Nvidia (NVDA) is scheduled to report its first-quarter earnings after the market closes bell on Wednesday, May 22. All eyes are on the chipmaker as Wall Street analysts predict that NVDA's latest numbers could spark 2024's next big market.
Dan Niles, founder and portfolio manager of Niles Investment Management, joins Josh Lipton on Yahoo Finance's Asking for a Trend to discuss the trajectory of Nvidia stock (already up 98% year-to-date) leading up to this earnings release, and the new Blackwell Let's talk about the timeline. GPU.
“If you think about last quarter, expectations were really high going into this quarter, and the stock price was up about 16% after it went to print,” Niles said. “It was interesting today in that there was a headline that you would think would have pushed the stock price down, and that was that Amazon Web Services confirmed through a spokesperson that it is accepting some orders for its current generation chips and is moving those chips over to its next generation chips, called Blackwell, which will come out later this year.”
For more expert insights and the latest market trends, click here to watch the full episode of Seeking Trends.
This post was written by luke carberry morgan.
video transcript
More than 200%.
That's how much NVIDIA stock has risen since May of last year.
And if history is any indication, these games are just getting started.
We speak with Dan Niles, Founder and Portfolio Manager of Niles Investment Managers.
I'm glad to have you on this show because you're the perfect person to talk to about this.
NVIDIA Dan, it's hard to think of a more beloved name.
About 90% of Dan, the financial analyst who covered this video, told me I should buy the stock. The stock is already up about 90% this year.
There is very high anticipation for this print, Dan, what will we hear after the bell tomorrow?
What do you think the response will be?
Well, I think there are two things going on with you. Like you said, expectations are very high and that's the biggest problem.
Everyone knows it's beat and raise.
Everyone expects the reported numbers to be significantly higher than analysts' expectations, and everyone expects an upside.
That's the minus.
Nvidia Ford's valuation is positive in the sense that its 12-month P/E ratio is 15% below its five-year average.
And that's the other side of this equation.
Also, given that expectations for the last quarter were also very high, the stock was up about 16% in today's print, but interestingly, there was a headline that I thought would push the stock down. Amazon Web Services confirmed through a spokesperson that it is moving some of its current-generation chip orders to a next-generation chip called Blackwell that will be released later this year. I expected it to push the stock price down, but the stock actually closed at an all-time high.
The intraday high was back to March earlier this year, but it closed at a record high.
So this is a good sign that people are expecting a continued slowdown in growth in the short term.
And they're expecting some of this order movement as New York chips go on sale.
So we'll have to wait and see what happens tomorrow.
My guess is that, given the stock's reaction to today's Amazon Web Services news, the stock is at an all-time high, and given that expectations are high after being bounced off by a low valuation, the stock will rebound a bit from here. I guess so.
I see, that's interesting.
I just want to touch on that for a second because I've heard from some analysts and NVIDIA fans and they're talking about exactly the points that you made.
Listen, NVIDIA has this new GPU U platform, Blackwell.
It comes in the fall.
The question meets your point.
Will NVIDIA customers experience delays or cancellations?
Because they're waiting for the latest and greatest to come out.
What you're saying is that you're probably expecting to hear about it tomorrow.
Well, it's more subtle than that.
What I'm saying is, expect some digestion period.
In my opinion, the average customer and perhaps Amazon are large enough to avoid this problem.
But customers generally want to get new Blackwall chips and don't want to cancel their current chip orders. Canceling would mean delaying the release of new chips that are 2.5 times more powerful but only 20-30% more expensive.
So my guess is that when Blackwell ships later this year they're actually having issues digesting it, and then the next quarter they have issues that aren't resolved when they go back to Cisco.
But going back to our analogy of the internet bubble, we can see that growth over five years was not linear.
Cisco had some pretty bad fixes.
During this period, stock prices fell 26% by the end of 1995.
It fell 38% at one point during 1997 and 34% at one point in 1998.
But that didn't stop the stop from rising 4000% since late 1994. This year, Netscape Navigator was introduced. Netscape Navigator was the first Internet browser to drive Cisco's stock price to a new high, making Cisco the world's most valuable company in March 2000.
That's the analogy here: we can expect more volatility from Nvidia, even though this AI build is only five quarters old.
The Internet took more than five years to build.
And I think there is still room for improvement with AI.
Let me get this out of the way, Dan, you're talking to your clients and they say, Dan, what are you worried about about NVIDIA?
What are the big risks?
What do you say to them?
So the big risk is that people know the largest hyperscalar.
They're all trying to design their own chips, so they're all trying to design their own silicon.
What's more, NVIDIA's real secret sauce isn't the chip, it's a software called CA, which they've been working on for at least a decade, and which has kept people locked in silicon. It's very difficult to get off.
However, everyone is trying to develop open source alternatives to CU A.
But it's going to take a very long time before people are willing to understand when NVIDIA chips have volume.
There are such risks as well.
And, you know, the biggest issue is, what we talked about with Cisco, and I just mentioned Cisco, is that you're going to experience this kind of drastic decline. .
Everyone is going to say, “Oh my god, it's over, and stocks are going to go up again, and we won't know until we get through that.''
That's the balancing act you have to go through.
But the good news is that unlike Cisco, NVIDIA is trading 15% below its five-year average.
And that's a multiple of this calendar year, you know, 40 times, but the numbers are going to go up so much that they're going to go down as soon as they're reported tomorrow.
Cisco's PE peaked at 100x and 35x with 60% growth compared to NVIDIA's 40x.
NVIDIA is growing 100%.
Therefore, this stock is not overvalued by any stretch of the imagination.
And in fact, it can be said that it is significantly undervalued compared to its growth rate.
And that's something to keep in mind.
Okay, Dan, valuation is still supportive.
Thank you for joining us today.
We've got a big earnings print in after the bell tomorrow so let's take a look at that.
I'm sure you agree.
Thank you, Dan.
