My top 10 things to watch Thursday, May 23
1. All things Nvidia. Our “own it, don’t trade it” Club stock name far exceeded sky expectations on the top and bottom lines Wednesday after the bell. The AI leader also delivered a big revenue guide and a broader vision from CEO Jensen Huang. The company sees automotive, specifically self-driving, as a huge vertical this year, noting Tesla’s use of AI infrastructure for its efforts. After that will be cloud service provider (CSP) partners and maybe rental companies like Snowflake.
2. Self-driving cars must recognize a stop sign even on a road it has never been on. The process of identifying this sign in a new context is inference. For training, you have to show the model thousands of millions of images of stop signs. You need Nvidia’s H100 GPUs (graphics process units) to start training so it’s not like they’re becoming obsolete with launch of its superior Blackwell chip platform. Video is key for Tesla CEO Elon Musk. You can run videos with Blackwell, not just signs and static movement. No other platform can run that.
3. How expensive is Nvidia’s stock? For that, we have to look back. At the beginning of the year, the stock traded at $481 on a $20.80 forward earnings estimate or a multiple of 23 times. It is now estimated to earn $26.59 per share this year. So, in retrospect, the stock was actually trading closer to 18 times at the start of the year. We just didn’t know it because the estimate was way too low back then. That’s hardly expensive. Advanced Micro Devices is much more expensive.
3. On top of the strong results, Nvidia announced a 10-for-1 stock split. While stock splits don’t technically create value, they do tend to have a positive impact on the stock. The company said the split is to “make stock ownership more accessible to employees and investors.” We commend Nvidia for doing it. Nvidia shares popped more than 6%, trading above $1,000 each for the first time ever.
5. A Wall Street Journal report talked about the threat of Nvidia’s rivals and customers nipping at its heels with their own chips. This argument leaves out entirely the need to train those chips and that’s Nvidia.
6. Another highlight of Nvidia’s earnings was Meta‘s announcement of its large language model Llama 3, which was trained on a cluster of 24,000 H100 GPUs. CFO Colette Kress said as more people use generative AI applications, Nvidia will see more opportunities.
7. Cloud computing company Snowflake, which uses Nvidia’s chips, rose nearly 4% after exceeding Wall Street’s first-quarter earnings estimates. CEO Sridhar Ramaswamy had an excellent quarter, and on “Mad Money” Wednesday said there’s still “a lot to come” in its collaboration with Nvidia.
8. Nvidia’s big beat is sending up shares of Super Micro Computer, Dell and Club name Broadcom.
9. DuPont is splitting into three companies. One will be a water company, which will sell at just 21 times earnings, while the average water company sells at 30 times. The other two will be an electronics company and an industrial solutions company, the latter will become the new DuPont. The new DuPont will be run by current CFO Lori Koch, succeeding Ed Breen, who will become executive chair of the board on June 1.
10. Portfolio name TJX: Was this the best quarter it has ever had? The off-price retailer reported better-than-expected numbers Wednesday, prompting us to boost our price target.
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