Not Everything In Financial Markets Is Fake
Or in other words, here's our Q3 FY12/23 Nvidia Earnings Review.
DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.
It's Real.
Many things in investing are not real. Almost everything to do with crypto, for instance. Next week's get-rich-quick-stock on FinTwit. Also most things I have seen on CNBC.
Some things are real however, even if everyone tells you they aren't. The AI spending boom is real. There are huge amounts of actual dollars being spent on actual AI products, or at least, products that are required for the current generation of AI software to perform well. In time this will span semiconductor, hardware systems, operating systems, application software, the artist formerly known as middleware, and a LOT of consulting hours. For now, peak AI can be found at the mother lode, being Nvidia NVDA 0.00%↑ stock.
The company printed probably the most impressive earnings we've reviewed since this service began. Yes, Q2 was a big beat but it was a one-time thing and there was the whole round-trip of Blackstone money into an Nvidia customer who ordered just the right amount of chips to deliver the beat and blah. This quarter? Growth accelerated, the guide was for further acceleration, and lest you think they are just buying growth, gross margins hit the highs, whilst EBITDA and cashflow margins also proved very strong indeed.
The stock is down a couple points this morning; that doesn't change our outlook on the name which is, up. Why do we think that? Because, one, it's not actually expensive as multiple of cashflows, given the rate of growth of cashflow; that's the most miserable form of fundamental valuation analysis, and it stands up. Also two, because the chart says this ginormo-move up since the 2022 lows isn't finished yet.
We think NVDA can hit at least