The Nvidia effect on markets: Asking for a Trend

On today's episode of Asking for a Trend, hosts Julie Hyman and Josh Lipton delve into Nvidia's (NVDA) first quarter earnings beat and explore its effects on the broader market.

Yahoo Finance's Jared Blikre provides an in-depth analysis of the earnings report, shedding light on how Nvidia's performance is impacting the wider semiconductor industry.

Despite the impressive results, D.A. Davidson Managing Director Gil Luria explains why investors should avoid Nvidia's stock due to the growing threat of competition that could negatively impact revenue margins in the future.

Public Ventures President and Chief Market Strategist Lou Basenese also joins the discussion to share his insights on the critical factors that will determine whether Nvidia can maintain its growth trajectory moving forward.

This post was written by Angel Smith

Video transcript

Hello and welcome to Yahoo Finance's brand new show.

Ask me for a trend.

I'm Josh Lipton Live from our NYC headquarters today.

The market.

It's all about NVIDIA.

It's one of the most consequential names in the A I space.

The largest companies on the S and P 500 the chip maker just reporting its first quarter results.

Let's recap the numbers here.

The chip giant beat really across the top and bottom lines in the fiscal first quarter.

Revenue soared to 26.0.

4 billion during the quarter against estimates of 24.69 and adjusted earnings per share.

They clocked in at 6.12 2nd quarter forecast, also topping the streets estimates.

And we are also announcing a 10 for one forward stock split and boosting its dividend by 100 and 50%.

NVIDIA has been all the market can talk about.

The company has added more than a trillion dollars to its valuation this year, thanks to its soaring stock price.

It's now the third largest US company by market cap, topping 2.3 trillion.

It's a cent has been staggering and fueled expectations that some say have become maybe too aggressive here.

Joining me now is his thoughts.

Is Lou Bassinet's M DB capital President and chief market Stra Lou Always good to see you.

Great to be here again.

So let's let's just start in video reports.

Th this thing Lou was we were talking off camera, so it's up 90% year to date, right?

And really, everyone's on the same side of the boat.

90% of analysts were telling II I need to buy it.

It's tacking on another 2.6% in the after draughts.

What do you make of the report?

Give me your I'm on that 10% of this.

I'm a forever contrarian.

Evaluation's always kept me out of this, But if I look at this report, I mean, cue up the Waynes world with party on mode.

Garth.

I mean, let's go because there's nothing bad in this report.

I think the risk, if I had to find something, was the the magnitude that they beat.

Earnings expectation is the smallest.

It's ever been about 8% if you look back a year ago when they reported that first blowout quarter that kicked off the A I hype machine.

It was about a 40% beat.

So I think expectations at some point are gonna get too far ahead of what NVIDIA can deliver.

But it's not yet.

So it's a you're not in because of valuation concerns.

And listen that that when you had sceptics on the show, they would bring that up.

What's the Is there a level Lou you're more comfortable with?

Look, I think if I had to be rational, right, the valuation used to be completely out of whack until the company's grown into it.

It's now at, like, 40 times forward earnings.

If you look at Microsoft Apple, maybe in the low thirties, I think that makes sense for a multi trillion dollar market cap company because you got to remember right there's an opportunity cost.

How far can this market cap go?

I mean, Apple hit three trillion last year.

That's the it's already two trillion.

You think you move into the, you know, does it join Microsoft in the $3 trillion Club?

I mean, it could be I think it's the leading candidate to be the next $3 trillion market cap company.

But if I had a dollar to put to work today, and I want a 10 exit.

It's not an NVIDIA right.

It's probably in the smaller cap side of the market or you'd be more conservative.

You I wanna look at the mag seven.

I mean, it's really alphabet is the most reasonably valued on a, you know, forward basis.

Can I get besides the bottom or top the stock split news What you take there?

I think it's a brilliant move psychologically, because if you look at the data now, about 40% of trading volumes is retail investors now in the latest couple months.

So this is a great way to psychologically bring in more retail.

I mean, it doesn't change any of the fundamental metrics and valuation calculations, but if I'm sitting there thinking about buying 100 shares or a share, it's a lot easier, more palatable at at, you know, 100 bucks versus $1000.

What do you think?

Also, I'm just to get your take, Not just what this report means for NVIDIA.

For Jensen WW.

What are the ripple effects?

Broader market implications.

Huge.

I mean, I think you know, as tech goes so goes the market.

I mean 40% of the S and P five hundred's gains have been attributed to the tech sector.

Um, if not more, if you're looking back.

Historically, it's similar to the.com days.

So we needed this, right?

I mean, this is the leader of the A I trend, but we should have expected it, too.

If you look you've reported on Microsoft's results.

Amazon's Google's.

We saw the acceleration in cloud revenue, which means that the NVIDIA's chips are getting pulled into the market.

Right, That's how that's being facilitated.

So all right, so what?

You've been on the silence and video you haven't stepped in you had some concerns about.

Maybe it's too pricey, but you wanna play the A I theme.

So where else would you be looking?

I think the more reasonably valued is Microsoft.

I mean, you gotta do your own due diligence, but the key difference with Microsoft they can push a I into the market, right?

They're creating products.

Therefore they can create the demand.

NVIDIA is getting pulled into the market.

I think Apple's the sleeper A I That's interesting.

You So a apple is sleeper because apple is right.

We've actually talked about it.

A little apple is kind of perceived as they missed the boat.

Right, everybody, either the race is on.

They got left behind.

You don't see it that way.

I don't be.

And look at Tim Cook's history, right?

Everyone thought he was gonna miss the boat after he he came in to replace Steve Jobs.

And he just apple.

He continued that tradition, they're never first or second to market.

They come in later, but then they go.

They come in late, but they end up being the leader.

And here's the key differentiator for Apple.

They have 2 billion active devices in use.

If they just iterate and add a little A I somewhere, it has a magnet magnified impact on loyal, satisfied group.

Um, and also, you know, I always think it with apple.

You know Tim Cook?

He controls.

He controls the software, The hardware that ships, right.

It's that vertical integration.

When he decides he wants to make his move, he can He can flip the switch quickly.

Are you then?

Are you sort of looking ahead to that software show for Apple?

Is that kind of maybe a catalyst you're looking to.

Yeah.

I think that's the first step for Apple, but it's gonna continually and perpetually underwhelm people, right?

Apple is in that swing of of sentiment where people just don't believe they're gonna pull a rabbit out of the hat and become a leader again.

Uh, I think this is usually when you is the time to buy an apple.

Historically, I've, you know, full disclosure.

I do own it.

Um, firm doesn't doing investment banking.

But if you look now in the middle of the doldrums of summer, approaching ahead of holiday season is historically been a good time to to time.

The market now works for Apple during the summer.

Well, any other, right?

So NVIDIA too expensive.

Any of their chip names you find?

I really think arm holdings coming back to markets re IP O as a public company is attractive.

They give you leverage to whatever the next semiconductor trend is.

They're branching into a I pretty aggressively.

They have a recurring revenue model that's much more attractive than a one off sales model than NVIDIA.

Um, I think if you wanna go see and are you are you, uh you're saying, too.

You think that evaluation is more attractive to you?

It's a little bit ahead, but I think it's gonna grow.

You're gonna see the GR like just like NVIDIA grew into its valuation.

I think arm has the potential to do that.

It's just a newly traded company again, right?

It it got taken off the market.

Um, if you wanna go, I like tangible A I application.

So And this is full disclosure.

We banked it.

I don't own it, but the firm does, um, it's heart beam.

So this is a portable, uh, credit card size device that can detect heart attacks, and their latest data came out that they can do it better than human cardiologists.

So, I I get more excited about small cap undervalued names that are really innovating and practical applications of a I.

And I think that's what what's really gonna have the biggest gains?

Because we're gonna see how a I really impacts our life saving lives versus helping our kids, you know, save a few grades by cheating on it in in school, right?

I mean, this is that that's not that doesn't have a long, sustainable business behind it.

But other applications do.

Lou always love having you.

Strategy picks.

Thank you.

Thank you.

More on NVIDIA earnings after this when asking for a trend returns.

NVIDIA shares are nearly 3% higher here in the after hours following those earnings.

Jared Blier joins us now to check in on how the numbers are impacting the rest of the markets.

Jared, Josh, we almost had $1000 for NVIDIA in the after market and you can see right now it's only at 9.

74.

87.

That is good enough for, uh, a 2.66% increase over the closing number.

And that number that we got only minutes ago was 949 50.

Now there are about $2.5 billion 2.5 billion shares outstanding.

So if you do the math at $1000 per share, you're going to end up with a valuation of $2.5 billion.

So still not to three trillion, like Microsoft or Apple was prior, but, uh, inching up there.

So I thought it was really interesting to see the commentary.

Gross margins just knocking.

It out of the park, the actual beat for the current quarter for the reporting quarter.

Not as big as people might have liked, but nevertheless, it's all about the for guidance, and I should say something about the stock split as well.

10 for one that's going to happen on June 7th, as we've talked about.

Typically, a stock split or a reverse split.

That's where shares are increased isn't supposed to really affect the bottom line of the company.

It's just a mathematical exercise, but this does make this very expensive stock 949 or $978 depending on your quote, that's going to be brought down to 94 97 98 $100.

So that will also put it in candidacy for in addition to, uh, another index.

I'm not going to throw the name out there.

I don't want to start rumours, but typically you do want to have those lower price tags for these consumer facing stocks.

And that's what NVIDIA now now is.

It's a poster child for the A I revolution.

Now let me check in on some of the other semiconductor stocks that are trending here.

And, uh, you can see the background colours here.

Those represent what happened during the day.

So little rectangles that, uh, show you what's been happening in the after hours.

I should point out that Super Micro up 1.8% arm up 1%.

So there's a lot of follow on trading here as well.

Thank you, Jared.

NVIDIA shares rising after reporting first quarter earnings.

The chip giant beating on the top and bottom lines revenue coming in at $26.04 billion.

That's versus the estimate of 24.69 billion adjusted earnings per share.

They clocked in at $6.12.

On top of all that, NVIDIA also announcing a 10 for one stock for stock split and raising its dividend.

Joining me now is Gil Luria, managing director at D a Davidson.

So Gil great, great to see you.

So listen.

In video reports, they be they offer another bullish, uh, sales forecast.

J Jetson won here.

Gill saying the next industrial revolution has begun in his words.

Give me your take on the print, Gil.

Your reaction.

No, it's a great result.

Expectations were high because they keep setting them higher, and they still exceeded them both for this quarter and their guns for the next quarter.

But it shouldn't be too surprising.

Their customers told us they were going to spend more.

Microsoft, Amazon, Google Meta told us they were going to spend more on GP US.

They told us they're buying any GP U NVIDIA will sell them, and that should continue for the rest of the year.

Those companies were very clear about the fact that they're in an arms race.

They're in a land grab to have as much generative a I capacity right now as they can buy.

And that bodes well, not just for this quarter next, but for the rest of the year.

For NVIDIA because they have all that demand lined up and and Gil just looking ahead.

Now, if you're an NVIDIA investor, you're excited.

New GP U platform Blackwell on the way.

What Gill, What is that gonna mean for the company for its business financials?

Well, so the innovation at NVIDIA is accelerated.

They're now introducing a new product set every year, and they have to because, uh, competition is now building products that are more and more comparable to what NVIDIA does.

And, importantly, those customers that are listed are all building their own chips.

They're all saying that infer will increasingly be done on their chips, whether in a data centre or on a device.

And that's what you have to start thinking about for next year.

And the year after that is that their customers at some point are gonna have enough NVIDIA GP USA because they'll have enough data centre capacity and B because they're gonna be putting their own chips in the data centre.

So those are the things to look out for as you get past this year.

But a lot of this stuff is not gonna happen this year.

Those companies told us so.

And Gil, um, you know most of your colleagues on the street G 90% tell me I should buy NVIDIA.

You don't you say you know you're neutral.

You just mentioned some of the potential challenges ahead.

Um, are those why you're on the sidelines, gay Or or is it an Eva evaluation call here?

No, that's exactly why.

Because, um, I have the street low number out of 50 something numbers for 2026.

I actually think that the the the revenue growth for 2026 will be negative, where most of the estimates are for pretty substantial growth into next year and the year after that.

To us what I just said in terms of their own customers competing with them, their own customers reaching a point of saturation at some point means that there's gonna be a point next year where revenue starts declining sequentially.

When that happens, the estimates are gonna have to go down very substantially.

Hard to recommend a stock when you expect that to happen as soon as next year.

So when you talk to clients, though, Gil they ask you OK, what what are some upside risks to that call?

What do you tell them that if applications start catching on at a faster rate, if we get more and more killer applications that depend on data centre GP U capacity, then NVIDIA will be able to keep ramping for the next few years because those large customers will need more and more capacity.

We haven't seen that yet.

We have some great, interesting, promising applications out there, but none that have caught on none that are commercially viable beyond testing, experimentation and and hope.

Until we see some of those applications generating real, substantial demand for Microsoft, Amazon, Google's customers, there's not a lot of reason to think that they'll have to continue to ramp up their data centre spend into next year and the year after that.

And so Gill and I am interested I If valuation isn't attractive here, if it's not supportive, in your opinion, what what is fair value?

Gill.

In your opinion, well, it it it's a tough situation, right?

Because what I'm describing is next quarter is gonna be great.

The quarter after that's gonna be great, and they're only trading at relatively comparable multiples to historical levels.

So valuation, if you believe NVIDIA will continue to grow into next year and the year after that, valuation is not unreasonable.

If you believe as we do, the 2026 results will have sequential decline and the business will converge toward more of a run rate.

Then valuation actually could end up being very, very high right now.

Gail, I like you're sticking to your guns.

Appreciate you coming on the show.

Thanks so much.

Thank you.

Coming up.

We'll continue to recap the latest numbers from NVIDIA and dive into a few other earnings reports from So Flake and Elf beauty.

Stay tuned.

Asking for a trend continues next, and video has done it again.

Chip giants Blowing past analysts expectations In its strong fiscal first quarter, the chip giant beat on the top and the bottom line is revenue coming in at 26.0.

$4 billion.

It's versus the estimate of 24.69 billion adjusted earnings per share, coming in at $6.

12 cents.

Company also gave another bullish sales forecast showing that spending on A I Computing is paying off.

Second quarter revenue will be about 28 billion.

Analysts have predicted more like 26.8 billion on top of all that, but also announcing a 10 for one forward stock split and raising its dividend.

Julie Hyman Dan Halley are here with the takeaways.

You know, guys, uh, you went into this print and everybody was on the same side of the boat.

90% of analysts had to buy it.

You know, sometimes the herd can be right, Dan Halley?

Yeah.

I mean, look, I think I'm just looking at this now.

Not for the first time I've been pouring over this, but I just wanna, uh, quickly, very, very quickly point out that, uh, obviously the data centre business easily the most important.

But I just wanna go over the gaming business real quick, because now they're referring to it as gaming and a i PC.

And if you've been following what's going on with, uh, Microsoft Qualcomm Intel a MD?

They're all talking about this new generation of P CS a IP CS Microsoft.

I was just in Washington had a big event for this.

Now invidia pointing to a IP CS they wanna get in on that action as well.

Uh, big partner with Microsoft, but But the gaming business not the most important.

It's clearly a data centre.

And I just want to point out the the revenue share, uh, for the company.

86% of the company's total revenue for the quarter came from data centre revenue.

This is a company that was all about gaming cars just a few years ago.

You go back to 2021 less than half of that was the share of the total revenue pie as we talked about, uh, earlier.

So it's pretty incredible.

You you mentioned the gaming there, and I was interested to look at the sequential change in the various segments here.

Data Centre Obviously up huge year every year, more than 400% quarter over quarter of 23% Still quite respectable.

Networking revenue was down 5%.

Gaming revenue up every year.

Down quarter of a quarter on, uh, by 8%.

And they blame that on seasonally lower GP U sales for laptops, Professional visualisation.

That's another part of the business down 8% quarter of a quarter auto.

Another bright spot, though up 17% quarter of a quarter.

So that one just it's interesting to look as we see this big growth And what does it look like quarter over quarter?

What kind of momentum is there behind some of these businesses?

Yeah, for sure, you know?

Yeah, I was thinking about how, heading into the print we were talking about some of the threads, the themes and we were talking about Listen, everybody we knew was gonna make a beeline for the data centre as soon as it hit.

And there was this sort of narrative building out there.

Well, what if because you had new GP U pla platform black along the way and, uh, maybe customers they delayed, They paused because they were waiting for the shining thing.

It didn't look like that happened.

Doesn't seem like that's happening.

And I, I guess you know, they're They're projecting these, uh, the revenue for for the next quarter that 28 billion plus or minus, uh, 2% which, you know, knocks out the 26.6 that analysts have been expecting.

The Blackwell chips aren't gonna come out until the the end of the year.

Right?

So that's something that I think you start to look at.

OK, well, if they're continuing to see these this kind of revenue, what does it mean when you know the big shiny thing comes out the big, shiny, more expensive piece comes out.

And, you know, one of the things that they that that during GTC that Jensen had really, uh, kind of pushed was the new, uh, Blackwell, the, uh, GB 200 chip.

That's the two Blackwell chips.

Uh, and the grey chip, Um, kind of all merged together into the the super chip.

That's gonna be pretty pricey.

So you gotta imagine that when that starts to sell, where's the revenue gonna go from there?

And And one more thing that, um that, uh, we noticed in the release here is that Jensen points out, um, who are the customers for Data centre, which is important here.

He talks about that beyond the cloud service providers.

Generative A. I is expanded to consumer Internet companies, enterprise sovereign I automotive and health care customers.

Um, he says, creating multiple multi billion dollar vertical markets.

And as Dan and I talked about off air, that's important because there was concern.

Maybe that they were too reliant on the so called hyper scalers too concentrated Jensen saying We serve a lot of people.

Yeah, but Colette, the CFO and then her statement saying, Still, 40% of that data those hyper cloud giants, thank you guys both so much Appreciate it.

Let's take a look at what's trending after hours here.

Shares of ELF beauty they are sinking here After projections for the cosmetics companies 2025 fiscal year came in lower than expectations, ELF seeing net sales for 2024 coming in between 1.23 billion and 1.25 billion.

That was below estimates, $1.28 billion that Street wanted to see for the fourth quarter.

ELF beat expectation on the top and bottom lines.

Adjusted PS of 53 cents came in higher than the 33 cents analysts were anticipating.

Meanwhile, Snowflake shares are rising here in extended trading after the software company reporting first quarter results that beat expectations and raised its full year forecast for product revenue.

For the first quarter, Snowflake reported revenue of $828.7 million which rose 33% over a year.

That did top estimates of $786.3 million and look the Q two.

The company sees product revenue between 805 million and 810 million, exceeding estimates of 787.5 million and check out shares of DuPont stocks soaring on WHO the company it is going to split into three companies.

The conglomerate is going to separate, uh, separate electronics and water divisions.

It's the latest industrial giant to make that move to try to boost returns after a similar move from General Electric.

That's gonna do it, UH, for today's Yahoo Finance.

Be sure to come back tomorrow at 3 p.m. Eastern for all of your coverage leading up to and after the closing bell.