TOP STORY
🚀 Nvidia Crushes Earnings, Projecting Massive 70% Growth Next Year

📊 Last night Nvidia ($NVDA) reported earnings, so it's time for our special edition Weekly Buzz breaking it down!

😰 And unlike last quarter when the market was in a state of greed, this time Nvidia had a much tougher crowd:

• 📉 Chip stocks just had their worst week since July

• 💸 Long-term bond yields are hovering near two-decade highs, raising the cost of the AI buildout

• 😬 Nvidia itself came in off a seven-day losing streak, and is up just 11% this year while AMD, Intel ($INTC) and Micron ($MU) have more than doubled

🫧 On top of that, a lot is riding on Nvidia each quarter to prove that the AI trade isn’t a bubble, so Nvidia really needed to deliver.

🥁 Well, drumroll please…

🤑 Nvidia Crushes Earnings Yet Again

👏 For the 17th quarter in a row, Nvidia smashed estimates:

• ✅ 💰 Revenue: $96.2B, up 106% from last year, vs. $92.2B expected

• ✅ 💸 Earnings per Share: $2.22, up 120%, vs. $2.10 expected

• ✅ 🤖 Data center revenue: $89B, up 117%, vs. $85B expected

• 🔮 Q3 guidance: $108B, vs. $104B expected, Nvidia's first-ever $100B+ quarter

🎢 The stock actually slipped when the numbers first hit… then CFO Colette Kress started talking, and the stock jumped ~5% after hours (and is now up 7% this morning).

👀 So… what did she say?

🤯 70% Revenue Growth Projected for Next Year (Analysts Could Hardly Beleive It)

🚀 The big surprise from this quarter’s earnings was when the CFO told analysts that Nvidia expects revenue to grow ~70% in fiscal 2028, much, much higher than the 45% estimated.

😱 For the most valuable company on earth to see growth accelerating is pretty wild…

🙋‍♂️ In fact, it was so wild that the analysts could hardly believe it, with four separate questions about the number on the call. Morgan Stanley's Joseph Moore even asked: "What gives you the confidence to guide a full-year out? You haven't been doing that." 

🤯 What’s even more insane is the 70% number is the ‘supply-constrained’ estimate, and Kress said if it wasn’t for the chip shortage, revenue would double next year, with Nvidia’s order backlog now sitting at more than $2T.

💰 This ties into the massive AI spending we’ve seen all earnings season, with hyperscaler spend expected to grow from $800+ billion this year to $1.3 trillion in 2027, and a lot of that is going right to Nvidia.

🤖 Jensen Huang Says AI Has Reached an Inflection Point

💸 In the earnings call, Nvidia CEO Jensen Huang said AI has reached an inflection point, and that AI has firmly crossed into a product that generates real revenue per unit of compute:

🚩 But not everything in the report was bullish… there were two red-ish flags worth having on your radar. But before we dive in there, a quick word from today's sponsor CIBC CDRs!

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TOP STORY CONT.
🚩 The Red-ish Flags + Analyst Reactions

✨ While overall it was an incredible earnings report, there were 2 areas some are calling red-ish flags worth having on your radar:

😰 1. The Memory Crisis & Competition

💸 First is gross margins. Due to the memory chip shortage that Tim Cook recently blamed for Apple’s price hikes, Nvidia told investors that its margins will fall from 75% to 71- 72% early next year. Nvidia plans ~15% price hikes to pass on costs.

👀 This alone isn’t a big deal, but a memory shortage is in part why Nvidia is ‘sold out’ and supply-constrained. In the words of Jay Goldberg (the one analyst with a sell rating on Nvidia):

🥊 Goldberg also sees margin pressure building next year as AMD, Google's TPUs, and the custom chips from OpenAI and Anthropic all come online at once (new competition for Nvidia).

🏭 But Jensen Huang is confident this won’t hurt demand, and that margins will improve next year, arguing that while rivals sell chips, Nvidia sells ‘the whole AI factory’.

⭕️ 2. Circular Financing & Debt

😰 The other recurring worry with Nvidia is circular financing, and those fears haven’t gone away. For the first time ever, Nvidia listed ‘debt’ as a risk factor in its quarterly filing.

🤝 For a company printing $50B+ in quarterly profit, it may sound strange to worry about debt, but Nvidia has been borrowing and making massive financial commitments: investing in OpenAI and Anthropic, backstopping customers' data center deals, and joining a $500 billion financing pool with BlackRock, KKR, and Apollo, putting tens of billions of dollars of liabilities on its books.

Nvidia's CFO didn’t shy away from this question on the earnings call, saying that the investments represent a major computing platform shift:

💰 The $1.5T Question

❓And that brings us to what The Wall Street Journal is calling ‘the $1.5T question Nvidia’s Earnings Can’t Answer.’

🤑 Basically, for all this massive AI spending to pay off, AI needs to generate massive revenue. 3 years ago, David Cahn, a venture capitalist at Sequoia Capital, estimated that AI needed to generate $200M for the investments to make financial sense.

😮 Now, with the soaring spending, WSJ says that number has grown to $1.5T, and points out that ‘while companies have started generating significant revenue from AI,’ there’s still a big gap to hitting this number:

🐻 This is ultimately the biggest case against Nvidia - essentially, if at some point the AI spending from the Hyperscalers scales back, so will Nvidia’s revenue. But if spending continues, so will Nvidia’s glorious results.

✨ Now, while I’ve shared a few areas for caution, I don’t want to overrepresent the bears here - most analysts are extremely optimistic about Nvidia’s future prospects, but before we cover the analyst reactions - a quick word from our other sponsor this week, CIBC ETFs!

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TOP STORY CONT.
🚀 Analysts Are Resoundingly Bullish

🎯 Of the 61 analysts covering Nvidia, 58 rate it a Buy or Strong Buy, with an average price target of $305, implying 44% upside.

💬 Gil Luria, Head of Technology Research at D.A. Davidson, thinks the market has been underestimating Nvidia's runway:

⭐ Many analysts also pointed to Nvidia’s valuation, noting that Nvidia’s forward PE ratio (a measure of how expensive a stock is) has fallen dramatically, with BofA's Vivek Arya arguing the stock is trading at a 34–50% discount to what its free cash flow is worth.

✅ To sum things up, Nvidia delivered once again, proving AI demand is hotter than ever. While there are some red flags to keep in mind, overall this was an overwhelmingly positive quarter for Nvidia investors.

🌼 To share your thoughts about Nvidia earnings and see what other Blossomers are saying, check out my discussion post here!

🎁 And as a thank you for reading to the end, I’ll be giving away 1 share of Nvidia to someone at random who likes and comments on the post - see you on Blossom!