💀 Nvidia: Dead money or coiled spring?

Nvidia, the prime facilitator of the AI boom, reports quarterly results today after the close.

It would be a monumental disappointment if the company reported any negative surprises in the highest-profile numbers. Nvidia has reported better-than-expected adjusted earnings per share for 12 consecutive quarters; on the top line, that streak runs for a baker’s dozen.

However, if you had nothing but a five-month chart of Nvidia’s share price, you wouldn’t think expectations were too high. You’d think this is a company that’s struggling to convince investors that it’s on the right track.

• On November 19, the company’s Q3 results bested expectations, as did its guidance for Q4 revenues and adjusted gross margin. Management tried to give all the right answers on their conference call.

• None of it worked. The initial knee-jerk jump in the stock faded, and shares ended the next day sharply lower. 

• It’s not like the stock had been on fire, either: it was down 8% month to date in November ahead of reporting, trailing the S&P 500’s 2.6% slump over the same stretch.

• After those results, CEO Jensen Huang claimed that “the whole world would’ve fallen apart” if Nvidia had a bad quarter.

The stock has caught a bid ahead of earnings, but came into this week up less than 2% from where it was at the end of Q3. After trading sideways for about five months, is this “dead money” — that is, a stock that’s going nowhere — or, as Macro Risk Advisors CEO Dean Curnutt wrote, a “coiled spring”?

The Takeaway

The common misconception of Atlas is that he was forced to carry the weight of the world on his shoulders. No doubt, Huang feels like Nvidia is bearing an enormous load. But in fact, the titan was charged with keeping the heavens separated from the earth. Ironically, Huang faces the opposite challenge: designing the chips that will bring digital God to the masses. Presumably, something powerful enough so that investors will stop worrying about his biggest customers’ return on investment.

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A bunch of deals were revealed yesterday, with TSMC and AMD the big winners. 

• Advanced Micro Devices finished up nearly 9% on Tuesday after the company booked another major customer for its GPUs, striking a deal with Meta. 

• The deal is for AMD to deploy 6 gigawatts’ worth of AI infrastructure, spanning multiple generations of AMD AI chips. AMD has said that each gigawatt is equivalent to “several tens of billions of dollars” of sales, making the value of this pact in excess of $100 billion.

• In exchange, Meta will receive warrants to buy as many as 160 million shares — roughly 10% of AMD’s current total shares outstanding — for a penny each as certain milestones are hit pertaining to the amount of gigawatts shipped, AMD’s share price, and “Meta achieving key technical and commercial milestones.”

• Meanwhile, Apple’s plan to invest $600 billion to expand in the US over four years entails a big win for TSMC, as those plans involve the purchase of “well over 100 million” chips from TSMC’s Arizona facility this year, “a significant increase from 2025.”

• Apple has long been one of TSMC’s largest customers, even as the iPhone maker shifted to designing its own processors in-house — chips that TSMC overwhelmingly manufactures. 

Apple’s demand is helping fund TSMC’s massive multibillion-dollar chip plant expansion in Arizona. 

The Takeaway

If anything, these deals are yet another example of the maxim that the Magnificent 7’s capital expenditure is eventually going to be other companies’ revenues. That capex is primed to surge to eye-watering levels this year. 

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Hinge Health CEO and cofounder Daniel Perez sat down with Sherwood News to talk about life as a public company, how being at the whims of Mr. Market can shift company morale, and the scale of the addressable market opportunity for digital healthcare.

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• 📺 WBD: According to Warner Bros. Discovery, Paramount has hiked its offer to $31 a share, up a dollar from its previous offer, following its seven-day discussion window with the company. Event contracts on which company will ultimately come out on top of the bidding war have Paramount at a 55% chance over Netflix’s 38% odds.

• 🥊 “Boxing”: Cryptocurrency entrepreneur Floyd Mayweather Jr. and retired Filipino Senator Manny Pacquiao have agreed to meet in what is, technically, a boxing match in Vegas in September. Old guys cashing big checks for what can barely be described as fights has become the norm in boxing; it’s not even the first time Mayweather will be lacing up the gloves against a retiree this year. Prediction markets give him an 85% chance to beat Mike Tyson in the ring in April.    

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.

• Earnings expected from Nvidia, Salesforce, Circle, Hut8, TJX Companies, Lowe’s, Synopsys, IonQ, and Snowflake