This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
Try to knock this king off the throne.
In the days since Nvidia’s (NVDA) big quarter and outlook on Wednesday night, two tracks have emerged.
Track one is owned and operated by Wall Street, and it believes Nvidia will continue to speed to new profit heights this year and next. Consensus estimates (which can be tracked on Yahoo Finance here) are on the rise (again), and the Street remains steadfast in its appetite for jacked-up price targets.
The other track is owned and operated by the media, and it is increasingly looking to poke holes in the Nvidia investment thesis. Hey, I get it; it’s our job to be skeptical of numbers, commonly held narratives, and leaders.
But to be out there peddling that Nvidia’s stock is in a bubble because it’s up a lot, or its financials may be in a bubble due to eye-popping growth rates, strike me as off base completely.
Let me offer this up front: I have no car in this race — do not own shares of Nvidia and never have.
All I am saying is that an asset bubble has a few simple characteristics.
One: The asset appreciating in value usually doesn’t have the fundamentals to justify said appreciation. Two: People are blindly buying the asset without understanding the asset — mainly because everyone else is going in.
I don’t see either of these things for Nvidia.
Investors appear very knowledgeable on Nvidia’s business and are buying for the correct reasons.
Then, Nvidia’s growth rates justify a higher valuation. This is a company that just grew earnings by 461% in the first quarter! Sales exploded 262%!
Why? Because we are witnessing a seismic shift in tech stacks at the hand of generative AI, powered by models underpinned by Nvidia chips. No one is even close to this company’s technology. Concerns over Amazon (AMZN) and Apple (AAPL) building their own AI chips are great to discuss, but Nvidia is doing this at scale, and is 27 miles ahead of these companies.
“People want to deploy these data centers right now,” Nvidia CEO Jensen Huang told Yahoo Finance’s Julie Hyman and Dan Howley in an exclusive interview right after earnings (video above). “They want to put our [graphics processing units] to work right now and start making money and start saving money. And so that demand is just so strong.”
Will Nvidia keep growing its top and bottom lines by triple digits? No, but the growth rates will remain beyond impressive and faster than competitors.
Bubble? Let’s get real here, people!
Amazon AWS has begun to make AI chips to better control a supply chain starved for these powerful pieces of technology. AWS CEO Adam Selipsky discusses the strategy in a new episode of the Opening Bid podcast. Listen in below.
Brian Sozzi is Yahoo Finance’s Executive Editor. He is also the host of the “Opening Bid” podcast. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to come on Yahoo Finance Live? Email Brian Sozzi.
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Source: finance.yahoo.com