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Nvidia delivers, but stock nosedives

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

· Nvidia beat median estimates but missed the high end of analyst forecasts

  • Warns of Q4 headwinds

All eyes were turned to Nvidia last night, which not only delivered, but smashed consensus expectations.

Revenue came at $18.12B (vs $16.1B expected) led by a massive outperformance in the Data Center, which beat expectations of $14.51B (vs $12.82B expected) and slightly so in the Gaming segment $2.86B (vs $2.7B exp.)

However, it did not meet the lofty analyst top-line expectations of $21B, as the stock was priced to perfection. This resulted in its share price failing to break the threshold of $500 per share and declining to mid $480s in early Wednesday trading.

Yahoo Finance (@YahooFinance) / X

Source: Yahoo Finance

Undeniably, Artificial intelligence (AI) is the driving force behind Nvidia’s stellar growth.

Data Center revenue grew a mind-blowing 279% in Q3’2023 to $14.5 billion, now accounting for 80% of Nvidia’s top line and doubling its weight there in under two years.

CEO Jensen Huang said, „NVIDIA GPUs, CPUs, networking, AI foundry services, and NVIDIA AI Enterprise software are all growth engines in full throttle. The era of generative AI is taking off”.

A graph of a graph

Description automatically generated with medium confidence

Source: Company data, as of Q3’2023

The increasing global demand for training and inferencing of large language models, like OpenAI’s ChatGPT, along with the expanding needs of hyperscale and major cloud computing providers for generative AI applications, has significantly boosted Nvidia’s revenues, particularly in the data center segment.

Spot the Outlier

A graph with numbers and dots

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Source: Koyfin

As a result, the mega-cap stock is up a mind-blowing 225% this year, bringing its total market capitalization to over $1.2 trillion. Nvidia is one of the five tech darlings Amazon, Microsoft, Apple, and Google valued at over $1 trillion in the S&P 500, and by far the most successful out of this elite group of companies on a year-to-date return basis.

Future headwinds

The GPU producer warned of a “significant” slowdown in China sales. However, the company plans to produce GPUs that will allow it to re-enter the Chinese market but not trigger export restrictions.

“We expect that our sales to these destinations will decline significantly in the fourth quarter of fiscal 2024“, the company said.

NVDA may have finally hit the limit to its growth, for Q4 estimates matched the top end of the analyst estimates range.

AI Hype cooling off?

CHART OF THE DAY: AI hype in the stock market is starting to cool

Source: Goldman Sachs

AI continues to be a buzzword online, especially among company earnings calls.

However, the AI bubble euphoria seems to be declining as the acronym’s popularity falls to 29% in Q3’23, down from 35% in the previous quarter.

Conclusion

Bubbles come and go, however, and with the AI excitement going down, will Nvidia’s share price follow suit?

Quite unlikely, as AI is still in the early stages of a multiyear growth trend, and Nvidia is more than well positioned to take full advantage of it.

The company is the leader in PC gaming and AI, powering 74% of the top 500 supercomputers, according to its latest Q3 presentation.

Investors can long Nvidia using our 2x NVIDIA , 3x NVIDIA .

Alternatively, Investors can short Nvidia using our -1x NVIDIA , -3x NVIDIA .

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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Violeta Todorova

Senior Research

Violeta è entrata a far parte di Leverage Shares nel settembre 2022. È responsabile dello svolgimento di analisi tecniche e ricerche macroeconomiche ed azionarie, fornendo pregiate informazioni per aiutare a definire le strategie di investimento per i clienti.

Prima di cominciare con LS, Violeta ha lavorato presso diverse società di investimento di alto profilo in Australia, come Tollhurst e Morgans Financial, dove ha trascorso gli ultimi 12 anni della sua carriera.

Violeta è un tecnico di mercato certificato dall’Australian Technical Analysts Association e ha conseguito un diploma post-laurea in finanza applicata e investimenti presso Kaplan Professional (FINSIA), Australia, dove è stata docente per diversi anni.

Julian Manoilov

Marketing Lead

Julian è entrato a far parte di Leverage Shares nel 2018 come parte della prima espansione della società in Europa orientale. È responsabile della progettazione di strategie di marketing e della promozione della notorietà del marchio.

Oktay Kavrak

Head of Communications and Strategy

Oktay è entrato a far parte di Leverage Shares alla fine del 2019. È responsabile della crescita aziendale, mantenendo relazioni chiave e sviluppando attività di vendita nei mercati di lingua inglese.

È entrato in LS da UniCredit, dove è stato responsabile delle relazioni aziendali per le multinazionali. La sua precedente esperienza è in finanza aziendale e amministrazione di fondi in società come IBM Bulgaria e DeGiro / FundShare.

Oktay ha conseguito una laurea in Finanza e contabilità ed un certificato post-laurea in Imprenditoria presso il Babson College. Ha ottenuto anche la certificazione CFA.

Sandeep Rao

Research
Sandeep è entrato a far parte di Leverage Shares nel settembre 2020. È responsabile della ricerca sulle linee di prodotto esistenti e nuove, su asset class e strategie, con particolare riguardo all’analisi degli eventi attuali ed i loro sviluppi. Sandeep ha una lunga esperienza nei mercati finanziari. Iniziata in un hedge fund di Chicago come ingegnere finanziario, la sua carriera è proseguita in numerose società ed organizzazioni, nel corso di 8 anni – da Barclays (Capital’s Prime Services Division) al più recente Index Research Team di Nasdaq. Sandeep detiene un M.S. in Finanza ed un MBA all’Illinois Institute of Technology di Chicago.

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