Yahoo Finance

NVIDIA earnings do out after the closing bell today. I want to bring in our very own Josh Shafer. Steve Sosnik's still here with us, but Josh, I know that you're looking at a few charts that investors should keep top of mind heading into the print today.

Yeah, Maddie, so we took a look at a list of charts since the launch of ChatGPT, which would have been November of 2022, and just tried to explain NVIDIA's performance. How do we get here two years later after really what was that big earnings report two years ago that sent the stock soaring, right, in May of 2023? First chart is pretty simple. It's just the top five performers in the S&P 500 since ChatGPT was launched. You can see NVIDIA far outperforming the others there. Interesting point on this chart as well, when you take a closer look at it, several of the stocks that are included in the best performers in the S&P 500 actually weren't even in the index when ChatGPT was launched. I'm looking at Super Microcomputers, Coinbase to name two of those. And then I think other interesting here is just how NVIDIA has sort of surpassed its competitors, right? So we took a look at simply market cap growth among three companies that really should sort of be in this AI race. You have, of course, have NVIDIA, you have AMD, and you have Intel, which its market cap has actually fallen over the last two and a half years. But I think the core question here, of course, is why, right? And you hear a lot about sort of the hype story with NVIDIA. You can go to a bar in Manhattan now and someone might talk to you about this stock and they don't really know exactly what it does, right? But when you look at the fundamentals and you look at simply the revenue growth that this company has seen since November 2022, it's absolutely skyrocketed, right? You were in revenue less than 10 billion. We're zooming in on that chart right now. Revenue closer to almost 40 billion from a total. That purple section there is data center revenue. Of course, that's the key metric. Steve, I look at a chart like this and it makes a lot of sense to me why a stock would rally as much as it has, right? You're looking at a massive rate of change in the fundamentals of the company. But I also look at that chart and I see it not growing as much every single quarter, right? And it makes me sort of wonder if I'm an investor, what happens next after this sort of rally and how do we think about the fundamental story of NVIDIA?

The law of large numbers catches up to you sometimes. I mean, when you, when you think about it, you know, I, I before you came on, Maddie, and I, it's in the, in a prior segment that, you know, I, I contrasted the current AI gold rush with, let's say, with the, with the internet era, which, you know, and I said these companies make money. I mean, NVIDIA, NVIDIA's trading at about a 31 estimated PE, but it's PEG ratio, meaning the, the price earnings, the forward price earnings over its growth is about one. That's typically not a wor, you know, you, you start to worry when you see two, three, four, five, or infinite, but in this case, the earnings, you're, you're getting delivered earnings. You're getting delivered top line and bottom line. So of ultimately, yes, it's, it's hard to imagine that this, that this growth rate can continue just as the company gets so big. It's now the second largest component of the S&P 500. But, um, to your point, it's, it's there. Top and bottom line is there.

Yeah, does make some sense.

Well, another question I have to if we can pull up the second chart here that shows NVIDIA outperforming some potential competitors, the likes of Arm and Intel. Steve, is that bullish or bearish? Like, is that outperformance going to be justified going forward, or is that a valuation fear chart to you?

The question is, can the other ones, is their lead insurmountable? Um, and, you know, tech is littered with companies who had insurmountable leads that, that got caught upon. I mean, you mentioned Intel among others. So, is it going to happen next week, next month? Probably not. Will some of these other competitors catch up? You know, or the flip side is, you know, does the deep seek, um, situation mean that people can get away with

There's deep seek. Like, we're not talking about deep seek enough, I think, and you correct me.

Exactly. No, it's the first time I've used the term in, in, in weeks, but you know, that was that a flash in the pan, or was that real? If it, you know, and I think we'll probably hear something from Jensen Huang, you know, tonight about that. But, um, you know, if, if there are alternatives to some of the more expensive, you know, NVIDIA chips, which to be fair, again, using my limited knowledge of, of chip set design, Blackwell seems to be the real thing in terms of the amount of calculations it could do, price performance ratio. But in term, you know, can do you need that sort of, do you need that to get to where you need to be in AI? That's a huge question as well.

Well, and to the deep seek point too, I think the other question here is, so if I'm an investor and I just want to invest in the broad AI theme, do I then move from maybe semiconductors into something else, right? I was just at an outlook earlier this morning with the team over at Bernstein Private Wealth, and one of their strategists was saying, what we're telling investors, if they come to us and just say we're interested in AI as the theme, maybe look at a big box retailer that could benefit from AI, right? If we're thinking deep seek could disrupt the chip organization, and deep seek makes everything cheaper, well, where does that sort of fall, and who does that benefit? It would benefit the end user, right? And so where are the opportunities sort of outside this space? Steve's smiling like he probably already made this point earlier, right? But I think that's definitely one of the growing conversations that we've continued to talk about more and more, it seems like.

Maddie elicited that comment from me earlier. So, yeah, this is exact, this is exactly what it is. Ultimately, a, for the same reason the internet worked and became a transformative technology, it was because companies could do stuff with it that, that really helped their bottom line. I work the company I work for, interactive brokers, we, we, we had this tiny little web brokerage division. And now as a result, you know, now we've completely, the business model of our company is completely different than where we were when I joined it in a good way, right? But, but so this is the, you know, there, there are going to be uses for AI. There's, you know, if, if this, if the promises is real, it's going to affect all kinds of companies, but it's not going to happen overnight, and we have to see that at some point because you can't just keep spending money, billions of dollars on stuff without it actually yielding some result.

Well said, Steve. Thank you so much. And thank you, Josh, for bringing us those fantastic charts here.