NVDA Earnings, February 15th

Semiconductors in general have been on a wild ride the past few months, more so than the market/tech in general, rising to stratospheric heights only to lawn dart.

So far during earnings, semiconductors have been a mixed bag, though more positive than negative.

Winners so far:

TXN, QCOM, AMD, NXPI, XLNX, KLAC (maybe)

KLAC is a maybe since it had a dive immediately on earnings but recovered quite well, however it may have just been riding a general uptrend.

QCOM likely would have had a stronger uptick, but had earnings the same day as FB.

Misses:

WDC, INTC, TER, LRCX

TER had a surprisingly bad miss, far worse than other semiconductors have reported. WDC and INTC are perennial earnings misses, so nothing surprising there.

To come:

ON, Reports Monday morning half an hour before market open.

The AMD comparison:

When one speaks of NVDA, AMD isn’t far away.

It’s easy to see why: They have significant market overlap. GPUs, data center, and embedded systems make up their largest revenue streams with data center and embedded being the fastest growing for both companies.

So tied together, in fact, NVDA popped on AMD’s latest earnings and had a sympathetic rise with AMD’s previous earnings.

AMD spiked on record revenue growth along with the statement in their call that, simply put, demand exceeds their ability to provide. They answered the ever-present supply-chain issue with a very positive outlook, stating they were investing heavily in their backend to meet their impressive guidance.

Something to consider is that last earnings, AMD had a slight shrinkage in market share and NVDA had an even more significant shrinkage along with reduced shipped units from both. I haven’t been able to find a report on that for their latest earnings, but during the call Lisa Su mentioned they’re expecting total units shipped to remain flat for 2022.

My thought here is they’re simply capturing more revenue through pricing increases.

This lines up with information I’d dug up on NVDA for their last quarter earnings. A report from a german distributor/retailer of computer hardware made mention that NVDA’s shipments to them had decreased, not because of lack of supply, but that NVDA was looking to trickle out their product. Suspicion and conjecture indicates that NVDA is doing this because they’re well aware of scalping and increased prices for their hardware. Going another step further, there’s a supposition that they’re using this to normalize higher prices so when they release a new card at a steeper MSRP, consumers won’t have as much ‘sticker stock.’ This likely flows into the data center world as well.

I think it’s fair to anticipate a similar outlook and reporting from NVDA.

Their presence in data center is growing fast, though their embedded–specifically automotive–is their fastest growing division, I believe. They’re also growing their AI division, though it’s still an infant compared to IBM and Google–which, incidentally, they partnered with for AI as well as quantum computing. They tend to release news like this the week before earnings, so keep an eye out for NVDA headlines this coming week.

That said, while I personally expect positive movement from NVDA’s earnings, they could easily have a negative outlook.

  • They already have a very high valuation. It wouldn’t take much negative guidance or missed earnings to drop the share price. In fact, I believe NVDA is overvalued at $242. Not that I won’t take a pop to $300 on earnings, but it’s not a figure I imagine will hold over the long-term.
  • Like so many other companies, if they don’t have a firm grip on supply chain issues (or at least can blow enough smoke up investor asses to hide the fact they don’t) that’d hurt rather badly–it’s what caused TER’s massive drop.
  • NVDA doesn’t always pop on earnings. Sometimes it even sags immediately in AH/PM then runs in the following days. Trying to play pre-earnings could result in a nasty IV crush even with a good report. This is exacerbated by the fact NVDA options already command a high premium and running into earnings is going to make them that much more expensive.
  • Lastly, there’s the crypto connection. While I’m unsure of the impact, I believe the fall of AMD and NVDA compared to other tech/semiconductors–and their higher volatilities–stems from expectations about demand from the crypto side of things. If BTC continues to flag and stumble, it may hurt sentiment prior to earnings and even after.

So, plenty of downside potential not even considering their sky-high premiums. At the time of this, with a share price of $243, the Feb 18th $250c is a whopping $10.60.

I’ll be looking to take calls (or call, considering premiums) at some point for earnings, but seeing as how this ticker casually swings $10+ a day and can go up and down $30-50 a week, a ‘safe’ entry may be difficult to find. It’s not totally wrong to say NVDA is a mini-TSLA with its swings.

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Took a brief look at 10Q’s from q3 and q2.
Nothing really stood out for me other than Graphics vs Compute growth. Looks like they take turns catching up. In Q3, they were about 4:3 graphics to compute in revenue.
Geographically in q3, Taiwan/China revenue went up a lot, NA not as much, Europe went down. This is a very high margin business to be in (65%). Not sure how that compares to AMD, but AMD looks more diversified than NVDA.

I am a little skeptical on the earnings after what we saw with FB. This could be a bad news for compute side of business which I think NVDA is more heavily weighted towards than AMD(~20%). NVDA rallied 13-14% on Nov 4, 2021 after hype built around Metaverse announcement.

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The lack of growth in compute is what hurt INTC their latest earnings, so I understand that aspect.
Though AMD still managed significant growth in that sector, primarily through increased pricing it appears.
No reason to suspect NVDA will be different–plus, INTC released their new line of processors after quarterlies and they’ve been selling quite well.

But, back to NVDA: Their data center segment has been growing quite fast. Looking at the past few quarters, it wouldn’t surprise me to see data center finally overtake compute in revenue lead this quarter or next. Then there’s NVDA’s whole ‘omniverse’ thing and who knows what’ll pan out with that.

I disagree that AMD is more diversified, however. NVDA has quite a few side projects going on that aren’t exactly revenue generators just yet, but could give them space to grow into within a few years–but that’s quite down the line.

Short term I think NVDA will carry up on earnings, but market sentiment is going to be a huge factor. I think they had a large pop in November because, at the time, things were bullish as fuck for tech, the metaverse, etc.

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Well dropping arm acquisition means nvidia won’t be in general purpose computing market anytime soon. It still limits them to compute side of things, accelerators, etc.

This news seems to suggest softbank may take IPO route instead for ARM. Arm IPO Likely in 2022 With Nvidia Deal Looking Dead. It Could Be a Blockbuster. | Barron's

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Officially dead.

Full article: Subscribe to read | Financial Times

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In my opinion, doesn’t really change anything. It’s been known that the deal probably wouldn’t work out, and it’s not like they aren’t a global leader in AI already without the Arm acquisition.
https://www.msn.com/en-us/news/technology/nvidia-e2-80-99s-arm-deal-e2-80-98was-dead-from-day-1-e2-80-99-e2-80-94-and-that-e2-80-99s-ok/ar-AATawoS

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The biggest thing about the deal being ‘officially’ dead now is NVDA is still on the hook for the $2bn they offered when they signed the deal. Having to cough up the cash for nothing could have a fairly large impact.
While this fall-through won’t impact the earnings report, it does make me wonder about guidance.

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NVDA certainly had a day despite no catalyst that I could find. Semiconductors in general had a fantastic day, plus these two snippets on the news today:

Nvidia (NVDA) popped 6% after BofA Securities said it expects the semiconductor company’s Q4 results may get a boost from its Steam gaming portal, but chip supply continues to be the main constraint. However, the investment firm forecasts that the company could grow organic sales at a rate of more than 25%.

Williams (Spouting Rock Asset Management’s chief investment officer, Rhys Williams) calls Nvidia stock “one of the best plays on the metaverse.” He goes even further, citing several secular tailwinds, concluding that the company is “hitting on all the touchpoints on where the world’s going.”

BofA also re-iterated their $375 price target.

Of course, we all know how silent this shit goes when the stock reverses. Still, if bullish sentiment remains strong leading into next week it could be worth it to play calls to ride not just the IV but general share increase.

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NVDA with a remarkable day.

Russia’s softening tone on the whole Ukraine thing certainly helped growth stocks.
More analysts coming out of the woodwork to say how much they love NVDA and re-iterating $340+ price targets.
While NVDA did have a few moments where it trended with SPY, it’s largely been doing its own thing. Even now in AH with SPY slumping (Close 446.10, 445.16 as I write this) NVDA is continuing to reach higher, closing at 264.95 and currently 266.15.
In the afternoon AMD picked up on NVDA’s sentiment and started a strong run as well.
I think NVDA could continue to race tomorrow into earnings, but as with anything, market sentiment is king. All Russia has to do is get nasty again and it’ll scare the market down.

Today I dabbled very lightly in NVDA, mainly owing to the cost on the options, but turned out a few bucks and sold my position before close. Will be looking to take another call position tomorrow in the AM and ride further underlying increases and further IV gains.

IVR is currently 84.31 and IVP is 99.21.

With these values, NVDA is going to have to absolutely kill earnings in order for most calls to avoid getting crushed into dust.

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Currently up in AH. I do not have a position but I’m interested to see where this goes.

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NVDA is currently chasing its huge market expectation. If earnings is not superb, the bubble will burst. Bearish sentiment is growing by the week and a blowout earning will be required to justify this PE ratio.

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I’m looking at selling a 230 put and a 300/305 CCS

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Off the cuff, I agree with this. Keep in mind NVDA is usually a multi-day runner if earnings are a blowout, no real need to risk the IV crush. People are still gambling these earnings a bit too much.

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ended up going with the full condor. I didn’t want to risk getting blown out on the downside without protection. I may consider taking assignment if NVDA does end the week below 230.

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I think this was a great and overlooked callout. NVIDIA had admirable earnings performance but nothing earth shattering. My gut says the stock is one to watch tomorrow morning for a potential post-ER run on their slight beat, but otherwise best case is they may open tomorrow sideways.

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Very curious how this will move tomorrow. At a glance, the mainstream headlines are bullish.

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I don’t think anyone would be surprised if we opened sideways or slightly down tomorrow. I think the price movement on Tuesday set too high expectations for EC, which I think Nvidia did well. There really wasn’t much we could hope for to drive prices beyond the Tuesday movement. We probably won’t see the Nov highs unless the whole market becomes hot again, not a result of Nvidia’s individual performance.

Macro factors are starting to catch up to Nvidia. The Ukraine/Russia issue still remains to be solved. Rise in interest rates are giving bulls pause and bears are probing for weakness.

I like Nvidia as a company, but as a stock they are way too high and overpriced for me. Besides Tesla, they have by far the highest PE ratio in the top 50 companies by market cap. Even their forward PE, which is factoring very high growth, is very high. My worry is if Nvidia announces any weakness in their growth in the next EC, it will dump just as hard as FB, maybe even worse.

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I think Nvidia is doing a good job where they can regarding supply chain, but I’m not sure I see an end to the supply chain issues going forward. The companies that can fix the supply chain issues are incentivized to keep the problem a problem.

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