Again, and again, and again. The poster boy of Wall Street has a knack for delivering on lofty expectations. And they did just that with their Q2 earnings report once more. There was a blip on the immediate headline but Nvidia shares surged back up in after hours, gaining by over 5% in overnight trade.
In case you missed some of the details and headlines:
- Nvidia earnings results: Revenue and EPS moderately beat but shares fall
- Nvidia’s stock does the limbo then the moonwalk on 2028 guidance
The overall mood is keeping the AI rally momentum running and spilling over to other chipmakers and semiconductors too. S&P 500 futures are up 0.5% with Nasdaq futures up 0.9%. And in Asia, we’re seeing the KOSPI also push higher by 1.5% with gains from SK Hynix and Samsung.
So, what exactly did Nvidia’s earnings call tell us?
For one, it is that they are still not only the most valuable but also the most profitable company in the world. No other company this big in stature has ever grown revenue by this much during a quarter. There’s just no precedent for it.
And though with big expectations, comes a big responsibility to deliver, Nvidia definitely did. It’s quite ridiculous how they can keep pushing the limits and beyond for so many consecutive quarters.
Adding to that, a stronger outlook/guidance continues to fuel the AI rally for the most part. The 70% revenue growth forecast for next year is a big message that the race to $1 trillion in revenue is definitely on. For some context, Nvidia is expected to generate around $400 billion in revenue this year.
The only concern for Nvidia is will the AI buzz fade down the line but whatever the issue is with the stock’s performance, you can’t fault the engine running the company as they have delivered over and over again – making it seem like analysts are wildly underestimating their growth potential, even if at this high run rate already.
For now though, the message is that the AI boom is continuing to amplify more broadly. However, Nvidia did warn that memory shortages could persist well into 2028. So, that in essence is a margin issue for the company amid tighter supply and more durable demand conditions.
But as we have seen, Nvidia has ways of finding solutions to beat the crunch. They still boast profit margins near 75% but it’s one spot that could bite a little down the road.
Does this mean US stocks are poised to test all-time highs again?
Let’s just say that with Nvidia’s earnings, the bears have to go back into hibernation for a little while longer.
The message here is that the AI trade is not quite done and dusted just yet. But again, we are at very lofty levels of value and expectations. And to mention there’s still the added risk from US-Iran tensions, the inflation outlook, as well as Fed rate hikes that could dampen the mood.
The latter remains a key litmus test for markets in ending the week, with all eyes on Fed chair Warsh’s keynote speech in Jackson Hole tomorrow.
This article was written by Justin Low at investinglive.com.