Hamilton Capital Partners | Atlanta, GA — Hamilton Capital Partners

NVDA: Cathie Wood Missed Out!

By Kelvin Lee, Alonso Munoz


Today, after the bell, we get Nvidia (NYSE: NVDA) earnings. This is it; no other company is going to move markets like NVDA will. The company has risen to the third-largest weighting in the S&P 500, boasting a market cap of more than $1.7 trillion. NVDA is up 40% this year and responsible for a quarter of the gains in the S&P 500. NVDA’s fast ride upward has many skeptics wondering if the company can continue to match its lofty 32x earnings premium valuation. Notably, Cathie Wood’s ARKK innovation fund has sold over a million NVDA shares over the past year, citing that the market is getting ahead of itself with expectations. Now, NVDA earnings are on deck, and those same expectations are being tested. Implied options indicate a 10%+ move in the stock price after release. So, the question is, will that be a 10% move up or a 10% move down?


Of course, up…? Our attitude hasn’t changed one bit since our last post about NVDA. Yes, NVDA stock is relatively expensive to buy, but it’s expensive because you’re getting an exponentially growing firm. Just last quarter, Nvidia’s profits hit $9.2 billion, up a ridiculous 1,259% from the prior year, with sales tripling to $18.1 billion. It’s difficult to find a similar growth story out there, and we’re bullish as this trend continues. NVDA certainly is; their guidance this quarter is $20B in sales, which represents a year-over-year growth rate of 427%. No matter what NVIDIA has been trading at, the company has kept its sales multiple in line with its stock price. Whether you like it or not, the next tech wave is AI. Trillions of dollars are being spent on natural language processing, machine learning, virtual assistance, and image recognition models, and NVDA solely holds the keys to the infrastructure needed to run all of it, or most. Chips and data centers are one of the fastest evolving market sectors, and we wouldn’t want to bet against the momentum here.


So, here’s what to watch this afternoon. Analysts expect revenue of $20.4B and net income of $10.8B, about a 200% increase from last year. As mentioned above, these expectations were in NVDA’s guidance last quarter. On specific financials, we’ll be looking at data center revenue. Data centers have been NVDA’s best moneymaker, and we’re eager to see if the company’s prior forecast of a trillion-dollar AI market opportunity can show up in data center sales. We’re hoping to see another 20% growth in data center revenue, and we’re confident that NVDA can deliver. Unlike Cathie Wood, who missed out on more than 200%+ in NVDA gains in just the past 12 months, we think market expectations are fair based on the market opportunity and sector tailwinds. And on the off chance that NVDA does miss? Well, we’re still buyers. Any pullbacks, especially a 10% one, are rare chances to invest in AI for the long term at a “discount”. Historically, NVDA has rebounded from any downward drafts, and as long-term investors, we’re in it for the next 5 years, not just the next 5 days.




To contact the author of this story:
Kelvin Lee at kelvin@hamiltoncapllc.com


To contact the editor responsible for this story:
Alonso Munoz at alonso@hamiltoncapllc.com








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