Nvidia's Outrageous Performance

Shares in the giant chipmaker and 6th most valuable company in the world hit an all-time high by close on Monday [The Daily Peel... ]( November 24, 2023 | Peel #592 In this issue of the peel: - Shares in the giant chipmaker and 6th most valuable company in the world hit an all-time high by close on Monday, 24 hours before the firm was set to drop its latest earnings. - HP Inc. and Advanced Micro Devices had a ripe day, whereas Autodesk and Deere & Company suffered share price declines. - Sam Altman, the OpenAI founder and (former/current) CEO, is back in the top spot after a brief stint outside the company’s gates. Market Snapshot Happy Friday, apes. And to our American apes and all else who celebrate, I hope you had a Happy Thanksgiving. Hope you had a lot to be thankful for this year too, but at the very least, we can all be thankful that it’s Friday and we can leave our parent’s houses soon. It's always good to go back and remind yourself why you moved out… Sorry, Mom & Dad, but we can all also be thankful for the gains the equity market gods brought us on Wednesday. There wasn’t a whole lot of them to go around, but this Thanksgiving Eve, we saw small-cap leadership back in action with the Russell 2k’s 0.63% gain. 10 of 11 S&P sectors rose, with Energy as the only loser thanks to falling oil prices. WSO Alpha got in on the gains, too, beating all the indices for a day’s gain of 0.7%. Everyone gets lucky once in a while, I guess, but shout out to Zillow for leading the gains. More on that name (much more) soon. Let’s get into it. Financial Modeling Skills Get You Paid [image](=) Attention all financial wizards and career climbers, are you ready to take your modeling skills to the next level? If you're looking for an undervalued investment in your career, look no further than [WSO's Elite Modeling Package!]() With 6 courses designed to turn you into an absolute Excel master, this is the package that keeps on giving. From building a 3-statement model to tackling complex LBO modeling and M&A transactions, this package has got you covered. You'll also build a solid foundation in trading comparables and precedent transactions analysis and DCF modeling, all using the versatile and relatable example of Nike, Inc. So don't miss out on this opportunity to boost your career and invest in [WSO's Elite Modeling Package]() now! #ModelOn #FinancialGains #CareerGoals Banana Bits - There is no better way to celebrate Black Friday than with two of America’s favorite things: [football and Amazon.com.](=) - Putin’s [spicy messaging]( on Thanksgiving Eve should help heat up those leftover potatoes sitting in your fridge. - Finally, our old *ss “representatives” are [realizing that maybe they don’t need to legislate]( for a country of 340 million people until they literally can’t think anymore. Macro Monkey Says Great Expectations With great power comes great responsibility—we all know that, and we can thank Spiderman’s Uncle Ben (RIP) for the free lesson. But with great expectations, as we learned yesterday, comes great disappointment. Now, this isn’t the same level of disappointment our parents feel when we come home for things like Thanksgiving break, but it’s still definitely not fun, especially if you’re an Nvidia shareholder. Nvidia shareholders haven’t had much to complain about this year, and as long as you bought before literally the last ~2 weeks, you’re still in the green. But… Shares in the giant chipmaker and 6th most valuable company in the world hit an all-time high by close on Monday, 24 hours before the firm was set to drop its latest earnings. Upon the release of their Q3 earnings for fiscal year 2024 (yes, Nvidia is one of those companies that can’t count), that all-time high was quickly ditched. Pushing the stock to an all-time high a day before earnings is a great way to put immaculate pressure on the report and highlight just how “great” those expectations were. “Great” could also describe Nvidia’s performance in the third quarter, but ostensibly now, so could “not great enough” as well. "Shares in the giant chipmaker and 6th most valuable company in the world hit an all-time high by close on Monday ..." For the third quarter, Nvidia’s revenue legitimately tripled from Q3 of last year all the way to $18.12bn. That’s 206% higher than the already-obscene $5.93bn they raked in last year, and while investors had only been looking for $16.18bn, if you’re Nvidia, you gotta beat by a lot to keep that share price above the clouds. If that’s ridiculous enough for you, no problem—this is Nvidia we’re talking about, the stock that single-handedly lifted the S&P 500 from the depths of correction territory. While carrying the team on their back, Nvidia was also able to rake in $9.24bn in earnings for the quarter, or $3.37/sh. If that was their revenue figure, that would still be an incredible growth rate of 55%, almost unheard of for a company this large. But, earnings last year totaled $680mn, or $0.27/sh, or 1,259% growth. You legitimately could never formulate a sentence in the English language that could come close to overstating how ridiculous that is. Nvidia was already a behemoth at this time last year, and to post growth like that is like watching Usain Bolt beat Usain Bolt in a race… by a mile. Other highlights from the report include: - Data Center revenue of $14.51bn, up 279% annually - Gaming revenue of $2.86bn, up 81% annually - Gross margins expanded from 50.3% last year to 74.0% this year - Operating expenses grew only 16% annually - Revenues of $20bn expected in Q4, which would equal 231% annual growth "We could keep going, but we think you get the point. This is absurd ..." We could keep going, but we think you get the point. This is absurd and confirms the run-up in share price the stock has seen all year. Most of the growth comes from a key shift that occurred in the firm’s business model that was brought along by external factors like the AI wave. Most of its revenue came from sales of chips for PC video games, but now, that has flipped to the vast majority of revenue coming from data centers. In these data centers, Nvidia makes its bread when its clients use the company's GPUs and other hardware and software products. Referred to as “deployments,” the chips and computer platforms purchased by these companies drive far higher margins than any other line of Nvidia’s business and, quite honestly, most other businesses in the entire world. Going forward, Nvidia’s major concerns center around technological tensions between the U.S. and China. Since the U.S. decided to take its ball and go home by restricting exports of Nvidia’s most powerful chips, the chip maker's growth could suffer from that. But 231% anticipated growth for the next quarter doesn’t sound like a whole lot of suffering to me… Shares are up nearly 250% this year alone, slightly above the firm’s revenue growth but still dwarfed by that net income growth figure of over 12x. Nvidia is getting to the point where, much like DJ Khaled, they could start to suffer from their own success. If the firm didn’t deliver a quarter as immaculate as this, the reaction would’ve been bloody—likely both figuratively and literally. Since the results were great but not stupendously phenomenal per consensus estimates, Mr. Market managed to demonstrate just how much of an ungrateful f*ck he really is by sending shares down 2.46% on the day. I think I speak for CEO Jensen Huang and the whole team when I say—what more could you want? Or better yet, ARE YOU NOT ENTERTAINED?? What's Ripe HP Inc (HPQ) ↑ 2.83% ↑ - HP didn’t have an incredibly successful fiscal year, but it sure went better than former CEO Carly Fiorina’s Presidential run. But hey, at least both were entertaining… and made money for people. - Specifically, HP made about $3.3bn, a mild 4% increase from FY 2022. Revenue, on the other hand, performed worse than my bets did on Thanksgiving football, falling almost 15% for the year to $52.7bn. - Somehow, that fall was right in line with expectations and even fared better in certain lines of business, like consumer PC sales, which fell only 1%. Guidance is looking good, however, as despite the wild inflation we’ve been slapped around with, HP missed the memo and saw prices fall pretty much the entire time. Brilliant business moves—maybe the CEO should be President after all. Advanced Micro Devices (AMD) ↑ 2.81% ↑ - Poking the bear is typically not a recommended strategy, especially now as their hibernation season begins. For AMD, it’s now or never. - And as sick as a 3-4 month period of just sleeping sounds, something tells me Nvidia has no plans to take a breather. Despite that, AMD—and traders too, apparently—like AMD’s shot at landing a successful poke. - Basically, traders seem to have just realized that AMD also sells chips that can be used for AI-drive purposes. Nvidia ain’t gonna be running the show forever, and I guess everyone who missed the boat on that one isn’t trying to drown once again. Somehow, the room-temperature IQs over at [WSO Alpha]() managed to get in on the Nvidia wave, but stay tuned to see if they can do it again. What's Rotten Autodesk (ADSK) ↓ 6.90% ↓ - Software companies have largely seen performance over the last quarter that is exactly that: soft. David Goggins would throw a hissy fit, and apparently, so would the market. - Shares in B2B software provider Autodesk tanked despite beating on both the top and bottom lines in its latest quarter. The firm delivered $2.07 in EPS on $1.41bn vs expectations for $1.99/sh on $1.39bn. Not a huge beat, but a win is a win. - The trouble came, as has been the case in almost all of earnings szn, with guidance. Autodesk maintained last year’s guidance for ~9% revenue growth heading into next year, disappointing investors who had apparently been pricing in a magical fairy to come and give them more money. Deere & Company (DE) ↓ 3.11% ↓ - Oh dear, it’s a tough day to be a Deere shareholder on Wednesday. That movement in shares was far from endearing, losing over 3% despite a steroid-fueled quarter. - Alright, sorry for making you suffer through those egregious puns, but that last part is true. Deere posted a quarter so strong the farm equipment provider must be taking HGH, but like above, Wall Street was the opposite of impressed. - Despite beating the sh*t out of earnings by posting earnings of $8.26/sh on $13.8bn in sales while analysts had only been pricing in $7.46/sh on $13.6bn. I don’t even think I need to say it at this point, but weak guidance was the key driver, as usual. - Harvests wrap up right around the same time of year that this last quarter ended here in North America, meaning the company’s most active time of year has passed. Analysts know this, but they were still surprised by the depression infused in the company’s own guidance, turning Deere shares into venison. Thought Banana ClosedAI We get older and more mature, but corporate America stays the same age and as wild as ever. That’s how that saying goes, right? As each of us knows all too well by now, OpenAI—the hottest startup in the world—was front and center of that wilderness over the past week. Just a few days after making what proved to be one of the dumbest calls in the history of Silicon Valley, the young firm seems to have had its problems solved. I think I speak for Microsoft CEO Satya Nadella in saying, “You’re welcome.” Much like Thanksgiving football and buzzin' with the gang, Sam Altman is as BACK as ever. The OpenAI founder and (former/current) CEO is back in the top spot after a brief stint outside the company’s gates, of which 95% of the employees promised to follow him out if he was not brought back in as CEO. "... no harm, no foul… right?" Wild times, but no harm, no foul… right? Yeah, good one. Several board members and one, albeit brief, (former) CEO of OpenAI all got canned. Chief scientist Ilya Sutskever along with fellow board members Tasha McCauley and Helen Toner—who made up the votes needed to oust Altman for “failing to be consistently candid”—and Emmet Shear, the sham CEO brought in to humiliate himself, are all polishing up their resumes. Finally, we seem to have some glimpse into the actual reason behind the feud. According to the now-leading theory, disagreements between Sutskever (mostly) and Altman over one rather new philosophy seem to have been the primary driver. And that philosophy—“effective altruism”—is best represented by none other than our good friend and convicted scumbag fraudster, Sam Bankman-Fried. "... Altman ... were more concerned with immediate issues like the 2024 election ..." Basically, Sutskever was spearheading a project within OpenAI to develop an AI-based “scientist” to study AI systems with the goal of developing a way to inject “human values” into artificial intelligence, especially when we reach AGI (artificial general intelligence). The company had promised to devote 1/5th of its computing power to building this “alignment.” But unfortunately, that “alignment” didn’t align with the goal of *checks notes* literally everyone else at the company. Most, and ostensibly Altman—who has called effective altruism “very weird” (such a way with words) —were more concerned with immediate issues like the 2024 election and AI’s impact, along with other challenges. So, according to people who know a lot more than I do, this split over a philosophy whose greatest public supporter is now a convicted felon who almost caused the shutdown of the hottest company in the world right now. Hot start for effective altruism. Can’t wait to see where this leads! The big question: Will OpenAI continue to deliver at the pace and competitive advantage that it has held thus far? How will the firm operate differently going forward? Banana Brain Teaser Wednesday — Cathy has six pairs of black gloves and six pairs of brown gloves in her drawer. In complete darkness, what is the least number of gloves she must take from the drawer in order to be sure to get a pair that match? Answer 13. She could possibly take out 6 black left-hand gloves and then 6 brown left-hand gloves. The next one would have to be either the black right-hand or brown right-hand match. Today — I will sell you 4 CDs for £15 or 7 CDs for £24. I don't mind whichever, as I make the same profit on either deal. Today I sold 26 CDs. How much profit did I make? Shoot us your guesses at vyomesh@wallstreetoasis.com. Wise Investor Says “There is no point in being confident and having a small position” —George Soros How would you rate today’s Peel? [All the bananas]() [Decent]() [Rotten AF]() Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? [Be smart like your friend](). [ADVERTISE](=) // [WSO ALPHA]( // [COURSES](=) // [LEGAL]() Don't want The Daily Peel? [Unsubscribe here](. Click to [Unsubscribe]( from ALL WSO content IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States