
Have a good evening. I'll see you Thursday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
