gave nothing but good news in their earnings and call, but has traded down nearly 5% this morning. This is after a few investment banks raised their target price to as high as $300/share based on the strong results. The only rationale out there is that questions remain about what happens after the massive build-out of the mega data centers is largely complete.
Can NVIDIA maintain 75% profit margins? It would seem likely that supplying upgrades to an installed base of millions of GPUs, along with their ownership of parts of the leading AI companies, would answer that. It’s probably more the case of large numbers and the difficulty of maintaining high growth rates when you’re the largest company in the world. It appears to be a buying opportunity.
The turmoil of AI uncertainty continues, with the only certainty being that the buildout of the data centers is well underway and will be completed and lit up ASAP. That software will be converted into metered AI tokens, which will be a challenge for the software-as-a-service business model, but the established software companies can leverage their deep customer knowledge to likely come up with the best AI solutions for them.
In economic events, were modestly lower than expected. Labor concerns remain, given the high level of announced layoffs, but expectations for strong should address this. Interest rates are lower, with the US 2-year down over 1bp, the 10-year down over 2bps to below 4.03%, the lowest since late November. Bets for a cut are largely unchanged, with July as the first month a cut is most likely, October a 2nd cut, though all that can change quickly when the Fed chair changes in May and Warsh makes his feelings clear.
On the commodity front, precious metals are modestly lower except , down 4.6%, but still up 12% in a week. Miners are nevertheless up on the day. is back up to $66.50/bbl with no news on the Iran situation. Energy stocks are up 1.1% on the day. Crypto remains volatile, with Bitcoin down 1.5%, though up 1.4% for the trailing week.
Today is all about tech, where the Dow and Russell 2000 are flat, the even-weighted S&P is up modestly, while the is down 1.3%, led by semiconductors down 3.6% and the Magnificent 7 down 1.5%.
NVIDIA’s results confirm the AI theme is alive and well. No one will be surprised to see a recovery as AI solutions increasingly arrive and the logic of these huge investments starts making more sense to investors.
